When Will They Ever Learn?

In a recent move that seemed to surprise relatively few industry analysts, Taco Bell announced that it was firing the advertising agency responsible for its award-winning TV commercials of the past few years.

According to the company, the advertising that had built strong recognition as well as profitable merchandising opportunities for the Taco Bell Chihuahua was apparently unable to move product sales. Taco Bell sales have been reportedly flat -- a situation clearly unacceptable to its management and to its stockholders.

Is that the fault of the advertising? Not according to the head of the fired ad agency, who lays the blame more squarely on the company's lack of new and compelling products. As he stated to the New York Times, "It's product and promotion that drive frequency and loyalty in fast food."

That seems to make sense -- great advertising that makes a great promise, and great products that deliver on that promise. That's the perfect combination. That's what it takes to build great brand loyalty in the fast food or "quick service restaurant" category.

The Taco Bell problem, according to the agency head, cannot be its advertising. It must be its products. Only the combination of these two can assure repeat business.

Or … could it possibly be that there's something else involved?

Which comes first: the product or the promotion?
Evidence recently gathered by The Gallup Organization would suggest, contrary to the contentions of many marketers, that this is not what creates loyalty. Neither "product" nor "promotion" is sufficient. And even the combination of product and promotion isn't enough!

We've found that it's entirely possible for a fast food brand -- or an automotive brand, airline or bank -- to have great advertising and great products … and still not have great brand loyalty.

Why not? Isn't product quality important? Isn't advertising essential for spreading the word? Sure. It's simply that these two aren't nearly enough, if the marketing challenge is to go beyond trial and to establish an enduring brand relationship.

What brings them back?
In a survey of more than 1,600 regular patrons of various fast food chains, we found that Taco Bell customers praised the company's advertising, the taste and quality of the food, and the apparent value for the money that results. This should be great news, right?

In fact, Taco Bell customers were notably more impressed by these three key marketing components than were McDonald's customers, Wendy's customers, or Burger King's customers. A clear competitive advantage for Taco Bell.

How about Taco Bell's brand loyalty? Can I possibly love the food, the prices and the ads, and still choose not to come back for more?

In the case of Taco Bell, it seems that's exactly the case. In spite of their stated admiration for both product and promotion, Taco Bell customers expressed lower intended loyalty to the brand than did customers of McDonald's.

Why the difference? It's not that McDonald's customers praise their burgers, their ads or their value meals. Quite the contrary. McDonald's customers aren't dissatisfied with any of these. But that's not where McDonald's truly shines, at least when viewed by those who regularly or occasionally eat there. Rather, it's simply that McDonald's stands out from all other fast food chains where it counts -- and that's not product, advertising or value. McDonald's excels in an area most other fast food restaurants appear to ignore, or have not yet learned to manage.

It's the people.

More than a quarter of McDonald's customers feel that McDonald's people stand out above all other fast food restaurant employees. In comparison, less than one in 10 Taco Bell customers feel that way about the employees they encounter in Taco Bell stores.

Why does that matter? Our analysis of these survey results clearly demonstrated a compelling and perhaps surprising fact: The No. 1 driver of intended customer repeat, whether the brand is Taco Bell, Burger King, Wendy's or McDonald's, was the same. The No. 1 driver is having people that stand out, by virtue of their apparent helpfulness, warmth and welcome.

Taco Bell was No. 1 in customer ratings of its advertising and its products. It was, however, last in terms of customer feelings about the employees -- and it was last, as a result, in stated customer loyalty. Taco Bell customers were a third less loyal than were McDonald's customers.

The loyalty advantage to McDonald's over Taco Bell is not to be found on the grill, or on the TV, but in the people who work the grill and who, in the case of McDonald's, even appear on the TV.

Chalupas, McSalads and stuffed-crust pizza: keys to success?
Taco Bell has promised fast food customers a stream of exciting new products, but it must thus always search for the next chalupa, the next encharito. Keeping this "exciting new products" promise over the long term is a major challenge. And yet, the long term is exactly what "loyalty" and "relationships" are all about. More importantly, the promise of exciting new products fails to address what we found to be the primary driver of intended loyalty: a great "people" experience.

In sharp contrast to Taco Bell, McDonald's has promised an employee-driven experience. "We love to see you smile." McDonald's core promise revolves around a service commitment, which moves well beyond a mere product commitment. To the extent that McDonald's delivers on this promise (and it appears that it has, far better than its competitors), it creates enviable loyalty --loyalty that the other chains can dream about, but so far haven't matched.

Taco Bell can change its advertising agency, and its advertising message. If that's the extent of the change, however, there will likely be no noticeable impact on the company's real goal: increasing customer loyalty.

Stepping outside the marketing box
The challenge for Taco Bell?

Taco Bell should put aside, for the moment, wrestling with the traditional "four P's" of Product, Place, Promotion and Price. Taco Bell has established apparent differentiation on three of these and still hasn't seen increases in customer loyalty.

They should seek, instead, to establish differentiation based on the "fifth P:" People. Our evidence, supported by an abundance of case applications, shows that employee engagement is a requisite for customer engagement. Employees must feel a brand bond if the customers they serve are to feel one as well. In the customers' eyes, the people are the brand, every bit as much -- or more -- than the chalupa. And a lot more than the Chihuahua.

Great brand relationships start with great employees. That's the foundation of the relationship. Compelling and award-winning brand advertising is a great addition. People-pleasing products, consistently delivered and competitively priced, are also important additions to this mix. Without a positive people-driven experience, however, the evidence is that "loyalty" will neither be built nor sustained. And Taco Bell will be back hunting for another chalupa. And another ad agency.