Insights: AMA's digest of the latest findings from marketing's top
It’s been more than 30 years since I took my Mazda RX7 to a local repair shop because it had smoke coming out of the engine. Despite the many years, my first interaction with the repair shop on that day is still one I recount because of how I was treated. The shop impressed me because it could have taken advantage of me. But it didn’t. Rather, it let me know that the smoke from my engine was simply due to having too much oil in the engine. No charge. The shop earned my loyalty from that day forward by making my interests a priority.
Recent research reveals a few special things about my interaction that day that led to an immediate jump in my loyalty. For starters, I had no relationship with the repair shop before that first visit. As such, I had low expectations that they would do anything extraordinary to take care of me. But they did exactly that and so it made a big impact. And importantly, it’s not that they fixed my car really well or charged very low prices. Those things surely would have been nice and would have earned a modicum of loyalty from me. But what really made a difference is that the shop exceeded my expectations on a relational basis. They made me grateful and that was a pathway to loyalty for years to come!
Research on Transformational Relationship Events
Though marketing research has long shown that disconfirmation (i.e., exceeding or falling short of expectations) leads to changes in customer satisfaction and loyalty, the authors of “Transformational Relationship Events,” published in the September 2015 issue of Journal of Marketing, wondered if some disconfirmation events have a more dramatic impact than others.
To investigate this possibility, the researchers conducted a series of studies. In the first study, the researchers coded complaints of a matched group of 4,399 complaining and 4,399 non-complaining customers of a financial services company as (1) relational or (2) product.
Using customer tenure as a proxy for relational expectations (i.e., longer tenure = higher expectations), the researchers found that the impact of a customer complaint about a product issue had a smaller negative impact on retention 15 months later when relational expectations were high. In other words, customers interpreted product issues less negatively when they had a good relationship (“This is unusual for them.”).
In contrast, the researchers found that the impact of a customer complaint about a relational issue (i.e., how they were treated) had a more negative impact on retention when the customer had high relational expectations. When a customer already has a good relationship, a relational issue is more threatening to long-term loyalty because it causes the customer to reassess the nature of their relationship (“I wonder if they deserve my loyalty.”).
In a second study, the researchers presented a sample of adult consumers with a restaurant scenario in which their relational or product expectations were either disconfirmed positively (a good interaction) or negatively (a bad interaction). They further had some of the participants read a scenario in which low relational expectations were set (by focusing on “good products” and “a discount” as the basis for loyalty) whereas others read a scenario to set high relational expectations (by focusing on “personal interest in you” and feeling like part of the “family” as the basis for loyalty).
Similar to the first study, the experiment showed “the beneficial effect of strong relationships for negative product disconfirmations … and their detrimental effect for negative relational disconfirmations” (p. 51). Specifically, the results showed that customers felt most betrayed and were most likely to anticipate changing the nature of the relationship when they experienced a negative relational event and had high relational expectations. In contrast, they felt the least betrayed and the relationship was least impacted when they experienced a negative product event and had high relational expectations.
When the disconfirmation was positive, the results similarly showed that exceeding relational expectations had the biggest impact on customer gratitude and desire to change the nature of the relationship. In this case, however, the biggest impact came when the customer had low relational expectations because these expectations are easier to exceed.
Overall, the research shows that relational expectations and the type of disconfirmation combine to determine whether or not a given event is a turning point in a relationship or not. In general, disconfirmation of a relational expectation is much more likely to transform the nature of a customer relationship for good or bad. And that raises an interesting conundrum for marketing managers.
Early in a relationship, gestures to exceed relational expectations can have a huge positive impact on customer loyalty. And this is a good thing because it not only benefits the bottom-line, but it also buffers the company against the negative impact of the occasional product or service failure. However, the deepening of the relationship with the customer also makes the company more susceptible to falling off a cliff as relational expectations rise and failure to meet expectations causes even greater damage.
Because of this, companies must take extra care to deliver relationally to their most loyal customers. They must ensure that these customers are treated well interpersonally, that promises are kept, and that customer interests are made a priority in individual interactions. And, fortunately, when a relational failure does occur, the research also found in a subsequent study that proactive communication (e.g., speaking on a regular basis) and a genuine apology dampened some of the negative impact of a relational failure with the company’s most loyal customers.