What Audi Doesn't Understand and Acura Does

One of the core components of brand and corporate reputation is customer service, yet many companies fail to fully provide the level of service to match their high-priced brands. In the auto industry, the issue has often been the distribution relationship between the manufacturer and the dealer which leaves the dealer in charge of the brand in relation to the customer.

My wife leased a 2007 Audi A4 two years ago and almost immediately began having problems with the navigation system. She took the car back to the dealer 5 times and each time they said they had fixed the system, but it still did not work properly. Finally, I wrote to the president of Audi US, who forwarded my letter of complaint to a regional service manager to handle the problem. To say that the regional service manager was a low-level complaint department with no ability or authority to properly deal with the problem would be a bit of an understatement. Having lived much of my adult life in the corporate world, I could tell from my numerous telephone coversations with him that he was unable to solve our problem, even if he were willing to do so. But, because he had so little knowledge of customer relationship management, any appeal to his sense of marketing, brand and reputation management failed to make even a dent.

He suggested that we bring the car into yet another dealer for checking the system. I commented that after 5 tries we were more than a bit frustrated with that route and that the company should replace the system. He refused to do that and said he had no authority to make such an offer. He suggested that we could order a new software package and download it ourselves. We found this offer unsatisfactory. After several very frustrating telephone conversations and letters back and forth, we decided that our best course of action would be to wait out the 2-year lease and get rid of the car.

When my wife finally returned the car to another dealer, she asked if her experience was typical. The gentleman at the dealership said: "I shouldn't be bad-mouthing my company, but this is the way Audi treats customers". He gave us a few other examples in which Audi would not stand behind its product and service was short-changed.

Now, let's juxtipose this against my own personal experience with Acura. I own an MDX, which I bought in 2005. A few months ago, I started to have some problems with my navigation system. I took it in for service. I got a call from the dealer who said that my system was acting up for them as well and that they thought that I should get a new software package installed. The normal cost would be $285, but they had gotten Acura to agree to pick up the cost. Situation solved. Customer happy. Loyalty to the dealer and Acura secured.

After my wife turned in her Audi, she bought a new car. Guess what she bought? She got an 2008 Acura TL from the dealer who had been so good to me.

The morale of this story is so simple that it is amazing to me that every company does not fully understand it. When dealing with high-priced, high-quality brands, one must understand that customer service is an integral part of the total brand experience. Selling a car is not like selling Coke. A can of Coke costs a dollar or two and has a usage life of a few minutes. Cars are expensive and have usage lives of years. The management of the brand cannot, like a Coke, stop at consumption. In fact, even Coke realizes how to enliven the brand experience to create return customers. Audi's customer service and brand management were so poor that they can only serve as illustrations in this blog, to my clients and with my student of what not to do.

A few decades ago, Audi had a problem with its breaking system. At that time, its response was to blame U.S. drivers for not knowing how to drive high-performance European cars. The real fault, it was found, was an engineering problem. I guess the people running Audi still have not learned a sufficient lesson in how to handle customer service and what good brand and reputation management really mean.

Crisis Planning is Not Reputation Management

Whenever communications people talk about reputation management, the talk immediately turns to the subject of crisis management and how important it is to prepare the organization for a crisis.

Crisis managaement is to reputation management as fire fighting is to fire prevention. Crisis management is important and plans should be in place, but it is handling of an already existing problem. Reputation management should be a strategic process that gets everyone in management aligned on how to balance the needs and interests of all stakeholders so that reputation is enhanced and risk is minimized.

A good way to manage reputation in a complex organization is via the use of a Reputation Council. The Council brings together all of those in the organization responsible for "stakeholder relations". The membership would include communications, human resources, marketing, sales, government relations, investor affairs, and any other function that has responsibility for an important stakeholder of the company.

The Council would have as its objective the integration of the company's reputation efforts with regard to employees, customers, investors, media, government agencies, and all other stakeholders. The Council would all work from the same strategic guidelines and would share research, both that already on-hand, as well as that which is needed. It is amazing how often I have found that research done by one organization is not shared with other organizations.

Through such a Council, reputation can be managed as a holistic, strategic company-wide process. Crisis management would then take its rightful place as a tactic within the overall plan.

Some Basic Principles of Reputation

I have been attending a number of meetings at which a variety of people talk about reputation. It is interesting how liberally and non-specifically the term is used. It seems that many people suggest that simply doing good public relations or having good corporate advertising will create a good reputation.

The following are some basic principles which should provide guidance for those involved in corporate brand and reputation management that, I hope, will make the discussions increasingly more specific:

1.Brands and reputation are judged within a competitive set and each organization must differentiate from other offerings;

2.An organization needs to behave in trustworthy ways to earn trust and build reputation—communications alone will not do it;

3. Stakeholders decisions are made on specific, immediate needs, and these can change over time;

4.Not all stakeholders are equally important. You must have a way to prioritize stakeholder value and potential risk;

5.Stakeholders are increasingly defining brand(s) and reputation on-line;

6.The objective of brand and reputation management is to deliver measurable returns to your organization.

I will be posting more specific suggestions that elaborate on these principles in future blogs.

