faculty of economics and business department of marketing | 1 What you do and how you tell it: it matters! Insights on the impact of service quality and message content on firms’ success KUMPEM Forum Retail Conference Istanbul, May 14-15, 2015 Maarten J. Gijsenberg University of Groningen faculty of economics and business department of marketing | 2 The Impact of Service Crises on Perceived Service Quality over Time Losses loom longer than gains Maarten J. Gijsenberg – University of Groningen Harald J. van Heerde – Massey University Peter C. Verhoef – University of Groningen faculty of economics and business department of marketing | Mass service crises faculty of economics and business department of marketing | 4 Mass service crises › Characteristics of mass service crises Strong and sustained drops in operational service performance Affecting many customers at the same time - Production and consumption: same time - All consumers using the service are affected › Similar to, but different from, product-harm crises Products are defective, causing harm to users, often leading to costly product recalls (e.g. Van Heerde, Helsen, and Dekimpe 2007) Negative impact often limited to subset of customers - Production and consumption: different times Defective products can be recalled before consumption faculty of economics and business department of marketing | 5 Services performance & satisfaction › Service performance is important driver of customer satisfaction Satisfaction formation according to Expectancy-(dis)confirmation paradigm (Bolton and Drew 1991; Oliver 1977; 1980; Szymanski and Henard 2001) Negative experiences have strong effect on satisfaction (Anderson and Sullivan 1993) › Service failures Limited attention in literature, mainly in service recovery literature (e.g., Smith, Bolton and Wagner 1999) Focus on individual-customer level service failure › Mainly short-term focus Limited longitudinal research on customer satisfaction (e.g., Mittal, Kumar, and Tsiros 1999; van Doorn and Verhoef 2008) faculty of economics and business department of marketing | 6 Objectives › What are the short- and long-term effects of objective service performance changes on perceived service quality? › Do losses in objective service performance not only loom larger than gains, but do they also loom longer? › Do these effects depend on the trend in objective service performance? faculty of economics and business department of marketing | 7 Dynamic effects › Service restoration Excellent recovery can lead to higher satisfaction than before crisis (Smith and Bolton 1998) Negative experiences have stronger effects than positive experiences (e.g., Antonides, Verhoef and Van Aalst 2002; Inman, Dyer and Jia, 1997) Service restoration may not be strong enough to attain pre-crisis levels of satisfaction - Losses may loom longer than gains › Trend in service performance may affect customers’ mindsets “What have you done for me lately” heuristics (Smith and Bolton 1998) - Recent performance affects expectations - Contrast and assimilation effects (Bolton 1998) Prior beliefs also directly impact expectations (Boulding, Kalra and Staelin 1999) faculty of economics and business department of marketing | 8 Data › Large European logistics service company › Monthly data for seven years January 2006-October 