September 2009with a market norm, the social normThus, once social nor - PDF document

32 September 2009with a market norm, the social normThus, once social norms are replaced bymarket norms, it is very difficult to goback to social norms. This has an ob -vious parallel in the business world:When companies adopt social normsand later revert to market norms, the re-version can have deleterious effect onconsumer trust, which can, in turn, leadto customer disloyalty. ADOPTING SOCIAL NORMS: REWARDS AND PERILS Since the 1980s, businesses have beengradually adopting social norms tomake consumers act in the companies’interests, and reaping all the benefitsthat flow from the adoption of thosenorms. Even the words they use evokesocial norms. It’s not a “usage” card, buta “loyalty” card. We wait on the tele-phone for an hour, not because the or-ganization doesn’t think our call isimportant enough to have a human being answer it, but because, as the or-ganization assures us, “Your call is im-portant to us.” Telephone charges areincreased, not to benefit the firm, butto provide you with “even better ser -vice.” Financial organizations increasetheir hours of operation, not to increasetheir profits, but to provide better ser -Adopting social norms can be reward-ing to companies, but it does not comefree of obligations. When companiesadopt (or are perceived to adopt) a so-cial norm and later renege on it, theycan inadvertently create disloyal cus-tomers. In other words, customer dis-loyalty can be seen as a reaction toorganization disloyalty.Reframing market norms as socialnorms may work for a while, but not forlong. The main reason is that socialnorms require reciprocation. If cus-tomers have been “loyal” to an organi-zation, they expect something in return,FEATURE Effect on loyalty (% stay with the firm) Effect on trust (rating on a 10-point scale) FIGURE 1: CELLPHONE SCENARIOSFIGURE 2: AIRLINE SCENARIOS Effect on loyalty (% continue to work) FIGURE 3: INTERNAL COMPANY SCENARIOS Social norms acknowledgedSocial norms ignored Social norms acknowledgedSocial norms ignored Social norms are not violatedSocial norms are violated Social norms are not violatedSocial norms are violated Social norms emphasizedSocial norms not emphasized Social norms emphasizedSocial norms not emphasized 34 September 2009deal has some hidden conditions. Cus-tomers who believe that they can get thisdeal find that, by and large, they cannot.They may well feel they have fulfilledtheir part of the social norm by beingloyal to the airline, but the airline is notbeing loyal to them in return: it is reneg-ing on the promised flight. This strategy also adversely affects cus-tomers’ trust in the firm. Could the firmkeep the loyalty and trust of customersby reframing the offer? To test this pos-sibility, we created two alternative sce-In the first scenario, the firm makes itdifficult for customers to understandwhy they cannot get the reward prom-ised by the airline when the customeragreed to be loyal. The following sce-nario was presented to 826 respondentsto determine its effect on loyalty andtrust.An airline announces that you can fly tothe destination of your choice for 50,000airline points. But no matter when you tryto book a flight, it always seems to be un-available. However, you learn that seatsare available fairly easily if you have150,000 points. You also learn that to geta flight for 50,000 points you need to bookyour flight almost a year in advance. Whatwould be your reaction?You’ll continue to use the airline’s services,ORyou will consider switching to anotherairline organization.On the following scale, how much wouldyou trust this airline organization? On aten-point scale (where 1 is “do not trust atall” and 10 is “trust completely”), howwould you rate this organization?A second scenario was presented to agroup of another 823 respondents. Theoffer in the alternative scenario wasidentical to the first one in terms of con-tent. However, in this scenario, the of-fer was reframed in such a way that theorganization refuses. What would be yourreaction?You’ll continue to use the organization’sservices, OR you will consider switchingHow much would you trust this cellphoneorganization? On a ten-point scale (where1 is “do not trust at all” and 10 is “trustcompletely”), how would you rate this or-To a group of another 820 respondents,we presented an alternative scenario.request of the customer to provide thesame deal. However, in this second sce-nario, the firm uses business normswithout breaching social norms. HereA cell phone organization announceshighly reduced rates for new customers forthe next twelve months. You have been acustomer of the organization for ten years,and you contact the organization to ask ifyou will be given the same deal. The or-ganization says that, for business reasons,it cannot do that. But since your businessis valuable to the organization, you willbe given a better deal than you have now.What would be your reaction?You’ll continue to use the organization’sservices, OR you will consider switchingOn the following scale, how much wouldyou trust this cell phone organization? Ona ten-point scale (where 1 is “do not trustat all” and 10 is “trust completely”), howwould you rate this organization?The results proved interesting. When thesocial norm was taken into account, fivetimes as many respondents (49%) saidthat they would continue to use the firmthat acknowledged the social norm asopposed to the firm that did not (10%). FEATURE When the social norm was simply ig-nored, 81 per cent of respondents saidthat they would consider switching toanother cellphone