What Could Corporations Learn from One Lady?

I returned today from the funeral of my Aunt Judy Feldman. She passed away at the age of 83 after a blessedly short battle with cancer. She was a dynamic, fun-loving, artistic women with an infectious laugh. She and my Uncle Sid had been married for 62-years and still walked around the mall holding hands.

The funeral was a wonderful tribute to her life. It was a non-traditional, non-religious service led by her son-in-law. He began his eulogy by saying that the service "was for a Jewish woman, it would be led by a Catholic man, and it would follow the Quaker tradition of sharing thoughts and memories". We all listened to some of her favorite music and then her two daughters--my cousins-- talked about their mother. Others of us gathered were then invited to share memories and stories. Finally, my uncle thanked us for coming and said that he hoped all of us would find the same good fortune he had found to be in love with someone that was so delightful for so long. His message was that we should not feel sorry for him, but rather that we should be happy for what he had for so long.

I sat and listened before I got up to speak. I had always loved my aunt and uncle dearly. They were always two extremely important people in my life, but I could never explain why. I began to understand. Virtually everything I was going to say about my aunt was the same as what had been said previously. It struck me then that I loved her so much because she loved unconditionally. She shared her love with others and asked for nothing in return. She treated everyone the same. I had felt wonderful in her presence and loved being with her, but I wasn't necessarily special. She made everyone feel special. It was never superficial. It was genuine caring. She truly listened and connected with those around her.

There is a new Arthur Page Society paper that seeks to establish the "Authentic Enterprise" as the phrase to capture the needs of the corporation in today's environment. After listening to the stories today about my aunt and her authenticity, I started to wonder: How many corporate executives are authentic enough to lead authentic corporations? How many really listen and care about their employees, their customers, their investors, their communities, their critics, and other stakeholders? Most want people to listen to them and feel that they deserve to be listened to, but how many spend time listening and caring about others?

My Aunt was a truly remarkable woman who I was fortunate to know. She was authentic. She treated everyone the same. What you saw was what you got and what you got was good. She could have taught so many companies how to be authentic, if they had only had the good fortune to have known her.

Reputation is About Competitive Advantage, Not Being Liked

I have attended a number of conferences lately at which the term reputation was bantered about. For the most part, the term was used to denote an organization "doing good things", or "building up the trust fund so that there are friends when times are bad". These definitions fall far short of something anyone could or should take to a CEO for action. It's little wonder that there are so many companies doing so many things poorly, but investing in community activities and philanthropy believing that they are building themselves a good reputation.

A good reputation should build a relationship with key stakeholders and have them behave toward your organization in desirable ways. That is, a good reputation should help you attract and keep the best talent, it should lower your cost of capital, it should attract investors, and it should make it safe for government officials to support your actions. But, let's recognize that organizations do not operate in a vacuum. Everyone has competition. A good reputation, then, should help differentiate you from your competitors in the eyes of your key stakeholders.

So, let's stop all the talk about about doing "good things" so that people like us more. Having people like us is great, but companies don't exist to have people like them. They exist to make money. Companies with higher reputations tend to do better financially, but the financial success comes because a company meets the needs and interests of its stakeholders better than do others in the competitive set. Certainly, companies that desire a good reputation also need to be concerned with how they are viewed by their communities and others, and social responsibility is an important part of a reputation program. But, social responsibility of CRM, as is is often called, is not, I repeat is not, a reputation program. It is just part of it.

Let's put the focus where it should be when we talk about reputation with CEOs and others--on helping the organization to create value and beat the competition. That's what marketing and communications executives get paid to do.

Privacy--Is a New Concept Needed?

There has been considerable concern amongst many people about the potential loss of privacy in the new media environment. What will we do, ask these people, when advertisers and others can reach us through our smart phones?

I share the concern about unwanted intrusions, but we have lived with these when we have used other media and have learned how to deal with them. No one invited commercials that interrupted their television shows. We never knew we had a choice other than to accept these intrusions. With new technology, we can zip through the commercials we don't want to watch. Unwanted telephone calls can now be blocked through the "Do Not Call" registry and call display.

We have never really had the privacy that we believe we have had and, if we are smart, our new technology may not only allow us more privacy, but also allow us to receive information and offers specific to our interests. To achieve this goal, however, will require us to rethink our concepts of privacy.

I have worked with lawyers at several companies who have taken a very strict definition of privacy. They will not accept the notion of "opting in" or "opting out" of information. By opting in, a customer would willingly give the company information about him or herself in exchange for receiving information, goods and/or services specifically of interest. A good example of this is "Real Age", a medical web site that asks users to provide some rather detailed and otherwise confidential medical information about themselves. In exchange, the user receives an analysis of that information that calculates their so-called "real age". Not only does the user receive this analysis, but by opting in, they also are willingly giving their permission to receive other interesting medical and health information. I have used "Real Age". Not only was I pleased to learn that my "real age" was 12-years younger than my actual age, but I later received some useful information about dieting that I could use.

