While you can put a value to trust – you certainly can’t buy it.
Consumer trust in business is declining Only ½ of people say they have a great deal or quite a lot of trust in the businesses with which they regularly do business. Nearly one in five (18 percent) adult American consumers say their trust in businesses that they regularly deal with has decreased in the past 12 months. More than 70 percent of American adults had just some, very little or no trust at all in many types of business they regularly use besides drug stores and grocery stores. In addition to a decrease in consumer trust, consumer complaints are increasing. Nationally, complaints have risen for five straight years, and BBB now handles more than one million complaints per year across the U.S. and Canada. (More than 1.2 million complaints in 2007) In 2007, the Federal Trade Commission received more than 800,000 complaints.
(Ask 3-5 members of the audience how they would define trust) As you can see, there are lots of different ways to define trust, but there are two words that really sum it up.
According to the book Speed of Trust by Stephen M.R. Covey, trust is created through character and competence. At BBB, we like to think of those two key elements as integrity and performance. Integrity means honesty, which includes not only telling the truth, but also leaving the right impression. It’s about “walking the talk,” acting humbly, and having the courage to do what’s right, even when it’s hard. Trust also is about performance – your skills, your results and your track record. People need to know they can count on you to get the job done, and get it done right. Both integrity and performance are critical to building trust.
So what do consumers say is important to them in building that trust with a business? According to a recent BBB/Gallup Trust in Business survey, the most important factor is the company’s reputation for honesty and fairness, followed by it’s reputation for being dependable. Less important is the company’s reputation for providing good prices.
In looking at attributes of the companies consumers trust most, providing dependable and reliable products and services tops the list. Price falls to the middle to bottom of the list. What’s important to realize here is that price is NOT the main factor for consumers – customer satisfaction metrics play a major role.
Building customer trust seems like a given – like something every company would want to do. So why is trust declining? Economic pressures are mounting. Everyone from large company executives to small business owners are feeling pressured to cut costs and improve their bottom line. Unfortunately, this focus on the bottom line has distracted some people away from one of the most basic of business principles – customer satisfaction.
Economic pressures also have led companies to create other sources of income – at the expense of the consumer. How many of you have had to pay extra just to exchange an airline ticket? Or tried to switch cell phone carriers only to be hit with a heavy “early termination fee?” Hidden credit card fees, poor service and explanations and dishonest actions are no doubt to blame for the current environment.
Our skepticism has also been fueled by what author Robert Putnam calls a “loss of social capital.” In his book, Bowling Alone: The Collapse and Revival of American Society , he talks about how Americans are joining fewer clubs, visiting less with friends, worshipping less often, and even bowling alone rather than in leagues. This increasing disconnectedness, or decline in social capital, reduces our willingness to trust each other. Technology has also escalated the problem. With so many ways to get information, people are overwhelmed. Information is everywhere for everyone. All of this information – and confusion – is creating both uncertainty and mistrust. But, this uncertainty isn’t stopping people from using technology. As just one example, Juniper Research projects that the number of people using social networks will grow from 14 million in 2007 to 600 million in 2012.
While technology is clearly important when it comes to sharing information, word-of-mouth is the most powerful marketing tool. According to a 2007 Neilsen survey, consumers still place the most trust in other consumers, and are more likely to be influenced by their friends and family than traditional advertising. Word of mouth can be scary because you can’t control it. But, you can influence word of mouth through your actions – reinforcing why it’s important to act with integrity and be accountable for your performance.
Still don’t believe in word-of-mouth? Maybe this will help.
Building trust is not only just the right thing to do – it’s good business. Trust has a value that is hard/real/quantifiable/measurable. As a very wise P&G executive once said, “Market share is trust materialized.”
In Speed of Trust, Stephen Covey presents us with a simple way to look at how trust impacts your bottom line – Trust = Speed + Cost. Think about the formula this way – trust always affects two outcomes, speed and cost. When trust goes down, speed also will go down, and costs will go up. When trust goes up, speed also will go up, and costs will go down. It’s that simple. Examples include Warren Buffett and Herb Kelleher. This formula is just one way to look at the value of trust. The value of trust can also be looked at from another perspective.
The total value of a customer is not just the amount of money that customer spends with you. It’s the value they spend with you PLUS the value of what everyone they refer to you spends with you. And when do they refer someone to you? When you’ve treated them right, delivered what you said you would and produced results. Trust is the foundation for customer loyalty.
Once you’ve earned a customer’s trust, they are more likely to do more business with you – spending more, repurchasing and referring you to others. Much like time – trust is money.
On the flip side, if a customer doesn’t trust you, it’s likely to have a negative impact on your bottom line. When customers don’t trust you, they spend less, go with a competitor and are more likely to share negative experiences with others.
Earning trust can be as simple as learning to trust others. A coffee cart vendor in NYC set up shop on a street corner. During breakfast and lunch he always had long lines which discouraged new customers. He also noticed that as a one-man-show his biggest bottleneck was making change. So – he set out a jar and let customers make their own change. People loved it! Most were completely honest, often leaving him larger-than-normal tips, and he was able to move customers through twice as fast. Customers liked his pace, and kept coming back. By extending trust, he was able to expand his customer base and his revenues. On the other hand, a large life insurance company found it was earning large profits from customers who were so unhappy with the firm that they were paying large early termination fees to cancel their policies. After investigating, the company discovered that some agents were selling customers inappropriate policies to collect a larger commission up front. Negative word of mouth spread fast, and the entire company was effected by the actions of agents who demonstrated they couldn’t be trusted.
Hopefully by now you understand the importance of trust and see it’s business value. According to business strategists Treacy and Wiersema, there are three ways your business can stand out – you can excel at the way you do business (operational excellence), you can excel by providing the best product or service in the marketplace (product/service differentiation), or you can excel by creating customer loyalty. Creating customer loyalty is what can really set you apart. You build loyalty by building trust.
To build trust, create an environment that focuses on your customers and your employees. Engage and empower employees – make them feel like a valued part of the team. Studies show that when employees are engaged, they are more committed to your business, and to your customers. Listen and engage customers – let them know they are important to you. Constantly monitor and improve your performance, and take action on employee and customer suggestions and concerns. It’s really very simple – treat others as you’d like to be treated. Be straightforward and clear – with employees and customers – and act with honesty and integrity. BBB principles for trust can also serve as a guide.
Establish and maintain a good record in the marketplace, and approach everything with integrity. Disclose all information that might impact a consumer’s decision to buy, and stick to all written and verbal agreements. BBB works to promote these standards every day. In addition, there are several other things we are doing to promote trust in the marketplace, on a national and local level.
As we close today, I’d like to leave you with one final thought – it all starts with trust.