2012 Objective Service Performance - % successful connections Perceiced Service Quality - Answer scale: 10 = excellent, 9 = very good, 8 = good, 7 = more than sufficient/satisfactory, 6 = sufficient/satisfactory, 5 = inadequate, 4 = very inadequate, 3 = bad, 2 = very bad, 1 = could not be worse faculty of economics and business department of marketing | 9 OSP & PSQ faculty of economics and business department of marketing | 10 OSP & PSQ faculty of economics and business department of marketing | 11 Model results Parameter estimate Standard error p-value -.060 .011* -.027** .002 -.000 .023** -.308** -.010* -.019** .412 .006 .011 .110 .007 .010 .110 .005 .008 .884 .091 .016 .983 .951 .033 .007 .058 .020 8.475 3.219 .092 .000 .006 .000 PSQ equation Constant 𝑂𝑆𝑃𝑡 ∆− 𝑂𝑆𝑃𝑡 ∆𝑃𝑆𝑄𝑡−1 𝑂𝑆𝑃𝑡−1 ∆− 𝑂𝑆𝑃𝑡−1 ∆𝑃𝑆𝑄𝑡−2 𝑂𝑆𝑃𝑡−2 ∆− 𝑂𝑆𝑃𝑡−2 R² AIC BIC .568 -3.474 -3.203 OSP equation Constant ∆𝑃𝑆𝑄𝑡−1 𝑂𝑆𝑃𝑡−1 R² AIC BIC 44.487** 9.063** .515** .423 3.755 3.845 faculty of economics and business department of marketing | 12 Long-term effects › IRF over all possible histories Improved service performance - No long-term effect Decrease in service performance - Negative long-term effect faculty of economics and business department of marketing | 13 Impact of performance history › 3 scenarios Business as usual - Relatively constant (up-down or down-up) Sustained gains - Upward trend in performance Sustained losses - Downward trend in performance faculty of economics and business department of marketing | 14 Business as usual Improved service performance - Positive short-term effect, no long-term effect Decrease in service performance - Negative short- & long-term effects Conclusion: losses loom longer than gains, as before faculty of economics and business department of marketing | 15 Sustained gains Improved service performance - Positive short- & long-term effects - Explanation: customer delight Decrease in service performance - Negative short-& long-term effects - Explanation: Extreme negative expectancy disconfirmation faculty of economics and business department of marketing | 16 Sustained losses Improved service performance - Positive short-term effect, but Decrease in service performance - Negative short-term effect, but no negative long-term effect long-term effect - Explanation: less predictability, more risk, stronger effect of negative experiences - Explanation: confirming expectations of bad and even ever worse service faculty of economics and business department of marketing | 17 Implications › Service recovery needs to more than overcome the service failure to keep long-term customer satisfaction constant The bar for future performance is raised › Be mindful about the trend in performance Upward shocks only have favorable long-term consequences during upward trends Downward shocks have strong negative long-term consequences during upward trends and stable situations Steady as it goes (up or down) is better for long-term satisfaction than up-down or down-up scenarios as the latter create more “risk” for consumers faculty of economics and business department of marketing | 18 The impact of consistency and overlap in advertising content on brands’ success Probably the best message in the world Mike Friedman - UC Louvain Maarten J. Gijsenberg - University of Groningen Nicolas Kervyn - UC Louvain faculty of economics and business department of marketing | 19 faculty of economics and business department of marketing | 20 faculty of economics and business department of marketing | 21 Background › Huge amounts of money invested in advertising › Good insights about returns to adspend, but what about content? Much anecdotal evidence Much experimental evidence on “soft” outcomes - Mainly on overlap - Some on variation No longitudinal evidence, no evidence on “hard” outcomes › Should brands try to be consistent in their message over time? › Should brands try to be different from competitors? faculty of economics and business department of marketing | 22 Consistency › Strong brands are built by consistent long-term communication support (Keller 2008) › Consistency in advertising content expected to have positive effect Mere exposure effects (Zajonc 1968) Prior exposure to same stimuli elicits positive affect towards the stimuli (Janiszewski and Meyvis 2001) Creating and reinforcing nodes and associations in consumers memory (associative memory models: Anderson 1983; Wyer and Srull 1986; Keller 1993) - More easily retreived and activated (e.g. Albrecht and Myers 1995; 1998; Wyer 2004; Luna 2005) faculty of economics and business department of marketing | 23 Overlap › The extent to which the content of the advertising message is similar to messages by other brands › Successful brands take unique position in consumers’ minds Clear positioning (e.g. Aaker 1996; Keller 2008) Clear communication of unique benefits (e.g. Aaker 1996; Keller 2008) › Overlap in advertising content expected to have negative effect Distinctive information is easier to retrieve (e.g. Craik 1979; Eysenck 1979) Competitive interference and brand confusion - Unconnected memory traces that resemble each other will get activated simultaneously (e.g. Keller 1987; 1991; Poiesz and Verhallen, 1989) faculty of economics and business department of marketing | 24 Overlap › Is overlap always bad? Not necessarily! - Brands should create “deep” awareness (Keller 2008) - Strong links to product category - High top-of-mind awareness › Effects may consequently depend on type of content Different types of nodes in the ad memory trace (cfr. Hutchinson and Moore 1984) - Category-related: e.g. how and when to use the product - More overlap likely beneficial: clear category link - Product-related: e.g. unique product features / benefits - More overlap likely detrimental: no unique product features / benefits - Brand-related: e.g. brand values - More overlap likely detrimental: no unique brand positioning faculty of economics and business department of marketing | 25 Marketing controls Message Consistency Message Overlap Time controls Relative adspend + Category factors + Category factors + Seasonality Relative price - Product factors + Product factors - Trend Brand factors + Brand factors - Brand market share faculty of economics and business department of marketing | 26 Data › United Kingdom Chocolate › 2008p2 – 2012p3: >4 years of data, 4-week periods Transcripts of all print and tv advertising messages per brand Volume sales, price and advertising spending per brand › Focus on most active advertisers 66 brands in the category - Many of them very infrequent advertisers and low-share brands Initial choice: top-10 most active advertisers Only advertising spending available for 7 of these top-10 brands faculty of economics and business department of marketing | 27 General descriptives Sample Category Yearly Adspend Market Share # Messages 7 brands 30.8% 336 £26,986 Mean Stdev 4.4% 4.3% 48 26.5 £3,855 £2,977 Max 13.3% 88 £10,410 Min .1% 18 £1,407 66 brands 100% 839 Mean Stdev 1.5% 12.7 2.9% 18.6 Max 17.9% 88 Min .0% 0 (*1000) faculty of economics and business department of marketing | 28 Text analytics › Focus on the following factors Category factors - Usage context of the product category: social psychological processes Product factors - Biological processes Brand factors - Personal concerns faculty of economics and business department of marketing | 29 Category: consistency & overlap Category factors Consistency Overlap Hyperparameter Z-score Short run 0.480 *** 2.330 Long run 0.645 *** 2.735 Short run 0.220 *** 3.423 Long run 0.317 *** 3.236 * p < 0.10, one-sided; ** p < 0.05, one sided; *** p < 0.01, one-sided ; ° p < 0.10, two-sided; °° p < 0.05, two sided; °°° p < 0.01, two-sided faculty of economics and business department of marketing | 30 Product: avoid overlap Product factors Consistency Overlap Hyperparameter Z-score Short run -0.100 -0.949 Long run -0.059 -0.449 Short run -0.199 *** -4.184 Long run -0.191 *** -3.220 * p < 0.10, one-sided; ** p < 0.05, one sided; *** p < 0.01, one-sided ; ° p < 0.10, two-sided; °° p < 0.05, two sided; °°° p < 0.01, two-sided faculty of economics and business department of marketing | 31 Brand: consistency Brand-related factors Consistency Overlap Hyperparameter Z-score Short run 0.147 * 1.631 Long run 0.240 ** 2.149 Short run 0.058 1.444 Long run 0.092 1.476 * p < 0.10, one-sided; ** p < 0.05, one sided; *** p < 0.01, one-sided ; ° p < 0.10, two-sided; °° p < 0.05, two sided; °°° p < 0.01, two-sided faculty of economics and business department of marketing | 32 Managerial implications › It pays off to clearly link the product/service to the category, and to resemble your competitors in that sense Not just once, but in a sustained way › When positioning the product/service, it is important to be clearly different than competitors What makes the product/service so unique? - Look into those characteristics that do matter to customers, and stress unique features › When positioning the brand, it is important to be consistent over time What is the brand identity/image? - What are the personal concerns of customers the brand appeals to? faculty of economics and business department of marketing | 33 faculty of economics and business department of marketing | 34 › Contact Information dr. ir. M.J. Gijsenberg Assistant Professor of Marketing Department of Marketing Faculty of Economics and Business University of Groningen PO Box 800 9700 AV Groningen The Netherlands Tel +31 50 363 8249 E-mail m.j.gijsenberg@rug.nl www.rug.nl/staff/m.j.gijsenberg faculty of economics and business department of marketing | 35 Appendix 1 faculty of economics and business department of marketing | 36 Asymmetries in PSQ evolution › Asymmetry Tests (e.g. Deleersnyder et al. 2004; Lamey et al. 2007 Randles et al. 1980) Deepness asymmetry (-.036; p<.05) - Perceived Service Quality shows stronger decreases than recovery PSQ time Steepness asymmetry (-.049; p<.05) - Perceived Service Quality shows faster decreases than recovery PSQ time faculty of economics and business department of marketing | 37 Econometric model › Starting point: Bivariate Structural Var model ∆𝑆𝑎𝑡𝑖𝑠𝑡 = 𝛽1,0 + 𝑃𝑒𝑟𝑓𝑡 = 𝛽2,0 + 𝐿 𝑙=0 𝛽1,1,𝑙 𝐿 𝑙=1 𝛽2,1,𝑙 𝑃𝑒𝑟𝑓𝑡−𝑙 + 𝑃𝑒𝑟𝑓𝑡−𝑙 + 𝐿 𝑙=1 𝛽1,2,𝑙 𝐿 𝑙=1 𝛽2,2,𝑙 ∆𝑆𝑎𝑡𝑖𝑠𝑡−𝑙 + 𝜀1,𝑡 ∆𝑆𝑎𝑡𝑖𝑠𝑡−𝑙 + 𝜀2,𝑡 › Allowing for asymmetric effects ∆− 𝑃𝑒𝑟𝑓𝑡−𝑙 = 0 𝑃𝑒𝑟𝑓𝑡−𝑙 − 𝑃𝑒𝑟𝑓𝑡−𝑙−1 𝑖𝑓 𝑃𝑒𝑟𝑓𝑡−𝑙 − 𝑃𝑒𝑟𝑓𝑡−𝑙−1 ≥ 0 𝑖𝑓 𝑃𝑒𝑟𝑓𝑡−𝑙 − 𝑃𝑒𝑟𝑓𝑡−𝑙−1 < 0 (Pauwels 2004) faculty of economics and business department of marketing | 38 Econometric model › Final model: Double-Asymmetric Structural Vector AutoRegressive (DASVAR) model ∆𝑆𝑎𝑡𝑖𝑠𝑡 = 𝛽1,0 + 𝑃𝑒𝑟𝑓𝑡 = 𝛽2,0 + 𝐿1 𝑙=0 𝛽1,1,𝑙 𝐿2 𝑙=1 𝛽2,1,𝑙 𝑃𝑒𝑟𝑓𝑡−𝑙 + 𝑃𝑒𝑟𝑓𝑡−𝑙 + 𝐿1 𝑙=1 𝛽1,2,𝑙 𝐿2 𝑙=1 𝛽2,2,𝑙 ∆𝑆𝑎𝑡𝑖𝑠𝑡−𝑙 + 𝐿1 𝑙=0 𝛽1,3,𝑙 ∆− 𝑃𝑒𝑟𝑓𝑡−𝑙 + 𝜀1,𝑡 ∆𝑆𝑎𝑡𝑖𝑠𝑡−𝑙 + 𝜀2,𝑡 Asymmetric effects of decline vs improvement in service performance Asymmetric number of lags L1 and L2 across equations faculty of economics and business department of marketing | 39 Econometric model › Long-term effects Impulse-Response Functions Importance of performance history - Effect of one-time shock depends on history prior to the shock - Role of asymmetric effects (cfr. Killian and Vigfusson 2011) faculty of economics and business department of marketing | 40 Model fit MAPE Asymmetric Losses-Gains Asymmetric Lags Symmetric Lags Focal Model: DASVAR Benchmark 2: Asymmetric Effect SVAR In-sample Out-of-sample .454% .489% Benchmark 1: Asymmetric Lag SVAR Symmetric Losses-Gains In-sample Out-of-sample .473% .552% In-sample Out-of-sample .472% .543% Benchmark 3: Symmetric SVAR In-sample Out-of-sample .474% .553% faculty of economics and business department of marketing | 41 Predictive performance faculty of economics and business department of marketing | 42 Conclusions › Losses not only loom larger but also longer than gains Deepening of existing knowledge on prospect theory › Important “moderating” role of service performance history Might occur due to different mindsets of customers Reinforcement of prior beliefs › DASVAR model Goes beyond traditional (S)VAR models by - Including asymmetric number of lags across equations - Including asymmetric effects of service performance losses vs gains - Allows for IRFs conditioned on performance history Is superior to models not allowing for these asymmetries faculty of economics and business department of marketing | 43 Appendix 2 faculty of economics and business department of marketing | 44 Issue › To be consistent and/or to be different: that is the question › This study: Quantifies consistency and overlap in advertising messages Quantifies the effect of consistency and overlap in advertising messages on brands’ performance Investigates whether effects are different for different types of advertising content Investigates whether we find differences between short- and longterm effects faculty of economics and business department of marketing | 45 Methodology › 5 steps Extract information using text analytics Define consistency and overlap Basic model: error correction model Endogeneity Individual and overall insights faculty of economics and business department of marketing | 46 Text analytics › Linguistic Inquiry and Word Count (LIWC2007) (Pennebaker et al. 2007) Classifying text content of the messages according to