By Vikas Mittal

"As board members, we only meet infrequently and are not engaged with the front line," confessed United Airlines CEO Oscar Munoz last year during the annual meeting in June. But this spring, when footage of passenger Dr. David Dao being dragged off a United plane swept the internet, it became clear the airline’s leadership needed to engage far better in situations with unhappy passengers. What, exactly, should United Airlines do? Recent research can help school the airline on how to improve.

Focus on customer satisfaction: The main source of cash flow for any company is a loyal customer base. Figure 1 below shows customer satisfaction rates for United passengers compared to "best in class," Southwest. The data come from the American Customer Satisfaction Index which provides a uniform and unbiased measure of customer satisfaction. Scores can range from 0-100, with 100 representing the highest level of customer satisfaction.

Since its 2010 merger with Continental Airlines, United's overall satisfaction rate has hovered in the 55-65 range, with Southwest topping 80. Between 2015 and 2016, however, United shows a sharp jump in satisfaction. Whether this reflects a fluke or a trend remains to be seen.

Extensive research links customer satisfaction scores to a firm's financial performance in the long run. To raise customer satisfaction, United should focus on the key factor of improving service quality.

Improve service quality: Customers who experience high levels of service quality complain less. Figure 2 gives a comparative view of complaints on a standardized basis. Southwest has consistently fewer than one complaint per flight, while United scores twice as high on this metric. Scoring high on a complaint metric is not good.

United shows wide gaps in service quality. They may spring from any number of factors: missed flights, lost luggage, inconsistent service, or other flaws. What specific issues are driving lower service quality and customer satisfaction at United? Mr. Munoz and his team need to listen to customers to find out.

To improve satisfaction, listen to customers.  Despite exhortations that "Customers are number one!" or "Customer first!" the truth is that many companies put customers last. Caught in a morass of automation, optimization, efficiency-enhancement, revenue management, branding, and advertising, companies forget the simple things that matter for customers. The only way to go back to basics is to listen to the customer’s voice. A structured customer feedback program encompassing qualitative research and quantitative customer research can give United crucial guidance. The information can help the company develop and implement a customer-based strategy for the whole company.

United should be asking: What is the root cause of customer complaints? What attributes and strategic areas drive satisfaction? Which levers should be pulled to improve customer satisfaction, customer retention and customer recommendations?

Invest in employees: Research shows employee satisfaction can indirectly affect the bottom lane by improving customer satisfaction. A recent study by Rice Business professors Vikas Mittal, Christopher Groening and Anthea Zhang showed that CEOs who satisfy both customers and employees can improve the long-term value of their companies by 11%.

For an average S&P company with a market cap of $10 billion, this translates into $1.1 billion in added value. As a point of comparison, the market cap for United in early May was roughly $20 billion. In other words: investing in workers so they can satisfy your customers would be worth about $2 billion.

To meet all these objectives, Munoz and his team have to engage intensely with their company’s two most important sets of stakeholders: customers and employees. Peripheral tinkering with processes and policies are unlikely to help in the long-term. To truly turn United around, Munoz, the board, and all United management and workers need to re-school themselves on the basics of customer satisfaction.

Vikas Mittal is the J. Hugh Liedtke Professor of Marketing and Management at the Jones Graduate School of Business at Rice University. 

Based on research by Frederick Oswald and Leaetta M. Hough

• Measures of technical competence (aptitude tests, high school grades and job knowledge tests) can successfully predict technical performance at work.
• Measures of personal competence (conscientiousness, extraversion) play a bigger role in predicting teamwork, helping behaviors and other types of non-technical performance at work.
• A manager choosing employees to send overseas should consider personal competence — not just technical competence.

Hiring the right person is one of the knottiest tasks managers face. Hiring is rarely simple, and the welter of selection techniques that employment-testing companies sell just makes it more daunting.

How does an employer know which employment tests work? And what’s most important to making a hire: ability or job knowledge, high school or college grades or personality traits such as conscientiousness?

Fred Oswald, a Rice psychology professor, has tackled these questions in his research on personnel selection systems that make use of scores on employment tests. His findings support how well-established tests of cognitive ability or technical competence are some of the best predictors of a job applicant’s future technical performance at work.

Oswald notes that there are cases where these measures can be less accurate when predicting performance on tasks that happen to be simple for all employees (either because they are very easy tasks, or because everyone at work is highly skilled at the task). But more often than not, ability tests successfully predict the technical aspects of employees’ job performance, for most employees and across most jobs.

That said, ability tests, like any test, can be misapplied. For example, if an ability test taps language ability at a twelfth-grade level, but the job only requires language at an eighth-grade level, then well-qualified applicants could get screened out.

