Brand Strategy

How Service Brands Grow

Posted 09 Nov 2022

Discover how marketers handle competition from similar brands when trying to grow. Learn the difference between consumer perception and experience with a brand.

Service brands

The old adage ‘When all the roads to fame are barred, take something simple and make it hard’ is what comes to mind when marketing dogma is passed off as marketing “laws.” Suggesting that there are codified laws of marketing that must be followed is analogous to believing that the route suggested by Google Maps is the sole way to arrive at your destination.

Closer to marketers’ lived experience is that patterns of consumer behavior are better characterised as “heuristic” rather than as “laws.” This heuristic process enables marketers to observe a single cue or a recognizable pattern of cues to feed into decision making. For example, the perception-experience heuristic that explains buyer choice in services markets.

Perception relative to experience

When it comes to growing market share in services categories, the consumer’s choice amongst competing services is an interplay between the consumer’s perception and experience. For expediency, perception is defined as how a prospective customer regards a prospective brand and experience is how an existing customer encounters their incumbent brand.

To illustrate, let’s say network performance is a primary choice driver for which telecommunications company you subscribed to. After experiencing a series of outages with your existing carrier, you increasingly perceive Verizon, a competitor, has superior network performance. Fuelling that perception is Verizon marketing communications based singularly on the network performance.

Verizon best network in the US

Raise the prospective customer’s perception of a competing brand based on a main choice [i] criteria to be above the incumbent brand’s experience, and you will have the platform for acquisition of that prospective customer. For marketing communications effectiveness, crucially, the narrower you define the category driver on which you seek to distinguish your brand, the greater the likelihood of success. Provided that is, that the organisation’s performance on that category driver is competitive and that category driver is a scientifically verified, primary driver of choice.

Heuristic versus “indisputable laws” and godly opinions

What is the probability that closing the perception-experience gap between service A and service B will generate switching from A to B? The probability is high however, not a certain event and whilst able to be generalised, still only qualifies as a marketing heuristic, not a law.

The perception-experience heuristic is valuable for guiding marketing management however, to suggest it is an indisputable law of behaviour would be nonsense. Despite this, there are volumes of evidence locked away in proprietary studies, along with business outcomes, that definitively conclude that the perception-experience heuristic is how service brands grow.

Marketing Communications is the primary challenge

In services markets, the interrelationship between perception and experience helps to explain consumer choice, market share and indeed, changes in market share [ii]. In the process, there are three distinct implementation prerequisites that significantly impact the success of the outcome:

  1. Pick the right choice driver upon which to distinguish your brand
  2. Gain unfailing support on aligning and communicating that driver, and
  3. Successfully communicate to the market.

At the outset of the acquisition journey, almost always, experience scores are higher for the customer’s incumbent brand than their perception scores of a competing brand [iii], and therein lies the primary challenge for marketing communication.

When it comes to capturing the actual performance of competing brands, it is not that the experience scores are superior, or the perception scores are wrong. It is about the gap between these two measures. In ordinary circumstances, the consumer will NOT choose a competing service until they perceive its performance on a main category choice driver is higher than their experience rating for the incumbent service. Again, this is the foundation of how service brands grow. Choice drivers are comprised of both rational drivers (price [iv], performance, and reputation) and discrete emotions.

How many category choice drivers should the brand seek to establish perceptual ascendency? Or expressed another way, how many choice drivers should be included in the creative brief? Brand owners frequently impose too much content into the creative process. In betting parlance, it is analogous to “laying the field.” The gambler lacks confidence on their primary bet and so, bets on every horse in the field. Instead, the optimum approach is the communications triple play [v].

When it comes to rational drivers, to optimise cognitive processing and therefore comprehension, it is best to have a single message by focusing on a single, rational choice driver – the reason to believe. When buyers “know” something about a brand, their perception tends to fill in the rest. This is analogous to the psychological principle of closure but beware, closure is bidirectional. Buyers might “know” something negative about your service and perceive the brand as poor on a multitude of seemingly unrelated choice drivers.

Without a trace – no truth in ‘buyers have the same beliefs’

Byron Sharp [vi] believes that buyers of one brand consider their brand “in much the same way” as buyers of rival brands consider their brand. In his words, ‘The buyers of Brand A have the same opinion of Brand A as buyers of Brand B have of Brand B.’ According to thousands of Forethought category studies we find no evidence whatsoever for such a proposition. Sharp’s assertion is plainly wrong. As will be illustrated below, it is common to find statistically significant differences with how buyers of Brand A and buyers of Brand B rate their own brand.

