There is much debate on customer trust and do companies undervalue their customers, it was Warren Buffet who once said “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
When we start to look at the customer value, this term has several definitions, any correct measure of the term should be described as customer lifetime value. Companies can increase this value by acquiring more customers. Equally, companies can destroy customer value in a variety of ways: to boost revenue, to cut labour costs and to reduce operating costs. Leadership and when reviewing the importance of customer value should make this a business priority.
Investors always ask difficult questions, however, it is widely understood the importance of customer value, many growth-stage companies preparing for an IPO or exit are in the main focused on acquiring customers that are unprofitable, but project earnings on future expected earnings from multiple products or services.
Leadership must gain and maintain the support of board members and investors by educating them about an employee based engagement program aligned to strategy. Leaders need to demonstrate to investors and board members that the decisions made will yield strong equitable returns, in the form of increased customer acquisition and retention, growing revenues, lower costs to serve and measures to improve customer value.
It is always an easy option to blame a companies short termism on shareholder pressure and a bias towards quarterly financial reporting. But managers share the blame when they fail to educate investors about the customer value their company creates or when they resort to quick profits instead of investing in long-term customer loyalty and value.
It would be irresponsible for any leader to ignore such a proven source of profitable growth. Boards and shareholders should demand that companies grow customer value, support the necessary investments, and push for new accounting standards that make the returns on these investments visible.
The true purpose of a business, Peter Drucker said, is to create and keep customers. Most managers understand this, but few behave as if they do. Under relentless earnings pressure, they often feel cornered, obliged to produce quick profits by compromising product quality, trimming services, imposing onerous fees, and otherwise short-changing their customers. This short-termism erodes loyalty, reducing the value customers create for the firm.
Any strong relationship is built on a foundation of trust and that includes the relationship between brand and customer. Whilst world events have tested that bond in many ways, it has also created an opportunity for brands to better understand customer values, make commitments that align to those values, and then deliver on their promises.
By acting with stakeholder values as their guide, brands can demonstrate trustworthiness and drive customer loyalty, employee motivation, and repeat purchases. A Deloitte survey conducted last May shows that 88% of customers who highly trust a brand have bought from that brand again, and 62% of customers who report highly trusting a brand buy almost exclusively from that brand. Meanwhile, 78% of employees who highly trust their employer also feel motivated in their jobs.
According to the “Edelman Trust Barometer,” consumer trust in businesses to “do what is right” averages only 53 percent globally. The report states that banks and other financial services firms are the least trusted industries for the second straight year. Only 45 percent of respondents trust financial services firms to do what is right. And even the best-performing industry—technology—garners the trust of only 79 percent of those surveyed worldwide. This status quo is not sustainable, from a customer or business standpoint.
The need for a trust-based relationship can’t be denied. But marketing executives who want to build customer trust have one question: How?
It starts with building a framework and guiding principles, which can be translated into specific actions for employees to take during interactions with customers. In their book The Trust Paradigm, Geoff Hudson-Searle and Mark Herbert identify six drivers of trust based on intent and competence that any organization can operationalize:
• Customer experience
• Employee empowerment
• Employee recognition
Building trust requires cooperation among multiple functions, including product development, information security, talent, and marketing strategy, among others. However, coordinating trust efforts across disciplines can be challenging, since different roles are responsible for different activities across the enterprise. While some functions, such as marketing strategy, have a clear owner, ownership of others, such as product road map and corporate culture, is more distributed across the C-suite.
Some companies are addressing this fragmented trust environment by establishing new roles that better encompass the multiple facets of trust, such as chief trust officer. This represents an important shift in mindset based on the acknowledgment that trust is an enterprise wide issue requiring executive-level coordination.
Organizations can take the pulse of their trust efforts by considering four components of trust, as identified by a Deloitte survey: humanity, transparency, capability, and reliability.
Together, humanity and transparency characterize a trusted brand’s messages, while capability and reliability guide that brand’s actions. Marketers can bolster trust by isolating each of these signals, identifying areas for improvement, and ensuring that brand messages match actions.
As organizations begin to address trust more holistically, marketers can help drive change by shifting the focus to values. While brands have historically considered demographics such as location, age, and gender when segmenting audiences and crafting messages, such categories are, at best, a proxy for how customers may act. By pivoting from demographic- to values-based segmenting, brands can more effectively influence customer behavior. Segmenting by values establishes an empathetic connection, which can make people more open to trusting a brand’s intentions, according to Deloitte’s Values Compass research. Further, by understanding people’s values, brands can ensure that the promises they make align with what their audiences care about most.
The Values Compass research shows that most people share some combination of eight cardinal values: ambition, trying new things, curiosity, sharing with others, belonging, caring for others, control, and learning new things. Among those values, belonging and control have risen to the forefront of many people’s minds during the pandemic, and trust is connected to control. In fact, a 2020 Deloitte study found that, across population demographics, control increased in importance by 31% after COVID-19 became widespread.
To be able to deliver on their promises and meet customers’ evolving, value-based needs, brands need to align their intentions with their actions (or competency). This depends on cooperation among all members of the C-suite—not just the CMO (or even the newly appointed chief trust officer). Here are some steps all leaders can take to steer their organizations toward more trusting relationships:
Enlist everyone. While clear functional owners exist in most organizations, securing trust requires collaboration. This means developing cross-functional teams that align on trust-related KPIs, assigning ownership for those KPIs, and developing a road map for closing the gap between intentions and competency.
Choose trust competencies wisely. How a company demonstrates trustworthiness may depend on organizational goals. If, for example, customers value transparent and ethical data usage, it may be important to incorporate straightforward messaging on how the organization will use and protect customer information.
Expand the marketer’s toolkit. It’s hard to deliver on trust when the marketing department mirrors the skills of an ad agency. Delivering holistically on trust depends on talent with a wide range of skill sets, including expertise in product development and analytics as well as a deep understanding of revenue models.
In the transformative age, with more data changing hands and more technology used in decision-making, trust is more important than ever. It’s trust that enables organizations to create value and capital markets to function properly.
With richer insights from deeper data analysis, you can look at risk afresh. You can make smarter choices, from what you should mitigate to what you can embrace. With trust comes the confidence to make bolder strategic moves. It’s trust that will help you seize the upside of disruption
With the help of technology, companies today sweep up huge amounts of customer data. But they tend to be opaque about the information they collect and often resell, which leaves their customers feeling uneasy. Though that practice may give firms an edge in the short term, in the long run it undermines consumers’ trust, which in turn hurts competitiveness.
To build trust, companies must be transparent about the data they gather and offer consumers appropriate value in exchange for it. Simple legal disclosures aren’t enough, however; companies must actively educate their customers and incorporate fairness into their products and models from the start. Companies that get this will win consumers’ goodwill and business and continued
Finally, within the C-suite, a CEO may see trust as delivering on a pledge to bring innovative products and services to the market, while the CMO may view trust in terms of brand messaging and experience. Outside of the C-suite, trust is contingent on what customers or employees and even partners value most. Regardless of the setting, trust breaks down when there’s a gap between what an organization promises and what it delivers.
With the proper tools and strategy in hand, marketers can help organizations close that gap, build a deeper bond with customers, and ensure a stronger enterprise for the future.
A great quote that provides deep insigt to the topic:
“As organizations begin to address trust more holistically, marketers can help drive change by shifting the focus to values.”