Customer trust is a precondition for prosperity. However, most companies…
o Act as if customer trust is built because the company believes you are honest.
o Build only a superficial type of trust that does not lead to profitable relationships and loyalty.
o They don’t have a strategy for building the kind of trust where customers increasingly value the relationship.
Now is an excellent time to work aggressively and systematically on building customer trust. Virtually all companies have been affected by the general increase in social distrust of companies.
o A recent Datamonitor study of consumers in the US and Europe found that 86% trust businesses less than they did five years ago.
o 80% of people stop buying products or services from companies when their trustworthiness is questioned (Edelman 2005 Trust Barometer)
o People transmit mistrust to friends and associates, the people we trust the most.
o More than 33% who lose confidence in a company openly campaign against that company on the Internet.
Datamonitor and Edelman’s research shows that it goes beyond a few isolated cases. Furthermore, according to a study by Yankelovich, more than two-thirds of people do not believe in advertisers or marketing. They see it as selfish distortions.
Customers want to do business with companies they trust, but don’t know who to trust. Therefore, companies that proactively demonstrate reliability can gain a great source of competitive differentiation.
What is trust and why is it important for customer relationships? Webster gives two definitions of trust that help separate the wheat from the chaff.
1. firm belief or confidence in the honesty, integrity, reliability, fairness of another person or thing.
2. confident expectation, anticipation, or hope; as in trust in the future.
Most companies believe they are trustworthy, but they only live up to the first definition. They want to be known as an honest, trustworthy and fair company. They expect their products to live up to expectations, and when they don’t, they think they treat customers fairly.
Do you think your company is up to the task? If you say yes, ask yourself what you do proactively to build this trust. Many companies do not have a deliberate strategy.
If you have a deliberate strategy, now might be a good time to question how well it’s working. As mentioned above, Yankelovich’s research shows that the majority of customers do not believe his marketing and advertising. And, the Edelman Trust Barometer found that when looking for a credible source of information about a company or product, CEOs, employees, public relations people and celebrities rank in the bottom half.
Living up to the first definition of trust is essential for sustainable and profitable customer relationships. However, even if customers believe your company is honest, trustworthy, and fair, this does not guarantee that they will be loyal and profitable. To achieve commitment, profitability, and high lifetime value, a company must also live up to Webster’s second definition.
Companies that meet the first definition but not the second, run into the Satisfactory Confidence Barrier. Satisfactory trust is the trust that allows a customer to feel comfortable buying products or services from a company. It is a feeling of confidence that the company will stand behind the product. It is confidence enough to buy a well-defined product, a commodity. In a world of abundance and overwhelming choice, satisfying trust does not ensure repeat business. Customers buy products that offer the best tradeoff between trust satisfaction, price, and convenience. Some companies become complacent because they feel they offer the best combination of all three. Unfortunately for them, all it takes to lose customers is for a competitor to create the perception of a better deal. The company that wins business in this way has not increased any real relationship value.
The operative words in the second definition of trust are “hope” and “confidence in the future.” Many purchases these days are not merchandise; they are not well defined and may not have a history. To make these types of purchases, the customer must take a “leap of faith,” and this requires trust. In this type of trust, the client must believe that the supplying company is really interested in a win-win relationship. That is, they are interested in a long-term relationship where both parties benefit. This type of trust stems from experience with a company that demonstrates a real win-win commitment. Since virtually all customers have been “burned,” companies often have to subdue their short-term interests to encourage the development of loyal trust.
The client wants to build relationships that help them make “leap of faith” decisions with more confidence. Being able to rely on this trust helps them simplify things in an increasingly complex world. When this happens, trust in the relationship becomes more important to customers than price and convenience. It begins with “hopeful confidence.” Clients want the best for them. They want to adapt and embrace change, and will place an extremely high value on relationships that help. Customers are on the lookout for signs from companies that their “hopeful trust” will be well placed. But this “hopeful confidence” is only a test. If experience shows that trust in relationships is justified, faithful trust will emerge.
When trust transforms from “hopeful” to “faithful,” a very significant shift occurs. The main concern of customers goes from price and utility to the search for advice and guidance. When price is an issue, customers have information. When they seek guidance, they openly share. “Faithful trust” allows this openness. It also allows both parties to thrive and builds a foundation for co-adaptation, now and in the future.
The trusted company gets the immediate sale, but they get so much more. Gaffes or mistakes that could have once ended a relationship are now being overlooked for the good of the relationship. Customers become turbocharged advocates. They don’t just tell others what you sell; they promise for you and the value of the relationship you deliver. They come to depend on your business and, as a consequence, they want you to prosper.
The real-life story of Billy Blue, a men’s clothing designer in San Francisco, illustrates the power of trusting relationships. Billy Blue’s thriving business took a nosedive during the dot-com bust. The recession was so severe that its owner, Billy Bragman, considered closing its doors. Instead, he wrote a letter to his customers explaining the situation and asking them to buy more clothes. Although many of her customers had their own commercial “trials and tribulations,” they increased their clothing purchases. One guy sent a check for $2,500 with a note saying, “You know what I like, just send me some new clothes.” Billy Blue customers could easily have turned to other men’s stores, but they want to support Billy Blue. They valued their relationship with Billy Blue and didn’t want it to shut down.