I have chosen two Australian oligopolies to illustrate: grocery and banking. Oligopolies are known for their homogeneity and matching behaviour and yet, even in these instances we can see such significant differences. More broadly, and far more importantly, we can see evidence of these differences between how customers score their own brands versus prospective brands.

Service brands3

In the grocery example, customers of Brand One, Two, Three and Four provide the experience ratings shown on the right. Prospective customers for each of these brands, provide the perception ratings shown on the left. The varying differences between these corresponding ratings is the perception-experience gap and is represented by the various colour-bands above.

The differences in experience scores between Brand One and Two, Brand One and Three and Brand One and Four were tested at the 5% level of significance, with the red box indicating differences that were significant. For example, the average experience rating of Brand Three (7.12) is significantly lower than the average experience rating of Brand One (7.73). The same testing approach was applied to the perception scores with the only significant difference being between Brand One and Two – indicated by the blue box.

Brand Two having the highest perceptions scores means it would be the most likely second choice for customers of Brand One, Three and Four.

The banking service illustration reveals a major issue. Brand Five has delivered class leading service and yet, it has failed to communicate the performance to prospective customers. Assuming the Brand Five performance is on a choice driver the gap between perception and experience is a major issue for the marketing communications of Brand Five.

Service brands4

Marketing “laws” and godly opinions

Picking the optimum choice driver upon which to distinguish your brand is pivotal to closing the perception-experience gap. According to McKinsey & Company, ‘You may think brand success is all about the media budget, but it isn’t. Message beats media.’ [vii] The greater importance of what is said in marketing communication, compared to where it is said (media) has been a consistent finding. [viii] The decade long fixation on media analytics coupled with a lack of science to determine what is to be communicated, continues to present a challenge, and overlooked opportunity for practitioners.

Marketing communications should set out to change the perceptions on a single choice driver and link to a precise message sent. Consequently, quantitatively pretesting the proposed creative amongst the target audience for message received, is a core element of good marketing practice.

When the stakes are high and marketing investment sizable, pre-testing of the creative should be mandatory. And yet, staggeringly, according to Professor Byron Sharp of Ehrenberg-Bass Institute for Marketing Science. [ix] “Pretesting is one of the things that marketers should stop because, there is no evidence that it leads to better advertising.” He goes onto to say that research rarely helps creative. His estimate is just 1% of instances and instead, “creatives should just get out into the real world and seek inspiration elsewhere.”

Someone might harbour such an opinion if they did not appreciate the importance of what message is communicated in advertising and believed that advertising effectiveness is no more than “did it reach their brain, and did they realise it was us?”[x] In the words of Charles Kettering, ‘Education is man's going forward from cocksure ignorance to thoughtful uncertainty.’ Making such absolute statements suggests that Byron Sharp would benefit from a broader perspective.

[i] Weighted by inferred importance using multivariate analysis and includes price, reputation, performance and emotion.

[ii] Forethought has produced thousands of predictive models that routinely correlate with in-market performance as recorded by third-party organisations with correlations of better than 0.8. The average lag time between the model’s prediction and in-market behaviour is two to three months. Hundreds of services businesses have applied these models to gain relative market share.

[iii] In several thousands of studies and tens of thousands of choice attribute scores, I have seen less than a handful of exceptions.

[iv] Please see Marketers – Stop Feeling Dirty About Being Cheap, and Stop Ignoring Your Price Brand!

[v] CMO Tenure Can Be Brand Damaging,

[vi] How Brands Grow: What Marketers Don't Know, Chapter 5, p 66, Chapter 8, p 114, Byron Sharp, 2010

[vii] ‘Marketing Performance: How Marketers Drive Profitable Growth,’ Bauer, T. et al, (2016)

[viii] A 2006 study by Project Apollo found that the contribution of creative to sales was, on average, far greater than the contribution of media, with the former accounting for 65% vs. 15% for media. In a follow-up study in 2017, Nielsen Catalina Solutions, in partnership with CBS, revised those shares to 49% and 36%, with creative still outpacing media in its effects.

[ix] Black T-Shirts Podcast, ‘Science, Owls & Standing Out,’ Byron Sharp:

[x] op. cit. Black T-Shirts Podcast.