Ximending District, 2013, Taipei, Taiwan
Ideas for Leaders #129

Consumers/Brand Relationships and Fair Treatment

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Key Concept

Different brands have different relationships with their customers, just as social relationships differ among people (casual friendships, committed relationships, etc.) Some relationships are strictly transactional; in the case of brands, customers expect value for money, and little else. Other relationships are more of a partnership; customers expect the brand to ‘care,’ just as caring is a component of certain social relationships. New research from the Rotman School of Management and Duke University’s Fuqua School of Business advances the concept that brand relationships mirror social relationships by showing how a company’s ‘fairness’ is seen differently based on the brand relationship.

Idea Summary

Some researchers argue that consumers form a relationship with brands that in many ways mirror social relationships. Pankaj Aggarwal, a marketing professor at the Rotman School of Management, and Richard P. Larrick, a professor of management at Duke University’s Fuqua School of Business, bolster that research with studies that focus on the issue of fairness. Fairness is a core element of social relationships, and is defined based on the relationship. What’s fair in a work relationship is different from what’s fair in a spousal relationship.

Aggarwal and Larrick looked at fairness from the perspective of two types of relationships involving brands. An exchange relationship between brand and customer or consumer is based on the outcome of the transaction: What the consumer receives in exchange for the price paid. Financial services firm ING Direct, for example, establishes an exchange relationship with its consumers, promising savings opportunities and high returns. A brand such as State Farm insurance, on the other hand, establishes a communal relationship that involves caring, trust and partnership; State Farm is, according to its branding, ‘like a good neighbor.’

Fairness comes in two types. Distributive fairness is based on the outcome: Did you get what you wanted? Interactional fairness is based on the process: the way the outcome was achieved.

Aggarwal and Larrick’s research on brand relationships involved both types of fairness: distributive (whether the customer received satisfaction), and interactional (how the customer was treated by the brand’s employees). In one experiment, consumers did not receive satisfaction from a brand (low distributive fairness), but were treated respectfully by employees in response to their dissatisfaction (high interactional fairness). In another experiment, consumers were not only treated respectfully but also received satisfaction.

Through this research, Aggarwal and Larrick revealed the link between type of relationship and fairness as perceived by the consumer. For example, after a disappointing experience, exchange customers are not impressed with being treated with respect by brand employees; the exchange had failed (low distributive fairness) and no amount of kind words (i.e. interactional fairness) was going to change the attitudes of the unhappy customers. The reaction was the opposite for disappointed customers in communal relationships with the brand. Respectful treatment reassured these customers that the disappointing experience was an aberration and that the company still ‘cared’ about them.  In communal relationships, interactional fairness is more important than distributive fairness.

In sum, respectful treatment had no impact on exchange customers after a disappointing experience but a significant impact on communal customers. However, the reverse proved true after a satisfactory experience. Interactional fairness had an impact on exchange consumers, but not on communal consumers.  The reason? When satisfied with the transaction, exchange customers viewed the respectful treatment as a bonus, and thus their view of the brand improved as a result. On the other hand, respectful treatment from employees did not improve the opinion of satisfied communal customers; after all, this is what they expect from the brand. Why should they be impressed? 

Business Application

The research of Aggarwal and Larrick offers an important framework for marketing and customer service strategies that reassure customers they are being treated fairly by the brand after either an adverse or satisfactory outcome.

The first step is to define the relationship that the brand is developing or promoting with its consumers. Do consumers feel engaged in a trust-based partnership with the brand (a communal relationship), or do they view the brand in terms of transactions (an exchange relationship)? In this context, a retailer or an auto-repair shop are viewed differently by their customers than a bank or an insurance company. What type of relationship is your company trying to establish with its customers?

The second step is to understand the expectations stemming from the different relationships. Consumers in an exchange relationship expect to get their money’s worth — the quality and value that they paid for — and little else. The value that consumers in a communal relationship expect from the company extends beyond economics; they trust the company to put their success and/or well-being first and foremost. They want, for instance, their insurance companies to respond promptly and sympathetically to any mishap; they want their financial advisors to help them make the most money.

The third step is to adjust the marketing and customer service to fit the relationship, no matter whether the customer is satisfied or not. How do you respond when a customer is unhappy with the product or service? If the relationship is based on exchange, the right response is a refund, credit or discount. A nice letter of apology will be ineffective.

However, for a dissatisfied customer in a communal relationship, a letter of apology can be quite effective. It reassures the customer that the company still cares, and is still committed to his or her well-being. 

In sum, the research by Aggarwal and Larrick demonstrates that fairness is in the eyes of the consumer, but it is company’s brand strategies that determine what the consumer sees. 

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Authors

Institutions

Source

Idea conceived

  • 2012

Idea posted

  • April 2013

DOI number

10.13007/129

Subject

Real Time Analytics