Why Satisfaction Scores Don't Predict Brand Loyalty

What We Need to Grow, Episode 069: Satisfaction Is Table Stakes. A Founder Talk conversation with Robert Passikoff. Cleaned for readability; the words are the speakers' own.

Caleb: All right, Robert, it is a pleasure. After our first chat, I was thinking about a number of things you'd mentioned, specifically about building brand. You founded your company, Brand Keys, in 1984. You built the index that's measured brand loyalty for Citibank, Toyota, Apple, the NFL. And as I understand it, NYU called you the most quoted brand consultant in the country. I don't know if you wake up every day thinking about that, but you have some deep roots. You're New York-based. I'm thinking about the Mad Men era, Madison Avenue advertising. Of course, there's a TV show that was built around it. I would absolutely love to hear you share a little bit about your company and your perspective on brand.

Robert: Well, thank you. Pleased to be here. The company came about because we saw that the world was changing. This was back in '84. And while it seems like an obvious thing to say that it ain't 1984 anymore, it ain't 1995. It isn't even 2026 anymore when it comes to trying to understand brands and consumers.

We recognized that satisfaction, which was very big when I started out, was going to be the price of entry. You jump ahead from the beginning of real modern advertising in the 20th century, and you end up at a point where the total quality movement, the ISO 9000 movement, really turned everything into pretty much the same. From a quality perspective, from a primacy of product or service perspective, the only real difference was the brand.

And what we've tracked from the late 1980s through now is that the engagement process and the consumer decision process has become more emotional than it is rational. It's the old story. You take the marks off the cars, and all cars look the same and they all run. With the exception that the luxury vehicles have leather seats, and now probably talk to you and drive for you, they pretty much look the same. So you put people in them and they drive around, and you say, what did you think? They go, wow, this is the greatest car in the world. And you say, how much would you pay? Oh, I'd pay $30,000. Would it surprise you to learn that it's, fill in the blank, some cheap car? And they go, wow.

Well, yeah, because the cars are pretty much the same. Most products that have survived into the 21st century are pretty much the same. It isn't, wow, I used this laundry detergent and my clothes dissolved. Your clothes are clean. You may have convinced yourself that one brand is better than the other, but the truth is that there's some emotional connection that's making that happen for you.

Even if you take just the 21st century, what we see is that emotional decision-making is taking up the lion's share of the decision process. It all has to do with my emotions: what I feel, how it makes me feel, what it brings out in me, who I am with it, and its ability to meet my really, really high expectations about stuff. Because that's how brands become loyal.

Loyalty has changed from the transactional. Back in the '70s it was, I only drink Coke, I don't drink Pepsi. And if you look at the brands and what they meant, they did mean something back then. But I defy people to look at different categories and tell me, can you really tell me what the difference between Coke and Pepsi is now?

Caleb: Hmm.

Robert: Outside of the logo. They're all cold, they're all refreshing, they're on sale every place, they're on sale every other week. What's the difference?

Caleb: Yeah, I heard a friend of mine refer to a Diet Coke as a fridge cigarette.

Robert: That's very funny.

Caleb: And I thought about that after. Now that's in my mind as a fridge cigarette. You don't put cigarettes in the fridge. Maybe you do, I don't know. But it's something that's now understood to be harmful but addictive, and perhaps a source of temporary relief or pleasure, some stimulant. This is just slang on the street. I'm sure Diet Coke isn't marketing itself publicly as a fridge cigarette. But for that person, if he chooses to reach for it, I'm observing it and thinking, wow, there's an aspect of the brand he identifies with: hey, I'm doing something that maybe isn't beneficial for me, but it gives me some form of gratification.

Robert: Right. Yeah, something.

Caleb: I think it was in our first conversation that you mentioned cola. There's bubbles, it's sweet, it's brown. Come on. And yet you see Coca-Cola and Pepsi having built these iconic perceptions of what they are, bringing massive figures and massive events along with it, and somehow associating it with a sweet brown water.

Robert: Yeah. It's all the same at one point in time. This would have been back in the agency days, and someplace in some closet I have a version of it. We overlaid a Coke Is It soundtrack on a Pepsi commercial visual. We didn't touch it, and except for the last two seconds, where it wasn't quite synced up, you absolutely wouldn't have been able to tell the difference.

Jack Trout, who invented positioning, at a time when it resonated much more, I think, when brands were creating themselves, said you've got to stand for something in the mind of the consumer.

Caleb: Hmm.

Robert: You've got to do something other than the category. I've come to look at these universally well-known brands more as category placeholders than actual brands in and of themselves.