Turning to the personality domain, measures of conscientiousness robustly predict the technical aspects of job performance. Higher scores on conscientiousness tests tend to predict higher levels of work performance. Lower scores predict poorer work performance. Even better, this prediction is relatively independent of the prediction that cognitive ability test scores provide. In other words, both cognitive ability and conscientiousness matter when selecting employees.

There’s a caveat, though. If you define conscientiousness as attention to detail and commitment to tasks — even with a catchy label like “grit” or “moxie” — then conscientiousness is required in almost all workers across the board. On the other hand, if you define conscientiousness as conformity and social appropriateness, this trait can often hinder achievement.

Employment tests take time and money. So how extensively should job applicants be tested? Recruitment before hiring is essential. So is training after an applicant is hired, Oswald says. Nevertheless, to tap the full range of available talent, minimize training needs and lower the number of terminations, he proposes that managers consider testing applicants for the types of technical competence and personal competence needed for a job.

In sales, for example, a new hire ought to be reasonably extroverted with customers, agreeable as a team member and open to new experiences as products and organizations change. Scoring 800 on a math SAT certainly won’t hurt. And what about high school or college grades? Go ahead and be impressed by an applicant’s report card, Oswald advises. Getting A’s really does reflect cognitive ability and the kind of conscientiousness that’s needed at work.

Resumes and report cards, though, won’t be enough. True, the track record on a sales applicant’s resume may predict future performance in a new sales job. Yet a highly talented young applicant might lack experience to list on a resume. And an experienced applicant might exaggerate past successes and minimize failures. Employment testing, as an alternative or supplement to resumes, can make hiring more reliable and fair.

What about managers who want to judge interpersonal skills and teamwork with an interview? They should ask all applicants the same, structured questions about job-relevant situations they’ve faced that required interpersonal skills, Oswald recommends. This works better than assuming an applicant has those skills simply because she sailed smoothly through an interview.

The farther a worker strays from home, the more important interpersonal skills seem to get. U.S. hiring managers who work for multinational companies often agonize about which workers to send overseas. The stakes are high, the required cultural and technical skills can be unclear and success is often perplexingly elusive. According to multinational companies, failure rates among expatriate workers are somewhere between 15 and 40 percent.

They may be using the wrong hiring approach, Oswald suggests. It may seem logical at first to hire overseas workers for their technical abilities alone. After all, they have a specific task to do. Why do they need to establish cultural bonds or even a common language with coworkers who simply work for the same company?

Yet personal qualities seem to matter even more with overseas hires. Despite the relative neglect of these qualities in making expatriate assignments, Oswald and other organizational researchers have found that people skills, adaptability and family situation all play central roles in supporting employee success in a foreign workplace. Sure, you can call HQ or log on to get many technical solutions. But if you ever need technical or psychological support from your coworkers, it’s going to help if they want to be around you (or even better, want to invite you to dinner).

So what’s the best way to use these techniques? Use a mix of methods, Oswald says. Make sure to measure technical competence, learning ability and interpersonal skills with tests such as those mentioned. Just confirm that the tests are reliable, valid and fair. Understanding a job applicant’s talents and past conduct in the road test of life can mean as much as the bullet points on his CV. Employee testing can be a powerful part of this approach.

In a few years, we’ll all work alongside robots. They’ll never sleep. Their resumes may eclipse those of any human. But for now, managers still need to assess the complex work units known as human beings. Good science can help, in the form of accurate tools for detecting technical excellence, people skills – and maybe even moxie.

Frederick L. Oswald is a professor in the Department of Psychology at Rice University.

To learn more, please see: Hough, L. M., & Oswald, F. L. (2000). Personnel selection: Looking towards the future, remembering the past. Annual Review of Psychology, 51(1), 631–664.

Also please see: Oswald, F. L. (2008). Global personality norms: Multicultural, multinational and managerial. International Journal of Testing, 8(4), 400-408.

On Chris Staffel, EMBA '17

A native of San Antonio, Chris Staffel grew up thinking she wanted to be a professional singer. After mastering regional theater and a classical tour throughout Russia and Eastern Europe she got tired of living out of a suitcase and put down roots in New York City. The daily grind of auditions drove her to producing. “I realized I enjoyed the business part of it, equally, if not more than acting.”

While she was producing The Dutchman she met two businessmen who were starting a midstream company. “What’s midstream?” She retells it now, laughing. As it turns out, acting and producing isn’t far off from starting and running a company. “You have to raise the capital, hire actors, market the show, and of course... perform.”

