How crucial trust is to corporate success
Companies in particular are under increased pressure from global trends that undermine consumers’ faith in businesses.
We live in a world where the perceived complexity is even greater than the real complexity; economic and social polarisation; concern for privacy in the face of the deluge of information by which we are bombarded daily; differences in the way we interpret and make meaning of reality that seem to increasingly separate the generations. We need immediate, informative, comprehensive, and transparent messages from political, economic, and cultural actors if we’re going to make sense of this complexity.
In this setting, customer confidence is essential to a company’s success.
In today’s fluid and hyper-competitive economy, trust is the primary condition for stable communication channels to open up between brands and consumers. The value of trust, a resource that is both relative and finite, has only increased in recent times. One could rephrase this as follows: “Trust in the company enables customer relationships, which in turn directly affects financial results.” The real difficulty lies in keeping it up and running over time after it has been established.
The price of betrayal
The web of connections between people and businesses has been plagued by a pervasive and perilous lack of trust for quite some time. The recent pandemic, economic crises, political instability, and bewilderment in the face of ambiguous and contradictory narratives have all contributed greatly to its amplification. The challenge of figuring out who to trust as a conversation partner has only increased.
The lowest levels of consumer trust since 2008 were recorded in a survey conducted by OOH media platforms Clear Channel and JCDecaux nearly two years ago. Though more than 80% of those surveyed said that a company’s reputation for honesty and integrity was important when making a purchase, only 34% of the 1,000 consumers polled said they trusted the brands they regularly bought from.
However, a lack of trust is a major factor in why customers abandon a brand, both quickly and (usually) permanently. When a client “abandons” a service,
The cost of making first contact and developing rapport with a potential client is in addition to the revenue the company will lose in the future. This is typically a very high price to pay.
Trust is a valuable commodity because it is so hard to acquire and so simple to misplace.
- The majority of consumers (71%) will not make a purchase from a company that has lost their trust.
- The vast majority (73%) of those shoppers report they would spend much less with an unreliable business.
Building customer confidence is a vital part of any successful business.
Companies must work tirelessly to maintain trust with their customers if they want to keep their valuable customer relationships and increase their profits, despite the fact that trust is granted sparingly, if not exactly with distrust.
Trust in the company plays a crucial role in increasing profitability, and it is a necessary component of branding processes (a company’s reputation is confirmed, enriched, and enhanced whenever a customer chooses to trust a brand). This was the most strikingly significant correlation to emerge from PwC’s 25th Annual Global CEO Survey (in which thousands of CEOs participated).
PwC’s survey deconstructs customer engagement into its component parts, including loyalty, dependability, foresight, insight, competency, and generosity. To make the trust index universal across variables like location and company size, the collected responses were first normalised by industry.
The report demonstrates a positive and statistically significant relationship between trust and economic performance, as well as profit margins, because of the ability to reallocate resources to high-potential opportunities. The findings provide compelling evidence of the connection between trust and performance, as they are shared by boards of directors all over the world and hold true across different industries.
Having faith in a company is a moral decision.
Despite the gloomy picture of consumers’ low tendency to trust that we painted at the beginning of this post, business remains, for the fourth year in a row, the most trusted institution, more so than governments and the media. Trust is fragile, and companies need to manage it carefully as they prepare their balance sheets, at least in the words of Tim Ryan, chairman of PwC and founder of the Trust Leadership Institute. However, the situation can change quickly, and doing nothing or merely administering accumulated credit capital is not a very forward-looking strategy.
Ryan offers three recommendations to business decision-makers in his Harvard Business Review article “How Business Can Build and Maintain Trust” on how to gain the trust of their most important stakeholders, customers, and clients.
- Get open policies up and running. The entire organisation needs to buy into the new way of doing things and embrace the cultural shift first and foremost. As an illustration, if the company has ingrained these values in its mission statement and is conducting marketing initiatives focused on these themes, then making public the demographics of its employees (with the consent of those involved) can serve as a testament to the reality of its workforce in terms of diversity and inclusion. The concreteness, rigour, and sense of responsibility that this type of communication strives to convey is indicative of the corporate image that is being promoted. Indicative of the extent to which the company’s outward actions are consistent with its internal values and not just lip service.
- Explain why your company is doing what it is doing at all times. As part of its “multi-stakeholder” strategy for gaining customers’ trust, the company will explain its decision-making processes to various groups. In doing so, a positive feedback loop is established, which aids in addressing potential worries, clearing up any doubts, and fortifying the sense of ownership. In order to gain the confidence of your customers, employees, regulators, analysts, business partners, non-governmental organisations, potential recruits, the media, and other stakeholders, you must always explain your reasoning behind important decisions.
- Make an effort to be honest and brave, and don’t be afraid to let your guard down. It is important for businesses to explain what went wrong and accept responsibility when an error is made. To repair a damaged reputation, an organisation must act swiftly, focusing all available resources on learning as soon as possible what went wrong and how to prevent a repeat performance. Regaining the trust of customers and stakeholders is dependent on a communication strategy that does not deny any weaknesses, but instead carefully investigates the matter and provides reassurances about the future.
Rather than providing a set of rules to live by, Ryan challenges the assumptions underlying corporate decision-making and encourages top executives to better align their judgement with the needs of their constituents. As we’ll see, this isn’t a rhetorical question; business and consumer assessments do not coincide when trying to make sense of widespread sentiment and identify the factors that actually affect the perceived level of trust.