Strategy Dynamics Briefing 76: Measuring state-of-mind intangibles

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If state-of-mind is to be useful in managing, we need to find reliable measures for them. A full exploration of research methods is beyond our scope here, but since the aim is to understand how strongly people are feeling on an issue, scales that in some way indicate a range from “empty” to “full” will often be appropriate. A common example is the Likert scale, which seeks ratings on (usually) a 5-point scale from “strongly disagree” to “strongly agree“.

It often useful to adopt a zero-to-one scale, where zero implies no feeling and 1.0 implies the strongest feeling possible. This works well because it is self-balancing at both ends of the scale — if there is little feeling in place, then there is little possibility of reducing that feeling still further; if the feeling is nearly full, then there is little potential to add any more to that emotion. It also allows the factors that depend on the intangible to be “looked up” in a consistent manner. How hard will staff work, for example, if their morale is at the highest possible level, or how quickly will customers leave if their annoyance is at a level of 0.5?

Do it right! Reputation: with whom, for what?

Reputation is frequently known to be important, but it is important to be clear about exactly what ‘reputation‘ we are interested in. This involves asking two questions:

With whom does the reputation exist? If we want to encourage changes in the behavior of specific individuals or groups, then it is important to specify carefully which groups are of concern. This may be the population of potential customers—in which case we may need to focus in more closely on particular segments. Reputation amongst existing customers may also be relevant. For example, a customer unhappy with a product or service may nevertheless stick with it if reputation amongst other active customers is strong.

For what does the reputation relate? Amazon.com may have a reputation amongst many consumers for being the cheapest supplier of books and other products, whether or not that is true for any particular product segment or individual item. Its reputation for reliable delivery is a quite separate issue, but important nonetheless to customers’ purchase decisions.

Reputation can also arise amongst potential employees. Accounting firm PwC, for example, has for many years enjoyed a strong reputation as a first career choice for new graduates (a highly specific group), because it is known to give them strong career development (a specific ‘value‘ of importance to those recruits).

All this implies that reputation may need to be tracked on several dimensions in any particular context, if its impact on the behavior of customers, employees, distributors, investors and other groups is to be understood and managed.

Whether in consumer or B2B markets, firms often make some effort to change how customers perceive various issues. But since customer behavior is affected by several factors, we may need to influence the perception of each. Figure 1 shows the situation facing a certain European drinks brand with a long heritage, but now falling in popularity. Once seen as a sophisticated drink, whose distinctive taste had been an advantage, it was now perceived to be too rough on the palate, and not the kind of product that young people drink.

Figure 1: The widening gap between requirements and perceptions of a drinks brand. (Click image to view larger)

The widening gap between requirements and perceptions of a drinks brand

Until next time…

 

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Think of neurones firing

Imagine you could peer inside people’s brains and count how many neurones are firing instructions, such as “look for a new job” or “fire that supplier.” Whilst all is well, most neurones are quiet, not urging action. When something bad happens, some neurones start firing, but others are also telling the person not to act — maybe the employee likes her colleagues, or we worry about the risk of changing supplier. If nothing bad happens for a time, some neurones urging action quiet down, and the longer there is no bad news, the more stop firing. But if bad experiences arrive often, the more neurones will be firing, until the number urging action outnumber those urging inaction, and the person makes their move.

Some of our efforts aim to prevent the events that start this negative brain activity in the first place, while others try, almost literally, to calm it down. After 30 years with my bank, they made a couple of bad mistakes. For the first time, I started looking at other possible banks – until, out of the blue, a box was delivered with an apology card and a nice bottle of wine. I stopped looking!

Strategic Management Dynamics book coverYou can think of positive states of mind in the same way, only now we want to make neurones fire that urge their owner to work harder or to recommend a product to friends. For both positive and negative states of mind, though, there is a limit to just how strongly we can feel about a wide range of issues—we can’t stay angry about everything bad that ever happened, or enthusiastic about everything good. So both kinds of feeling fade away over time unless stimulated once more.

This briefing summarises material from chapter 9 of Strategic Management Dynamics, pages 594-599.

Read more about the book on our website

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