But, she adds, “If you would have told me years ago that I’d be building companies for natural gas pipeline infrastructure, I would have never believed you. I went to a music conservatory in Chicago for my undergraduate degree, followed by an M.F.A. in musical theater and then moved to New York to pursue musical theater. I’ve now started three companies in the midstream energy space.”

Even before moving to Houston, she sat in on some classes at Rice and was sold on earning an MBA. “It’s been excellent. I’ve learned so much... The network is incredible.”

Since the sale of PennTex in November, she is curious about the next global opportunities on the horizon in energy and plans to travel to various emerging markets after graduation. “I want to see where the next possibilities are.”

Her most immediate “next possibility” is singing the national anthem at Investiture, the business school’s hooding ceremony for MBAs on the eve of her graduation.

Based on research by Douglas A. Schuler, Jean Boubour, Katherine Jensen, Hannah Richter, Josiah Yarbourgh and Z. Maria Oden

• In low-resource settings, poorly cleaned and unsterile medical instruments play a role in harmful outcomes for patients.
• Recent research at Rice shows that it’s possible to overcome these instrument sterilization problems, even in low-resource areas.
• Rice scholars developed a full-suite sterile processing unit, with its own power and water sources, inside a shipping container.

In 2013, Rice Business professor Douglas Schuler visited Sierra Leone and came home determined to do battle. The country was slowly recovering from a long and brutal civil war, and though the conflict had ended a decade earlier, health threats lurked everywhere.

Simple toothaches were ominous. Childbearing was risky. Infections were often a death sentence. Returning home, Schuler vowed to attack a core problem in Sierra Leone’s health: unclean medical instruments.

Health facilities, Schuler found, struggled with sterilizing their tools for surgery. Teaming with Rice bioengineering professors, undergraduate students and alumni, Schuler saw an opportunity to reduce infections, shorten hospital stays and prevent deaths by crafting a plan for sterilizing surgical tools at a low cost. The solution demanded rethinking not just equipment management, but infrastructure, facility layout and protocols.

Most hospitals in developed countries have the hardware and funds to uphold sterilization standards. But facilities in a developing country such as Sierra Leone can’t rely on their infrastructure for basics like clean water, electricity or even a secure spot for a sterilizing unit. Schuler and his colleagues resolved to find a bridge for those infrastructure gaps.

The first question: where to put the bulky sterilization equipment? Schuler’s revelation: a shipping container. Dividing a container into separate areas, Schuler’s team creates separate spaces for decontamination, preparation, sterilization and drying and storage. The decontamination area uses filtered water pumped from water tanks, plus three sinks to clean the surgical implements. The preparation area includes a steel table, and the sterilization area holds a non-electric, gravity-powered steam sterilizer. Solar panels source electricity for the hot plate and cellphones.

It may be unorthodox, but, the team found, it works. Running surgical instruments through the sterilizer 61 times to test the design and method, Schuler’s team found that the system thoroughly decontaminated and sterilized every time. After crunching the numbers for a statistical analysis, the team concluded with 95 percent confidence that the probability of failure is less than 5 percent. And the system is simple enough that health workers in the field can be trained to use it accurately.

Having shown the potential of this holistic, low-cost sterilization system, Schuler’s team wants to popularize it into other hospitals, clinics and post-disaster settings. The units could also serve patients needing dental, maternal and neonatal care.

Containers also offer possibilities beyond sterilization, Schuler says. A vast transportation network is designed to move shipping containers throughout the world. The units are versatile enough to house diagnostic labs and patient rooms, and their access to electricity makes them possible sites for telemedicine in areas where there are no doctors.

Cost poses a real challenge: The souped-up containers are too pricey for widespread use in poor areas. But the containers offer real benefits to patients and hospitals, and Schuler is currently working on models for potential funders. Already, at least on a technical level, Schuler and his team have shown that sterilization containers can place modern medicine in reach of millions in areas with few resources.

Maybe one day fewer health challenges will lurk beyond ordinary people’s control. Business, philanthropy and bioengineering will surely play a role in this. So will empathy and personal relationships with the communities facing these challenges day to day. The good news is that ingenuity knows no boundaries. And it can travel far if packaged in the right box.

Douglas Schuler is associate professor of business and public policy at Jones Graduate School of Business at Rice University

To learn more, please see: Boubour, J., Jenson, K., Richter, H., Yarbrough, J., Oden, Z. M., & Schuler, D. A. (2016). A shipping container-based sterile processing unit for low-resources settings. PLoS ONE 11(3).

Based on research by Erik Dane and Jennifer M. George

• Researchers have paid relatively little attention to the effect of pay and job security on worker happiness.
• Articles on the subject tend to be written from the viewpoint of management.
• Scholars who really care about employee well-being should look at the role of economics in workplace satisfaction.