organization. How-ever, when the social norm was acknow -ledged in terms of some alternativebenefit to the customer (not even speci-fied in the scenario), only about 44 perswitching to another cellphone organ Even more importantly, the effect on thelevel of trust was also dramatic. Fourtimes as many respondents trusted thefirm that acknowledged social norms,compared to the one that didn’t, givingthe former a rating of at least 7 on a ten-The results of these scenarios are pre-sented in Table 1 and Figure 1.TABLE 1: CELLPHONE SCENARIOS Would stayTrust score N Social norms ignored6%3.1824Social norms acknowledged 23%4.6820These findings suggest the first strategyfor building loyalty and trust:If businessrealities make it difficult to hold to thenorm, it might be better to find a compro-mise between market norms and socialnorms than to abandon social norms com-pletely.Strategy 2: Reframing the offer to avoidbreaching social norms.mon strategy used by firms is to presenttheir offerings in very favourable terms,a strategy that tends to attract many newcustomers. An example of this is the useof airline points. Some airlines advertisethat you can fly to a given destinationwith a certain number of points. Yetmost customers cannot get this deal be-cause it is the best case scenario, avail-able on a first-come, first-served basis,perhaps a year in advance. Since this as-pect of the deal is not advertised, cus-tomers are not generally aware that the 35 offer more easily obtained by customerswas presented first, along with informa-tion on how they could get a much bet-ter offer if they booked well in advance.An airline announces that you can fly tothe destination of your choice for 150,000airline points, a cost that you think is toohigh. However, the airline informs youthat, if you book your flight almost a yearin advance, you can get to the same destin -ation for as little as 50,000 points. Whatwould be your reaction?You’ll continue to use the airline’s services,OR you will consider switching to anotherairline organization. How much would you trust this airline or-ganization? On a ten-point scale (where1 is “do not trust at all” and 10 is “trustcompletely”), how would you rate this or-By reframing the offer in terms of whatin return for their loyalty (rather thanspecial circumstances), the firm avoidedbreaching the social norm. Conse-quently, we expected the second scenarioto be more appealing to respondents.What did we find? Four times as manyrespondents (40%) said they wouldcontinue with the program when the al-ternative scenario was presented, com-pared to those (11%) who said theywould stay with program offered in thefirst scenario. The intention to switch,which was 75 per cent in the first sce-nario, dropped substantially to 40 perMore importantly, the effect of the al-ternative scenario on the level of trustwas dramatic. Three times as many re-spondents trusted the firm that was seento honour social norms, compared tothe firm that didn’t seem to, giving theformer a rating of at least 7 on a ten-FEATURE The results of these scenarios are pre-sented in Table 2 and Figure 2.TABLE 2: AIRLINE SCENARIOS Would stayTrust score N Social norms violated6%3.2826Social norms honoured 19%4.6823egy for building loyalty and trust: If afirm makes it easy for customers to see thatsocial norms are honoured by the firm, cus-tomers are more likely to reciprocate by be-ing loyal and keeping trust.Strategy 3: Not emphasizing socialnorms.Yet another strategy to preventcustomer erosion is to avoid using so-cial norms if they can’t be kept. Whilethere are many advantages to adoptingsocial norms, social norms that are bro-ken are far worse than business normsthat are kept. We will illustrate thispoint using the relationship between afirm and its employees.In the first scenario, the firm projects so-cial norms by making the employees be-lieve that their loyalty will be valued.Employees keep their end of the bargainby being loyal to the organization. Yetwhen the time comes, market normsan employee is let go. The followingscen ario was presented to more than800 respondents to determine its effecton loyalty and trust.A colleague who works with you has beenwith the organization for many years. Hehas been told repeatedly that his loyalty isvalued. Last year, he was laid off, whenthe organization moved some of its oper -ations offshore, purely as a business deci-sion. What would be your reaction?You’ll continue to work there, OR you willconsider switching to another employer. How much would you trust your organ -ization? On a ten-point scale (where 1 is“do not trust at all” and 10 is “trust completely”), how would you rate this In the alternative scenario, exactly thesame situation is presented. An em-ployee who has been with the organiza-tion for many years is let go because itis in the interests of the business to doso. The only difference is that the firmwas run on market norms and did notpretend to subscribe to social norms.A colleague who works with you has beenwith the organization for many years. Theorganization always treated its employeesfairly but in a business-like fashion andwith no promises. Last year, he was laidoff, because the organization moved someof its operations offshore, purely as a busi-ness decision. What would be your reac-You’ll continue to work there, OR you willconsider switching to another employer. How much would you trust your organ -ization? On a ten-point scale (where 1 is“do not trust at all” and 10 is “trust com-pletely”), how would you rate this organ -Our hypothesis here is that people areupset, not by the market norm, but bythe representation of it as a