predefined libraries Main focus: - Linguistic processes - Psychological processes - Personal concerns Result: - Scores on 1-100 scale on different categories of words. faculty of economics and business department of marketing | 47 Consistency and overlap 𝐶𝑜𝑛𝑠𝑖𝑠𝑡𝑏,𝑡,𝑓 𝑖𝑓 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 = 0 0 = −1 ∗ 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 𝑖=1 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡−𝑗 𝐿𝑓 13 𝑗=1 𝑘=1 𝑙=1 𝑇𝑆𝑏,𝑡,𝑖,𝑙 − 𝑇𝑆𝑏,𝑡−𝑗,𝑘,𝑙 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡−𝑖 𝐿𝑓 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 13 𝑗=1 𝑘=1 𝑙=1 1 𝑖=1 𝑖𝑓 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 > 0 𝑂𝑣𝑒𝑟𝑙𝑎𝑝𝑏,𝑡,𝑓 𝑖𝑓 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 = 0 0 = −1 ∗ 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 𝑁𝑐𝑜𝑚𝑝𝑐𝑎𝑚𝑝𝑏,𝑡 𝐿𝑓 𝑘=1 𝑙=1 𝑇𝑆𝑏,𝑡,𝑖,𝑙 𝑖=1 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 𝑁𝑐𝑜𝑚𝑝𝑐𝑎𝑚𝑝𝑏,𝑡 𝐿𝑓 𝑘=1 𝑙=1 𝑖=1 − 𝑇𝑆𝑏,𝑡,𝑘,𝑙 1 𝑖𝑓 𝑁𝑐𝑎𝑚𝑝𝑏,𝑡 > 0 faculty of economics and business department of marketing | 48 Basic model › Error correction model at the brand level ∆𝑀𝑆ℎ𝑎𝑟𝑒t = β0 + β1 𝑆𝑖𝑛𝑡 + β2 𝐶𝑜𝑠𝑡 + β3 𝑇𝑟𝑒𝑛𝑑𝑡 + β4 𝑁𝑜𝐴𝑑𝑣𝑡 +𝛼1𝑠𝑟 ∆𝑅𝑒𝑙𝐴𝑑𝑠𝑡𝑡 + 𝛼2𝑠𝑟 ∆𝑅𝑒𝑙𝑃𝑟𝑖𝑐𝑒𝑡 + 𝛼3𝑠𝑟 ∆𝐶𝑜𝑛𝑠𝑖𝑠𝑡𝑡 + 𝛼4𝑠𝑟 ∆𝑂𝑣𝑒𝑟𝑙𝑎𝑝𝑡 𝛼1𝑙𝑟 𝑅𝑒𝑙𝐴𝑑𝑠𝑡𝑡−1 + 𝛼2𝑙𝑟 𝑅𝑒𝑙𝑃𝑟𝑖𝑐𝑒𝑡−1 +Π 𝑀𝑆ℎ𝑎𝑟𝑒t−1 − +𝛼3𝑙𝑟 𝐶𝑜𝑛𝑠𝑖𝑠𝑡𝑡−1 + 𝛼4𝑙𝑟 𝑂𝑣𝑒𝑟𝑙𝑎𝑝𝑡−1 +εt Estimate per brand, separately for each factor faculty of economics and business department of marketing | 49 Endogeneity › Control for possible endogeneity of relative adstock and relative price ∆𝑅𝑒𝑙𝐴𝑑𝑠𝑡𝑡 = 𝛾𝑎𝑑𝑣,0 + 𝛾𝑎𝑑𝑣,1 ∗ ∆𝑅𝑒𝑙𝐴𝑑𝑠𝑡𝑡−1 + 𝛾𝑎𝑑𝑣,2 ∗ ∆𝑀𝑆ℎ𝑎𝑟𝑒𝑡−1 + 𝜈𝑎𝑑𝑣,𝑡 ∆𝑅𝑒𝑙𝑃𝑟𝑖𝑐𝑒𝑡 = 𝛾𝑝𝑟𝑖,0 + 𝛾𝑝𝑟𝑖,1 ∗ ∆𝑅𝑒𝑙𝑃𝑅𝑖𝑐𝑒𝑡−1 + 𝛾𝑝𝑟𝑖,2 ∗ ∆𝑀𝑆ℎ𝑎𝑟𝑒𝑡−1 + 𝜈𝑝𝑟𝑖,𝑡 Simultaneous estimation with full variance-covariance matrix faculty of economics and business department of marketing | 50 Individual & overall insights › Basic estimation for individual brands Allowing for differences among brands (heterogeneity) Per brand, separate estimate for each factor Per brand, combine estimates for control variables across estimations › Combine individual-brand estimates into overall insights Meta-analytic approach - Uncertainty-weighted average parameter estimate - Significance: Added-Z method (e.g. Rosenthal, 1991; Van Heerde et al., 2013; Gijsenberg, 2014) faculty of economics and business department of marketing | 51 Main model: control variables Main equation Hyperparameter Z-score Intercept β0 10.555 °°° 5.596 x Sinus β1 0.075 °°° 3.651 x Cosinus β2 -0.227 °°° -8.109 x Trend β3 -0.007 °°° -4.648 x NoAdv β4 -1.099 * -1.641 ∆RelPrice 𝛼1𝑠𝑟 -2.033 *** -6.979 ∆RelAdstock 𝛼2𝑠𝑟 -0.041 -1.029 LagRelPrice 𝛼1𝑙𝑟 -1.793 *** -4.722 LagRelAdstock 𝛼2𝑙𝑟 Adjustment Π 0.039 -0.986 *** 0.949 -12.082 * p < 0.10, one-sided; ** p < 0.05, one sided; *** p < 0.01, one-sided ; ° p < 0.10, two-sided; °° p < 0.05, two sided; °°° p < 0.01, two-sided faculty of economics and business department of marketing | 52 Side equations Advertising equation Hyperparameter Z-score Intercept 𝛾𝑎𝑑𝑣,0 0.001 0.046 Lag∆RelAdstock 𝛾𝑎𝑑𝑣,1 -0.071 -1.355 Lag∆MShare 𝛾𝑎𝑑𝑣,2 Price equation 0.180 °°° Hyperparameter Intercept 𝛾𝑝𝑟𝑖,0 Lag∆RelPrice 𝛾𝑝𝑟𝑖,1 Lag∆MShare 𝛾𝑝𝑟𝑖,2 0.000 -0.359 °°° 0.009 2.032 Z-score 0.063 -5.467 0.613 * p < 0.10, one-sided; ** p < 0.05, one sided; *** p < 0.01, one-sided ; ° p < 0.10, two-sided; °° p < 0.05, two sided; °°° p < 0.01, two-sided