Gyms, yoga, juice bars — there are a lot of ways twenty-first century businesses compete to amuse and refresh their employees. And a cottage industry of scholarly research has arisen to advise them on how best to do so.

Despite the abundant literature on worker happiness, however, scholars often overlook how employee pay and job security fit into the equation, write Emeritus Professor Jennifer M. George and former Professor Erik Dane, at the business school. If scholars truly care about employee well-being, George and Dane argue, they need to look at the role of economics.

In particular, the scholars take issue with Aharon Tziner, Erich C. Fein and Assa Birati’s article “Tempering hard times: Integrating well-being metrics into utility analysis” in the December 2014 issue of Industrial and Organizational Psychology: Perspectives on Science and Practice.

By ignoring the impact of economic issues, the Rice professors argue, Tziner and colleagues neglect a core component of workplace satisfaction. Since the 1970s, economic inequality in the United States has vaulted upwards as workers have struggled with periods of high unemployment. Layoffs are no longer used as last-ditch efforts to save troubled companies, but rather as short-term tools for boosting profits.

Economic markers tell the story bluntly. Census Bureau statistics released in fall 2016 showed the U.S. poverty rate to be 13.5 percent, meaning 43.1 million Americans lived in poverty (defined as a family of four with an income below $24,257). Many workers now face long-term unemployment or job instability. Although in March 2017 the Bureau of Labor Statistics reported the unemployment rate being at a near four-decade low of 5.4 percent, many observers argue that these figures only reflect people who have looked for work in the last four weeks, and omits hundreds of thousands of “discouraged workers” who have given up looking for work entirely.

Metrics of employee well-being, George and Dane write, need to take such factors into account. Unless employees make enough money to meet their needs, the researchers argue, finding meaning in work becomes problematic. Yet such metrics rarely surface in research or in strategic decision-making. Though authors of previous articles have cited shareholders as critical stakeholders, they have rarely acknowledged that workers are stakeholders too.

Even those scholars who see employees as central to an organization tend to focus on the role of worker well-being on business. Consider the research on “dysfunctional turnover,” when workers quit of their own volition or lose their jobs during downsizing. Researchers typically address the fallout: flagging performance among workers left behind, the costs of recruiting new workers, lost customers, overtime pay — and disturbances in the normal functioning of the whole organization. What they don’t mention is the devastation that layoffs wreak on those who lose their jobs.

The scholarship, in other words, flows from a shareholder point of view. The ramifications considered — lower production, investment declines, financial disarray — are biased toward the organization.

In the past, many scholars have proposed using economic metrics of employee well-being to counter that bias. But even when used, those metrics typically describe that well-being as it relates to performance and productivity. Employee well-being is rarely treated as an important issue in its own right.

New scholarship, George and Dane argue, should take into account how layoffs and job instability affect employees and their families. The fear, uncertainty and deprivation that go with job insecurity often have long-term effects on the worker. They also have consequences for children, ranging from homelessness and hunger to mental and physical illness.

Gyms, yoga and juice bars all reflect the growing consciousness that the health of workers guides the health of business. But perks won’t cure the economic bloodletting related to low pay or, worse, job loss. For academics in the business of studying business, there’s far more to learn about what U.S. workers really need to be happy.

Jennifer M. George is the Mary Gibbs Jones Professor Emeritus of Management in Organizational Behavior

Erik Dane is a former professor and was the Jones School Distinguished Associate Professor of Management in organizational behavior at Rice Business.

To learn more, please see: George, J. M., & Dane, E. (2014). Taking a deeper look at hard times and worker well-being. Industrial and Organizational Psychology: Perspectives on Science and Practice, 7(4), 573-576.

By Rick Schell 

We’ve all witnessed variations on the scene: the embattled press secretary shrinking behind a podium, the corporate spokesperson issuing a feeble “no comment,” the business presenter fumbling to answer a difficult question.

Whether it’s politics or business, your success will depend at least in part on how well you plan and manage the question-and-answer period. You can’t plan the questions, but you can prepare to answer them well. The following public relations principles can help.

Get Your Idea Across

• Anticipate likely questions, especially the hard ones: Know your audience. Learn their level of knowledge, their experiences and their expectations. Brainstorm the questions they’re most likely to ask, and focus on the hardest of them so you can answer confidently.
• Rehearse your answers to the toughest questions: Know your key messages. For each of the hardest questions, write a clear, concise answer that reinforces your main message(s). When you’re satisfied with your response, practice saying it until it flows, sounding natural and unrehearsed. Give it a trial run in front of a colleague who understands your issue and your audience and can tell you how they will likely respond.
• Engage with the questioner: Listen and observe. When an audience member begins his or her question, square up and make strong eye contact. Your body language must reflect focused, respectful attention. Listen carefully, especially to the questioner’s volume and tone and his or her body language: eye contact, movement, signs of irritation or stress.
• Seek clarity: Be on point. Since many audience members compose their questions while they ask them, Q and A questions often are vague, extremely broad or simply rambling. If any aspect of a question is unclear, rephrase the question as you understand it or ask your questioner to do so. Then give one of your prepared responses or a variation that reinforces your key messages.

