It's one thing to say trust is important to customer relationships, it's another to have the numbers to back it up. A new report from Datamonitor pinpoints where companies have lost ground, and offers suggestions on how to win trust back.
According to the report, "Building and Profiting from Consumer Trust," 86 percent of the 3,200 U.S. and European consumers surveyed said that they have become more distrustful of corporations within the past five years. The report also shows that companies are aware of this drop, with 64 percent of industry leaders agreeing that consumer trust in brands has decreased in the past two years.
Why is the customer relationship breaking down? Datamonitor's Daniel Bone, consumer analyst and author of the report, points to three main reasons. First, companies aren't as transparent to consumers as they should be, and consumers are taking notice. "Consumers are seeking information like never before and it's only now that manufacturers are beginning to wake up to it," he says.
Second, firms are complacent when they should be proactive about winning customer trust and loyalty. "Many companies assume that consumers will be loyal to their brand over the long term," he says.
Third, it all ties back to the customer experience. "The more positive experiences a consumer has with the brand, the more trustworthy he or she is likely to become," he says. When consumers see efficiency gains or other corporate moves that may jeopardize the value of the customer experience, the trust factor is affected.
The numbers show that companies in general aren't very concerned about building long-term, trust-based customer relationships. However, some companies are thinking strategically about trust, and it's proving to be a competitive advantage, Bone says. In the survey, 85 percent of respondents said that "word of mouth recommendations from friends, family, or colleagues are typically more trustworthy than any corporate generated content." As a result, more marketers are adding word-of-mouth initiatives to their marketing budgets every quarter.
Also, socially responsible companies are considered more trustworthy, the report finds. "Aligning with a cause is a significant strategy for companies to attract consumers and gain a long-term, sustainable competitive advantage based on heightened trust," the report states.
As an example, Bone mentions natural supermarket chain Whole Foods in the U.S. and Canada. In January Whole Foods announced it will purchase renewable energy credits from wind farms to offset 100 percent of the electricity it uses in all of its stores, distribution centers, and offices. Revenue at the 180-store chain rose to $1.67 billion in 2005, up from $1.37 billion, driven in part by a 13 percent increase in sales from stores open at least a year.
The warm fuzzy feeling you can give customers is nice, but there are more tangible benefits to consumer trust, Bone says. Trust can be tracked to financial impact, much in the way good brand-building can. "Brands are rooted in the trust that consumers place in them," he says. "After all, the ultimate goal of marketing is to generate an intense bond between the consumer and the brand, with trust being a fundamental factor in achieving this."
Also, trusting consumers are willing to forgive mistakes, Bone adds. "Accrued trust allows consumers to develop personal brand relationships, making them more forgiving to a brand's shortcomings." In the U.K. there was outrage in 2004 when consumers found out that Coca-Cola's Dasani bottled water was essentially tap water. However, there has been minimal damage to Coke's brand equity because it has a long-term, trustworthy heritage, Bone says.
Companies with a heritage have an advantage over newer firms, Bone admits, but any firm that takes steps to build trust with consumers has the potential to make a long-term impact. It's a strategy worth paying attention to.