We used to have a test, the psychological association test. I say a brand, Mercedes, and you go, luxury. I go BMW, and you go, power. You go General Motors, and they go, uh. And that is the sound of a brand dying. Not to knock the vehicle, the rational vehicle itself is fine and dandy. But to this day I watch commercials for Buick and I still don't know what they stand for.

Caleb: Mm-hmm.

Robert: I don't have a reason to say, based on my expectations, this is something I want to own. Cars, of course, become translations of self more than anything else.

The difficulty is that satisfaction became a rear view. It was the last time something happened. It was a given. Like I said, it's table stakes in order to play in a marketplace. Even if you're a new brand or a small brand, you still have to satisfy.

And sorry to go back to the 20th century, but in the 1990s, that's when the World Wide Web became public. Consumers were no longer dependent on brands for the information. They were talking to each other before they talked to the brand. And that's only exacerbated the differentiation, because it's the electronic version of talking over the fence to your next-door neighbour. In this case you can talk to the world: here, I'm thinking of buying this, what do you think? Whether you trust it or not, that's the reality. And what that has done is drive up levels of expectation.

Caleb: Mm-hmm.

Robert: Meaning, what do you really expect? I think I said this to you when we chatted. I wish on you and me and all the people watching this a dollar for every time they get a text or an email or a phone call or a robot call that goes, have we met your expectations? And the answer is no, most of the time. Whatever the brand or product is, they're asking about the rational stuff. That's all they're asking about, mainly because there isn't a drill-down the way we do it, to look and understand the emotional expectations you hold.

Now we're looking at something that's across 140 categories, almost 1,500 brands, throughout the nine US Census regions, men and women, 18 to 64, balanced for political affiliation these days. What we see is that expectations, cross-category, go up about 28% a year. Probably higher in tech categories, certainly not in beer or soda, but across all categories about 28%. And if you look at the key brands in those 140 categories, those brands keep up by about 8%. So now there's a 20% gap between what I really want, what I really expect, and where the brand is.

And so loyalty has moved from that transactional 1960s, 1970s kind of thing to a behavioural model, which is good, but it's moved even further, to an emotional level.

Our approach, even back then, although we fine-tune everything, was this: I can't just ask you about stuff. I mean, I can, but you're either going to lie to me... Why did the guy my age buy the sports car? He turns around and says, well, the kids are out of the house, I need something for the golf clubs, I could throw them in and drive it around. No one says, babes will think I'm hot. I'll feel younger.

On the other side are technological brands and categories. I just want my phone to work. Yeah, I know there's stuff it can do, but there are scientists someplace figuring out what more it can do for you. So it's hard for me to articulate the expectations I really have, and particularly so on an emotional level. I'm either unwilling or unable to do that.

Now again, we're assuming all the rational stuff is good, because if it's not, people move on. They might try you once, but you disappoint me once, it isn't, oh, I'm going to try you again. These days consumers just move on. So if you can attach emotional meaning to who you are and what you stand for, that would be great. That's where that movement from transactional to behavioural to emotional lives. Even if you can't really answer the question, have we met your expectations, because the rational stuff is a given, you know it inside your heart and inside your brain.

You see it with things as simple as overnight delivery. We all expect that. But you don't really want to have to pay extra for it. So you've got folks like Zappos, what we call the Zappification of America. They turned around and said, you want it, we'll send it. You don't want it, send it back, we'll pay for everything. And there's a rationale to how people buy, how many things they're going to buy, what they're going to keep and so forth. That's great. But the point is that the expectations Zappos set up for us spread like an oil slick. They don't stay contained in your category.

Now if I can get stuff sent for free and I can get a return for free...

Caleb: Mm-hmm.

Robert: ...and you turn around and say, well, we'll send it to you for free, but if you want to return it, you have to pay for it. Or God forbid, we'll send it, and it's eight to nine days if you want it free, but if you pay the $13.95, we'll have it to you in two to three days. I am willing to bet dollars to donuts that when people see that kind of stuff online, or hear it on the phone, or however they're buying, inside they go: I don't want to do that.

Caleb: I think it was Jeff Bezos. He looked and saw what Amazon was spending on their marketing, and he looked at what they were spending on shipping, and the numbers were very similar one year. That's when he said, hey, wait a second. What if we actually don't market, and instead we cover shipping, and let word of mouth drive demand? We cover shipping with Amazon Prime.

Robert: Yeah. Zappos were the ones who essentially created that. When I address graduate classes, as I do a couple of times a year, I say there was a time when there was COD, cash on delivery. The post office would bring something and someone would pay for it. Then it moved to, yes, we'll ship it from the department store, but you're going to pay for it. People don't remember, it becomes ancient times in terms of technology, that Macy's was one of the first companies online who would deliver for free. But if you wanted to return something, you literally had to take it back to the store.