Name That (Hostile) Question

Don’t get trapped. Some questions are not meant to extend the dialogue but to challenge the information you’ve presented, undermine your credibility or hijack your agenda by introducing extraneous issues. Below are examples of a few types of hostile questions.

• The False Dilemma: These questions attempt to force you to accept one of two extreme (and usually undesirable) alternatives: “Are your revenues down because of poor sales performance or because of ongoing product quality problems?” Both choices may be incorrect and both are extremely negative.
• The Empty Chair: A questioner may invoke someone who is not present and whose opinion is unknown or irrelevant: “What would your CEO say about this situation?” Even if well intended, these questions can throw the presentation completely off track.
• The Hypothetical: These questions force you to speculate, often unwisely or inappropriately: “What action will you take if the unemployment rate reaches 15 percent?” Since so many other (unknown) things would have to take place before this could occur, trying to respond can introduce lots of extraneous and potentially negative topics.
• The False Premise: These questions force you to accept an underlying assumption that may or may not be true: “When will you announce the next round of layoffs?” The question assumes that there will indeed be future layoffs, so you will (unwittingly) confirm that if you attempt to answer it.
• The Forced Absolute: Trying to refute a question based on a false premise can often prompt a follow-up question: “So, there’s no condition under which you’d have another layoff?” Obviously, you never want to say never on an issue like that, but responding to questions that have a forced absolute may force you into doing so.
• The Slippery Slope: These questions assume that an action will inevitably lead to a disastrous conclusion: “If you hire contractors for this business function, won’t that lead to outsourcing your whole business operation?” There’s simply no way to refute the hypothetical domino effect that this question posits.
• The Ad Hominem: Ad hominem (literally “to the man”) questions focus not on the content of your message but on you as the messenger. In most cases they are not really questions but personal attacks, intended to throw you off balance and derail the discussion: “Why would we consider anything you’ve proposed?” You may be tempted to counter the implicit insult, but you won’t likely change this person’s attitude.
• The Ad Populum: Ad populum (literally “to the people”) questions appeal to the wisdom of the crowd: “How can you recommend XYZ when everybody knows that approach has never worked?” Responding that everybody does not know this simply initiates an argument.

Managing Unfriendly Questions

Sometimes the tone or structure of a question makes it clear that the questioner isn’t really interested in more information, but in undermining you and your position. When that is the case, here are some things to keep in mind.

• Stay professional and respectful: The first step in handling these sorts of questions is to keep calm, take a deep breath and listen carefully. Responding to emotion with emotion will escalate feelings. Also bear in mind that other, perhaps more important, audience members are watching how you respond. You may not win over a hostile questioner, but you will impress others with your professional demeanor.
• Establish clarity on your terms: Rather than rephrasing a question or asking the questioner to do so, take the initiative and ask your own clarifying questions: “Are you asking how we arrived at this recommendation? If so, let me describe our analysis process.”
• Don’t accept the premise of a hostile question. Reframe it: Many hostile questions have an implied premise, usually a false or misleading one: “What will keep you from repeating the mistakes your predecessor made when he took over your department?” The implicit premise is that your predecessor made serious mistakes. If you respond, “My predecessor did not make mistakes,” you have accepted that the topic is prior mistakes and helped dig your hole a bit deeper. Instead, reframe the question by focusing on the message you want to deliver: “Let me describe my key priorities and major initiatives going forward.” Rather than spiraling downward into a description of past decisions, you are free to provide a view of the future that you will create.

What If Clarifying And Reframing Don’t Work?

There are three things you can do when calmly seeking clarity and reframing do not work.

• Call out the questioner, gently: Ask a question like, “Can you help me understand how your question relates to our purpose here?”
• Call out the questioner, not so gently: Say calmly, “I don’t think we’re moving the dialogue forward. Let’s you and I talk after the presentation.”
• Know when further conversation is a waste of time, say so, and move on: Say again, calmly, “I need to move on to other questioners.”

And finally, some folk wisdom. Don’t get into a spraying contest with a skunk. And don’t try to teach a pig to sing—it doesn’t work, and it annoys the pig. Your audience will likely thank you.