social norm.If this hypothesis is correct, then erosionof loyalty and trust will be higher in thefirst scenario than in the second. Hereis what we found.Almost half (48%) of respondents saidthey would continue with the firm thatprojected the market norm, while only28 per cent said they would stay withthe firm that projected the social normbut later reneged on it. The correspond -ing intentions to switch employers were56 and 38 per cent, respectivelyThe effect on the level of trust wasequally illuminating. More than twice 36 September 2009K. Grayson, D. Johnson, & D. Chen. “Is FirmTrust Essential in a Trusted Environment? HowTrust in the Business Context Influences Cus-Journal of Marketing ResearchG. Hulme. “Lack of Trust Hampering Online Direct Marketing.” , 2005 (October 10): 4.S.D. Jap & G. Shankar. “Control Mechanismsand the Relationship Lifecycle: Implications forSafeguarding Specific Investments and Devel-Journal of Marketing Re-searchE. Maltz & A.K. Kohli. ”Market IntelligenceDissemination Across Functional Boundaries.”Journal of Marketing ResearchA. Rindfleisch & C. Moorman. “Interfirm Co-operation and Customer Orientation.” Journalof Marketing ResearchD. Starkman. “An Advisor To Trust.” The Wash-ington Post, 2005 (September 18): p. 13.Chuck Chakrapani, PhD, is the researchmentor and industry liaison advisor at theTed Rogers School of Management and senior research fellow at the Centre for theStudy of Commercial Activity at RyersonUniversity. Prior to joining Ryerson, Dr. Chakrapani was the CEO of MillwardBrown Canada and has held academic appointments at the London Business Schoolin England and at the University of Liver-pool. He currently edits Marketing Research, a quarterly publication of theAmerican Marketing Association. He is thechief knowledge officer of BehaviorWorxand the Blackstone Group in Chicago, pastpresident of the Professional Marketing Research Society (forerunner of MRIA),chairman of Investors Association ofCanada, and a fellow of the Royal Statistical Society. He can be reached atchuck@ChuckChakrapani.com.Dave Scholz is a partner and vice-presidentat Leger Marketing. He holds an MA in cognitive psychology from the University ofManitoba. Dave is an associate professor atMcMaster University in Hamilton and atSyracuse University’s joint Masters in Com-munication program. He is also an annualcontributor to Aberje’s communicator knowl-edge program in Sao Paolo, Brazil. He can bereached at dscholz@legermarketing.com.as many respondents trusted the firmthat did not use social norms as lever-age to obtain loyalty, compared to thefirm that did, giving the former a ratingThe results of these scenarios are pre-sented in Table 3 and Figure 3.TABLE 3: INTERNAL COMPANYSCENARIOS Would stayTrust score N Social norms emphasized8%3.4824Social norms not emphasized 19%4.4821These findings lead to our third strat-When it is known that it is not pos -sible to keep social norms on a long-termbasis or when there is no special benefit toadopting them, it is best to avoid socialnorms and adopt market norms. FINAL THOUGHTS Even though this study is based on re-sponses from more than 1,600 peopleand is supported by considerable otherresearch in social psychology, we prob -ably need more studies along these lines.While we argue that it is best to avoidusing social norms when they cannot besustained by a firm, we also realize thatthe reason why companies adopt socialnorms without thinking about the con-sequences is that the immediate rewardsHowever, given that reneging on socialnorms after adopting them affects con-sumer experience in profound ways, including loss of trust and loyalty, com-panies may want to rethink the perilssustainable in the long run. The otheralternative is, of course, to adopt socialnorms and stick with them, even whenit is temporarily not cost-effective forIn short, we don't argue against com -panies adopting social norms and enjoy-ing the benefits of doing so. But thereis always a price to pay. FEATURE Customer defection can (and does) oc-cur even when market norms areadopted and maintained. But what thisstudy has shown is that, when marketnorms are adopted, the intention to de-fect is substantially lower than when so-cial norms are adopted and thenSocial norms don’t come with obviousprice tags, but the benefits that accrueare not without costs in the long run.There is an unspecified cost: reciproc-ity. Reciprocity is the price a firm shouldbe prepared to pay when it adopts socialnorms. If a firm is not willing to pay orcannot afford the price, it is in the firm’sinterest not to adopt social norms. Thereis no free lunch for companies any morethan there is for its customers. ACKNOWLEDGMENTS This research has been generously sub-sidized by Leger Marketing. Our thanksare due to Mr. Jean-Marc Leger forsponsoring this research. This paper isbased on a chapter in a forthcomingThe Company Disloyalty. REFERENCES D. Ariely. Predictably Irrational.New York:Harper Collins, 2008.C. Augustin & J. Singh. “Curvilinear Effectsof Consumer Loyalty Determinants in Rela-tional Exchanges.”Journal of Marketing Re-searchD. Burton. “Americans Must Trust Vaccines forAvian Flu Plan To Be a Success.” The Hill2005, (November 15): p. 18.R. Cialdini. Influence: Science and Practice ed.). Boston: Allyn and Bacon, 2009.P.M. Doney, J.P. Cannon, & M. Mullen. “Un-derstanding the Influence of National Cultureon the Development of Trust.” Academy ofManagement ReviewI. Geyskens, J,-B. E.M. Steenkam, & N. Ku-mar. “Generalizations About Trust in Market-ing Channel Relationships Using Meta-International Journal of Research inMarketing, 1998 (July): 15, 223–248.