Caleb: Hmm.

Robert: There was no mechanism in place to just ship it back. You look at that now and go, are you kidding me? Were we rubbing two sticks together to make fire? It seems like a ridiculous thing to do now. But part of that isn't just, oh, we got better with our technology. It's: what do you expect, as a consumer? What do you want to feel like?

Caleb: I had a really interesting conversation about a week and a half ago on the podcast with Mathew Knowles, Beyoncé's dad. He was 40 when he shifted careers and started focusing on music for his daughter, and then for others. He was already very successful selling medical equipment, with Xerox and others, so he understood brand. Xerox had a marketing school, a branding school, and he went through that and really rose through the ranks. He said a lot of the people in the music industry were focused on marketing and so focused on the craft. I think it was Universal at the time that had about $1 million for their whole marketing budget, for everything. But he knew that Pepsi had something like $25 million for the marketing of one product. And what stood out to me was McDonald's. McDonald's had approached wanting to sponsor Destiny's Child, and he was interested in having the conversation, but he said there's no way the girls are going to eat anything off the menu. So they did a commercial where they're in the studio, there's a knock at the door, McDonald's shows up with bags of McDonald's, and in them are salads. And McDonald's, as a brand, changed its menu to add a new product line to secure that level of influence. So back to the brown cola, the brown water: you see McDonald's, this icon, but there's a different dynamic, in the sense that it drove innovation to some degree.

Robert: Well, yeah, you see that a lot these days. The reason you need it is because a significant product change is extraordinarily difficult to come by. Offhand, maybe if I thought for half an hour I'd be able to think of something, but I can't think of anyone who has come up with a new product along the brand line. Formats, yes. Look at laundry detergents. That's all they can do. It's liquid, it's not liquid, it's powder, it's in a pouch. The brand itself is relying on some sort of innovation that is going to help, from our perspective, meet expectations. But take the laundry detergent formats, which I guess is a good innovation example. I don't think anyone looks at any of them and thinks, wow, that cleans my clothes better.

Caleb: Yeah, maybe getting stains out. What about agents, AI agents? They're software, but you're giving them an increasing degree of autonomy, and people are giving them the ability to make purchases up to a certain point, to look after things. I'm wondering if agents would become a new category, because they sit in this place where it's almost like a staff member or a vendor or a contractor. Hired help, to a degree, that's assisting, but it also sits at the intersection of software as a service.

Robert: Yeah, I think it's a little early to make prognostications about it. I'm not a technologist in that sense. I'm a brand guy. What I've seen so far is that it's reliant more on history than on predicting where the values are going. Outside of the fact that we've reported back that when those kinds of questions get asked, sometimes our data shows up, because it's out there. That's what it's reliant upon. I think it will get better.

Caleb: Mm-hmm.

Robert: We think what it's doing right now is allowing for greater scale. But I'm not sure that at this moment in time it's doing anything that's going to make people more or less loyal, and I haven't seen anything in terms of predictive measures. Our approach is a combination of psychological inquiry and some really neat higher-order statistical analyses, and even there, I think we're limited to a 12-to-18-month view of what's coming down the road.

We're going to have to wait and see. I know they keep saying AI gets smarter and smarter. But so far, in terms of the relationship of brands, the work I've seen is mainly historical. And that's fine. But that's the last time. That's what happened last year, or six months ago.

Caleb: The question I like to leave people with as a final question is, what do you feel like you need most to grow right now? For some, they're raising money, so they're doing a round. Others have a product launch. Others are creating awareness about something they're doing in market.

Robert: Well, I know we can deliver on what we say we're going to deliver on. What I'd like most would be an acknowledgement that 1965 or 1985 metrics aren't really, really doing it for folks. If I had my one genie wish, I would rub the lamp and say, get rid of 10-point scales, and tell me what you think you're going to do about recommending something. Because given the ubiquity of delivery, given the ubiquity of awareness, it's a look back. It's not a look forward. That would be the greatest impetus for growth for us: people going, okay, we've got some legacy measures here that we ought to kill.

Caleb: So Robert, for anyone wanting to know more about your work, brandkeys.com, is that the best place?

Robert: That's the best place. We try to answer all the questions. We've got this year's loyalty index results on it. We've got the Loyalty Leaders results. We have our 25th annual Most Patriotic Brands survey. And of course you can always reach out to me if you have any questions.

Caleb: Awesome. Well, Robert, thank you very much.

Robert: Well, you're very welcome. Thank you.