Rick Schell is a former senior lecturer in management and communication at Jones Graduate School of Business at Rice University, where taught leadership communication and consultative selling.

Based on research by G. Anthony Gorry (1941-2018) and Robert A. Westbrook

• The larger the business, the harder it is to listen to individual customers.
• But feedback can pinpoint crucial problems and successes. Both can improve your business.
• Chat with customers on social media to understand how they interact with your business. Then promote their stories to build the company culture you need.

Listen up. Pull your head out of the marketing data. Pay attention to your customers — then use their stories to build a successful, inventive business.

All entrepreneurs understand that a healthy business must know its customers. This means listening in order to address problems, and using customer feedback to innovate. It’s old-school business, and there still is no better way to boost market share.

For many companies, though, this is easier said than done. Small, owner-operated businesses traditionally deal with customers face to face, building their relationships one at a time. But for large, multi-national corporations with millions of consumers, it’s daunting to connect with enough of them to truly understand their experiences.

G. Anthony Gorry and Robert A. Westbrook, both professors at the Rice Business, looked at the way large corporations attend to their customers’ stories and use them, if at all, to create a company culture.

A big company’s standard procedure, of course, would be to analyze quantitative data to craft a sort of paint-by-numbers portrait of its customers. But individual voices can get lost in this quantity of information. And customer feedback — individual voices on a macro scale — is where the most valuable marketing information lies, Gorry and Westbrook argue. Go beyond the data, they urge large companies, and listen to individual customers again.

The idea is not merely to respond to customer complaints. It’s also to find the kind of tales that can inspire others. And it works. Several leading companies are already doing this, Gorry and Westbrook write, tapping people’s innate taste for stories in order to improve customer relations and fuel organizational creativity.

Storytelling, they argue, lies at the core of what makes us human. Narratives appeal to empathy, which in turn inspires us to act.

Companies such as Harley-Davidson, Kimberly Clark, Levi-Strauss and Ritz-Carlton are skilled at this, deliberately training employees to pass along out-of-the-ordinary tales that illustrate client needs and the power of attending to them. They’re the kind of stories colleagues might tell at a staff meal, like the one about the chef at Ritz-Carlton Bali, who flew in his mother-in-law from Singapore carrying specific ingredients so he could make a soothing meal for a sick client.

But getting employees to gather tales like this for work is tricky. Gorry and Westbrook came up with an approach companies can use for spotting and collecting useful stories.

First, senior managers need to know why they’re trying to learn more from customers. Maybe they’re trying to upgrade customer service. Maybe they want to improve a product. The clearer the intention, the better the questions they can ask. And, Gorry and Westbrook point out, there’s value in listening just to keep up with what customers are thinking and feeling.

Next, managers must choose where the listening will take place: a call-in center, sales, technical support or other point of contact.

Then they should decide who will take part in the project. The group that is gathering information should be big enough to glean a proper sample of customers, and small enough to train and manage.

The next challenge: how to collect the stories? It could be via management talking directly with customers. Or company employees might emulate ethnographers, gathering stories via conversations with customers on social media.

Finally, managers have to choose what stories to save, and what to do with them. Those answers depend on the answer to the first question: What is the purpose of the research in the first place?

When a business grows, so does its distance from customers. But there are ways to cross that gap, and it is well worth it, Gorry and Westbrook argue. “By truly caring about storytelling,” they write, “business leaders can better serve their customers and their companies.”

Ever since the first innkeeper served a traveler, service providers have amused each other with tales gleaned from their clients. These tales are even more valuable up in the C-suite, Gorry and Westbrook say. Gathered carefully, customer stories are the seeds of top service, visionary products and healthy company culture – which includes great conversations in the break room.

Tony Gorry was the Friedkin Professor Emeritus of Management and Robert A. Westbrook is the William Alexander Kirkland Professor of Marketing at Jones Graduate School of Business at Rice University.

To learn more, please see: Gorry, G. A. & Westbrook, R. A. (2011). Can you hear me now? Learning from customer stories. Business Horizons, 54(6), 575-584.

Dustin Windham ('15) lived in Azerbaijan during his time in the U.S. Peace Corps and ate unprocessed and cooked-from-scratch food. It changed the way his body functioned and felt. And it inspired him to provide Houstonians with the same experience.

His startup, Grit Grocery, was born in the business school while Dustin was an MBA for Professionals student. Grit is a neighborhood grocery on wheels that is changing the food landscape in Houston. Focused on local, natural and unprocessed goods, it sells in urban neighborhoods around the city and is committed to bringing the best of the farm back to the block.

