Tax Added Value

As the UK government takes measures to boost the economy, some quick-thinking companies use the opportunity to demonstrate that the season of good will is well and truly upon us.  But, as Matt Powell discusses in his latest Thursday Night Insight, customers have certain expectations that must be met, and if a company doesn’t quite get it right, they can end up damaging – rather than differentiating – their brand.

As most people in the UK are undoubtedly aware, the Chancellor of the Exchequer Alastair Darling reduced the level of VAT from 17.5% to 15% on the 1st Dec, in a bid to boost the ailing economy.  It remains to be seen whether or not it will actually do any good, but it has certainly made for some interesting PR opportunities.

When the announcement was made on 24th November, a number of retailers saw an opportunity to pounce on the story and offer the reduced VAT rate ahead of its scheduled 1st December implementation.  Most notably, DSG International (the owner of Currys and PC World) offered the reduced rate less than 24 hours after the rate reduction was announced.  Other retailers such as Amazon, Tesco and Sainsbury’s followed suit soon after, along with a raft of others.  Of course, they would have to pass on the reduced rate regardless a few days later, but then so would everybody else. TV adverts, and print campaigns were hastily concocted and implemented – and the weekend before the change, TV advert breaks were packed with advertisements from retailers enticing consumers into their stores a few days early to spend.  

By leading the pack, and taking a slight hit on their profits for the few days ahead of the change, the companies that were quick off the mark had taken the opportunity to stimulate a feeling of good-will around their brands.  By offering the reduction ahead of the 1st December, it was in fact the retailers who had offered the cut to the consumers, rather than the Government.  In some respects, thanks to some quick thinking, they had stolen some of Mr Darling’s thunder.   

Other organisations have also taken an active approach in publicising their reduced VAT rates.  Manchester United has made quite a point about the fact that they will be refunding season ticket holders with the difference in price.

Many organisations made good use of the news and found a way to boost their brand image, as well as drawing in more sales over a busy Christmas-shopping weekend.  But what of those that did not offer the cut in advance?  Of course, they would not be losing out by changing their rate on the 1st Dec – it just would not have been such a positive PR opportunity.    

O2, one of the leading mobile telecoms provide in the UK, let its customers know that it would be passing on the VAT reduction to its customers via text message.  The only problem is that it missed the boat somewhat in terms of being quick of the mark.  I received my text message on the 8th of December.  Although it was only a week late, and only seven more windows on an advent calendar had been opened since the day of the cut, the impact of using the VAT rate reduction as positive PR had all but gone.  In fact, it seemed a bit ridiculous to be creating any kind of PR around the change so far after the change. 

In market research we speak of how certain elements of an organisation’s performance can impact on the said organisation’s overall satisfaction score.  Issues are usually grouped into two main categories – ‘Hygiene factors’, and ‘satisfiers’. 

‘Hygiene factors’ are elements of service/performance  that are expected – those that do not boost the overall satisfaction score higher if they are met, but they can lower it if they are not met. 

‘Satisfiers’ are issues or elements of service/performance that correlate closely with overall satisfaction and can drive the overall satisfaction score higher.  These issues can be differentiating features that separate an organisation away from its competitors. 

Issues can change over time in importance as to whether they are hygiene factors or satisfiers.  This can be for a number of reasons: an issue may have been a differentiating feature that competitors have since caught up on, and has now become a hygiene factor.  It could be that through a successful marketing campaign, an organisation has changed perceptions of an element of its service that was once a hygiene factor, so that it is now an issue that drives satisfaction.

The message that I received from O2 telling me about the VAT reduction made me realise that a similar thing had happened with the PR stories that surrounded the 15% VAT level.  By exceeding peoples’ expectations and staying ahead of the competition, the companies that had dropped their prices early had created an opportunity for themselves to potentially boost satisfaction levels and create good will around their brands.  After 1st December, the 15% VAT level PR opportunity changed from being an issue that could be considered a satisfier, to an issue that was a hygiene factor.  The impact had diminished, and is the reason that O2’s message – despite the good will behind it – was greeted (by myself anyway) with a level of indifference.

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