When I mention this site to pharmaceutical companies, they argue that the FDA and their lawyers would never allow them to share information directly with consumers in this manner. "Opting in" is not considered possible in the pharmaceutical industry. What a shame? These companies should recogize that patients are getting information from the Internet, some valid and some not valid. There are blogs and website of all stripes that provide medical information. In fact, doctors regularly indicate in research that the majority of their patients come to them to some extent "self diagnosed and self prescibed". If pharmaceutical companies cannot communicate with patients, they are denying these patients valuable information.

Now, at the same time that I suggest this, I realize that there will be some pharma companies that will misuse the ability to communicate. They will attempt to sell the patient rather than having a helpful dialogue and/or sharing unbiased medical information. Consider the strengthening of the relationship between the pharma industry and patients if the industry were willing to share and discuss medical information rather than focus on pushing their drugs. I have not yet understood why the pharma industry is a laggard in understanding pull marketing.

The point I would argue is that we need a new concept of privacy that is more in keeping with the possibilities of new technology. We need to recognize that some people are willing to provide information in exchange for something of value. Some people, obviously, will not want to "opt in" and that should be respected. It is hoped that sites like "Real Age" will not abuse their relationship with their users, but rather will help lead a new revolution that provides willing consumers with greater useful information than they were ever able to receive in the old media environment.

Corporate Social Responsibility (CSR)

I recently attended a meeting in New York for senior communications officers where CSR was the focus of a two day meeting. I came away from the meeting excited to see so much attention focused on the issue, but concerned that the definition of CSR remains so fuzzy.

CSR has come to mean different things to different people and companies. The term is often used to indicate environmental responsibility. The Sustainability efforts aimed at "Triple Bottom Line" reporting by companies has spurred much of this effort. Clearly, there is a growing interest in global warming and the environment in general in the U.S.

The problem is that CSR is not another name for environmental responsibility and should not be so. CSR is about corporate social responsibility, and there are many forms that such responsibility can be demonstrated. For example, while a chemical company is expected by its stakeholders to be environmentallly responsible, the same focus by a bank likely would not get the same level of attention. I mention banks because I have come across a number of banks that have been reporting and touting their environmental records. This is wonderful and the effort will likely save the bank lots of money. However, its environmental CSR programs are likely not going to win the bank the same level of public reputation as they would the chemical company committing the same level of action.

The important of CSR is well understood by communications executives, NGOs, media, community groups and others. However, there still are many companies run by executives who need to be convinced that such programs are important to the business. Simply trying to sell the importance of doing good is not likely to be convincing to those who want to know that the company's resources are being used to enhance the company's overall value.

The best social responsibility programs, and the ones that are likely to garner the greatest support within the company, are those that are tied to the company's business strategy. A great example is the current program Johnson & Johnson is doing for the American nursing industry. Nursing has numerous problems. Nurses have long hours, poor pay and not as much respect as it should. Because nurses are important stakeholders for J&J, the company made the problem its responsibility and took on the cost of running a "Campaign for American Nursing", that celebrates the profession. This is a perfect example of "doing well by doing good". J&J has used its resources to help an important constituency. The program is directly linked to J&J's business.

Compare this to a utility company I talked to that is focused on poverty. This is a wonderful effort, but it is not tied to the company's business strategy. The program was selected because it is a favorate of the CEO. Perhaps this same utility should offer free or severely discounted utilities to those living below the poverty line and form a partnership with a bank and mortgage company that might help poor people secure financing, jobs, etc. There would then be a program directly linked to the utility's business and it could leverage its local business network to still achieve the focus on poverty that inspires the CEO.

Often, companies shy away from programs that are tied to their business interests, thinking that this transparency might work against them. Just the opposite is the case, especially if the programs are well thought through, well executed, and good for both the community and the company. Companies need to recognize that value is created when their are enhanced relationships with stakeholders of interet and importace to the business.

One of the very best CSR programs that I was involved with was when I was at Bayer Corporation. We became leaders in efforts to enhance the interest of grade school children in science and math education. Why? Because the data showed that the U.S. was losing its competitiveness in these fields, which a company like Bayer--a pharamceutical and chemical company--despirately needed. We focused on grade school children because we learned that those who do not have an interest in science of math by 5th grade are likely not to take these courses in high school and, therefore, not to major in them in college. We were losing our children early and we needed to address this program, both for our nation's competitiveness and well as for our company's. Our work not only won us kudos, but it also brought us into closer relationships with key stakeholders like the government, both state and federal. Our employees gained enormous pride in the company and our recruiting efforts were enhanced as well.

It is important for companies to maintain and enhance their CSR activities, but they also need to focus them more clearly. Moneys spent on activities not tied to business interests are not likely to be continued when times are tough, and CSR needs to have a long term horizon. In addition, while companies may be doing many things out of concerns for the community, most are typically looking to gain some reputational advantage. To build reputation, one needs to differentiate and CSR should be part of and integrated with the overall reputation program. Let's keep in mind that employees and customers are key stakeholders for all businesses. The satisfaction of those two groups with the company enhance value and drive financial results. If we can develop CSR programs that build relationships between employees and customers, similar to what J&J and Bayer did, we will be integrating CSR with the business interests and making is strategic to the business. This, will be a formula for success for all.