Big box groceries have become dependent on processed goods and conveyance in place of connection with community. Grit Grocery wants to change that and revive the centuries-old tradition of building community around food. Today he envisions a fleet of Grit Grocery mobile units operating in neighborhoods throughout the metro-area to address the current gaps in today’s grocery industry.

A native Houstonian and Grit Grocery’s owner and operator, Dustin believes you can’t fake food. It’s either real or not, and your body always knows the difference.

“Grocery shopping outside the U.S. looks very different — neighborhood bakers and butchers across the street from fruit stands and flower shops; small store formats where you are greeted by name and get to know your neighbors. Processed goods are rare, because cooking is both sacred and celebrated.” Dustin Windham

This article originally appeared in Rice Business Magazine, Spring 2017.

By Vikas Mittal

According to a 2015 Consumer Reports survey, nearly 80% of consumers say they would rather buy an American-made product than an imported one, and 60% are willing to pay 10% more for it.

In his 2017 inaugural address, President Donald Trump vowed to “follow two simple rules: buy American, and hire American.” Organizations such as the Buy American Movement—which was founded on the premise of promoting American-made goods and services—are also gaining popularity.

But buying American is not just a matter of price and quality. Decades of research has identified four drivers of country-based branding: country branding, country animosity, consumer ethnocentrism and local identity. How can brand managers leverage these drivers to build on the “Buy American” movement?

1. Country Branding

A product’s country of origin is known to affect people’s opinions about the product. Consumers hold certain beliefs and associations about a country’s capabilities, its state of development and its relevant history. These associations can affect whether consumers view products associated with that country in a positive or negative light.

For example, a French wine’s association with France will likely lead us to the conclusion that it is of a higher quality than a wine from India. Likewise, Italy’s brand is associated with high fashion and quality clothing. These associations are rooted in our perceptions of countries’ brands, what they are known for and what they’re trusted for.

A broad analysis of 41 different country-of-origin studies shows this effect is most pronounced when it comes to consumers’ quality perceptions. For example, American consumers’ faith in the quality of products designed and assembled in the U.S. is generally higher than it is for products designed and assembled in other countries.

Consider the results of a 1998 study that assessed the impact of NAFTA: Consumers uniformly gave higher quality ratings to a TV they were told was designed in the U.S. than to a TV they were told was designed in Mexico.

Brand managers can define and highlight specific attributes of quality, reliability, design and innovation that are associated with the U.S. For example, many companies conduct quality and design work for their products in the U.S. but don’t highlight this phase of development to their customers. Doing so could help them capitalize on the U.S. national brand and increase perceived quality.

2. Country Animosity

Historical interactions between nations can promote and cement feelings of animosity—both economic and militaristic. For example, a study of Chinese consumers published in the Journal of Marketing shows that their animosity toward Japan negatively affects their evaluations and willingness to buy Japanese brands.

In another study, French consumers’ animosity toward the U.S. was shown to negatively influence French attitudes toward iconic American brands such as Kellogg, Heinz and Ford. A 2015 study shows that American consumers’ animosity toward Russia has led them to avoid many Russian products, irrespective of their judgements of product quality.

Animosity toward a country is a potent and often deep-seated emotion that can be difficult to reverse. Marketers should use consumer research to determine associations related to country animosity and carefully position their brand to minimize any negative effects. For example, Tiffany & Co. has had a strong presence in Russia since 2013 and in China since 2008. Yet within the U.S., Tiffany de-emphasizes its presence in both countries to avoid spillovers of country animosity.

3. Consumer Ethnocentrism

Consumer ethnocentrism is the belief that it is fair, appropriate and moral to buy products made in one’s own country because it supports domestic jobs and helps the economy. A higher level of ethnocentrism among American consumers motivates them to buy American because of a sense of fairness to American workers and a desire to promote the American economy.

To leverage ethnocentrism, brand managers should strategically link their brand to domestic jobs, to growth in the domestic economy and to a general sense of fairness. Consider foreign-based companies Toyota and Honda as examples: To capitalize on the ethnocentric tendencies of U.S. consumers, both companies have worked through difficult periods to successfully rebrand themselves as key producers of American jobs and as positive contributors to the American economy.

In fact, the top five vehicles in the 2016 American-Made Index by Cars.com were produced by Toyota and Honda, with Camry and Accord enjoying the top spots. Featuring this success prominently in their positioning and branding has helped Honda and Toyota dominate the U.S. market.

4. Local Identity

Consumers’ local identity is the extent to which they identify with their local community rather than the larger, global world. Forthcoming research in the Journal of Marketing shows that consumers with a strong local identity are more invested in local causes and are willing to pay more for locally sourced products.

Compared to ethnocentric consumers, consumers with a strong local identity are not necessarily motivated by the entire U.S. economy. Rather, they find local causes worth supporting—even if that means paying more for certain products and services. Thus, local identity operates at a local and regional level, while ethnocentrism operates at a national level.

Consider the 95 million-plus customers who shopped at neighborhood businesses for American Express-sponsored Small Business Saturday. That is not a small niche of well-intentioned consumers pursuing an obscure cause. That is a major movement driven by consumers’ strong commitment to local identity.

In addition to promoting their brand’s association with America at the country level, brand managers can highlight local aspects of their products. For example, Shinola proudly promotes its roots in Detroit and Ben & Jerry’s celebrates its association with Vermont. Brand managers can clearly associate their products with regional and local communities and attach their brands to causes that support and nurture this sense of local identity. The key is to stay local, even while selling nationally.

‘Buy American’ Branding: Start With Your Consumers

Leveraging the “Buy American” positioning will require managers to plan carefully. The planning process will start by surveying customers to bring greater clarity to important nuances: How much do customers care about local versus national causes? Is the customer base driven more by ethnocentrism, local identity or perhaps both? What are the different countries with which a brand is associated? How do customers feel about those countries? Do these countries impart a positive or negative spillover to the brand? If a brand is multinational, what perceptions do customers have about the different countries in which the brand has a presence?

A better understanding of these nuances—gained through customer surveys and critical observations—will provide a roadmap for brand managers to maximize the impact of “Buy American” positioning.

This article by Vikas Mittal, J. Hugh Liedtke Professor of Management in Marketing at Rice Business, is reprinted with permission from Marketing News April/May 2017.

Based on research by Scott Sonenshein, Utpal Dholakia and Michal Herzenstein (Delaware)

Key findings:

• Peer-to-peer lending online connects borrowers and lenders who have never met.
• Lenders on startup digital platforms typically assess traditional metrics like credit — and the often unverifiable narratives written by borrowers on open-text boxes.
• These narratives are surprisingly influential with lenders — and can be surprisingly accurate about borrowers.

Startup digital platforms have vastly changed the lending business. For better or worse, individuals can now secure personal loans without ever meeting a banker. 

Most often, lenders judge a borrower’s credit risk through traditional metrics, such as a credit score, and the less intuitive tool of a short, optional open-text field where a borrower can type anything that occurs to him or her.

With so little to go on, how does a retail investor decide if the exchange is worthwhile?

Scott Sonenshein and Utpal M. Dholakia, both professors at Rice Business, think that the open-text field plays a big role. In a recent study with University of Delaware colleague Michal Herzenstein they tested this theory, hypothesizing that borrower narratives shape several outcomes of personal loans.

Even when those narratives make totally unverifiable claims, the researchers argued, they still influence lender choices. This is because loan narratives give a glimpse into what a borrower believes himself or herself to be. Oddly, these beliefs seem to actually shape the borrowers’ future choices.

To test their theory, the researchers turned to the original and second largest peer-to-peer lending platform, Prosper Marketplace. Combing through a year of personal loan data, they found a portrait gallery’s worth of identity claims: trustworthiness, success, hard work, economic hardship, morality and religiousness. These self-crafted identities, the scholars found, affected loan funding. Not only that: Connotations linked to specific word choices statistically affected lending interest rates and repayment.

Borrowers who described themselves as trustworthy and successful were more likely to get loans. They also repaid these loans ahead of time and landed lower interest rates. On the other hand, claiming to be successful did not predict actually paying a loan back.

Self-applied labels of moral probity and economic hardship also correlated with loan repayment – but in opposite ways. Moral claims positively predicted loan repayment. Perhaps, the researchers speculated, a self-regulatory mechanism also drove these individuals to deliver.

Conversely, when an applicant told of economic hardship, it predicted a lower rate of loan repayment. Lenders often funded loans for these borrowers, but the borrowers often seemed to lack either the ability or willingness to pay them back.

Written or spoken, the researchers concluded, stories remain a powerful tool to get personal loans. Online, at least, these narratives even shape interest rates and performance. In the thinly regulated new world of digital peer-to-peer lending, thoughtful borrowers and lenders can both gain an edge by paying attention to stories. 

For borrowers, digitally crafting a responsible life story can make the difference in landing a loan. For lenders, a shrewd read of these stories can yield a treasure trove of clues about whom to trust.

Herzenstein, M., Sonenshein, S., & Dholakia, U.M. (2011). “Tell me a good story and I may lend you my money: the role of narratives in peer-to-peer lending decisions.” Journal of Marketing Research, 48(SPL): S138-S149. https://doi.org/10.1509/jmkr.48.SPL.S138.