The role of trust in business
More than ever before, organizations, and companies specifically, face global trends that negatively impact people’s trust.
Economic and social polarization, concern for privacy in the face of the deluge of information by which we are inundated daily, differences in the way we interpret and make meaning of reality that seem to separate the generations more and more: we live in a world in which perceived complexity is even greater than real complexity. To come to grips with this complexity we demand instant, informative, complete, and transparent messages from political, economic and cultural actors.
In such an environment, having the trust of customers is crucial for any company.
Trust is the primary condition for stable communication channels between brands and consumers to open up in today’s fluid and hyper-competitive economy. Trust is also a subjective and not infinite resource and it’s extremely valuable, especially in this historical period. Put another way: trust in the company, which makes customer relationships possible, directly affects financial results and is an inevitable premise for better performance. The real challenge then, is to be able to build and maintain it over time.
The cost of losing trust
A serious and generalized problem of trust has long impacted the web of relationships between organizations and individuals. In recent years, the pandemic, economic crises, political instability, and disorientation in the face of ambiguous and contradictory narratives have considerably accentuated it. Being able to identify reliable interlocutors has become even more difficult.
A survey by OOH media platforms Clear Channel and JCDecaux nearly two years ago reflected this trend, recording the lowest consumer trust since 2008. Just 34% of the 1,000 consumers surveyed said they trusted the brands they routinely bought from, compared with a vast majority (more than 80%) who considered trust in the company a deciding factor in purchasing decisions.
On the other hand, the loss of trust is one of the main reasons why consumers leave a brand, without particular hesitation and without (almost) ever looking back. In the case of “abandonment” by a customer,
to the lost future revenue, the company must add the acquisition cost of contact and build the relationship. This cost is usually very high.
Trust—difficult to earn and very easy to lose—is valuable currency:
- for 71% of consumers, it’s unlikely that they will buy from a company they no longer trust;
- of that group of consumers, the vast majority (73%) say they would spend much less to buy products or services from a company they do not trust.
Trust in business is a key asset for increasing profitability
Yet even if trust is granted sparingly, if not exactly with distrust, once lost it is rarely granted again and it remains a critically important asset that companies must nurture relentlessly to maintain vital customer relationships and to improve their bottom line.
In addition to branding processes—corporate reputation is confirmed, enriched, and enhanced every time a customer decides to trust a brand—trust in the company plays a decisive role in increasing profitability. This is the main, surprisingly strong correlation that emerged from PwC’s 25th Annual Global CEO Survey (in which thousands of CEOs participated).
PwC’s survey analyzes the nature of customer engagement with a company by breaking it down into six different dimensions: loyalty, reliability, foresight, insight, competency, and benevolence. The aggregate responses, normalized by industry, were then summarized into a trust index that is independent of characteristics such as location or company size.
The report shows how trust—along with another factor related to the ability to reallocate resources to high-potential opportunities—is positively and significantly linked to economic performance and profit margins. The findings, which are found in boards of directors around the world and are consistent across industries, provide strong evidence of the link between trust and performance.
Trust in business is a matter of values
Despite the rather bleak picture of the low tendency of consumers to trust that we described at the beginning of this post, business continues to be, for the fourth consecutive year, the most trusted institution, more so than governments and the media. But the situation could change abruptly, and remaining inactive or merely administering accumulated credit capital is definitely not the most forward-looking strategy: “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.
In the Harvard Business Review article, “How Business Can Build and Maintain Trust,” Ryan offers three suggestions, directed to business decision makers, on how to develop the trust of their key stakeholders, customers and customers:
- Activate transparent policies. Change must first and foremost be cultural and must involve the entire company. For example, making employee demographics public, with the consent of those involved of course, can serve as a testament to the reality of its workforce in terms of diversity and inclusion, especially if it has embedded those values in its mission statement and is conducting marketing initiatives focused on those themes. The corporate image that this type of communication aims to convey is characterized by concreteness, rigor, and a sense of responsibility. A tangible demonstration that the organization has not put purely cosmetic operations in place, but that its external actions correspond with its corporate identity.
- Always communicate the reasons that drive the organization’s actions. To build trust, the company must adopt a “multi-stakeholder” approach, clarifying the reasons why it made certain decisions for each of the target audiences. This creates a positive feedback loop that is helpful in addressing potential concerns, resolving doubts, and strengthening the spirit of ownership. Building trust always involves communicating the “why” (as well as the “what”) and sharing the salient aspects of the decision-making process with the widest possible audience of stakeholders: customers, employees, regulators, analysts, the business community, NGOs, future talent, the media, and so on.
- Attempt to act with integrity and courage without being afraid to show any moments of vulnerability. When mistakes occur, and mistakes are inevitable, companies should communicate what happened in a transparent way, taking responsibility for it. Recovering credibility after reputational damage requires prompt action, mobilizing all possible resources to understand the dynamic that led to the error as quickly as possible and designing new protocols and safeguards so that the mistake does not happen again. Beyond ethical and moral considerations (it is basically a matter of “doing the right thing”), a communication strategy that does not deny any weaknesses but carefully investigates the matter and provides reassurances about the future is crucial to regaining the trust of customers and stakeholders.
In general, rather than imparting a list of instructions, Ryan calls into question the priorities and values that guide corporate action and invites CEOs and C-levels to align their judgments with the expectations of their respective audiences. This is not a rhetorical invitation, as we shall see: when it comes to making sense of widespread sentiment and determining what actually affects the overall perceived level of trust, business and consumer assessments do not coincide.
The gap in the perception of trust in business
Recent research,Translating trust into business reality, by PwC investigated the perception of trust in business, highlighting a dramatic mismatch in the way trust is translated into markets by different stakeholders. While 87% of CEOs surveyed believe their customers trust their companies, the survey shows that the reality is very different: only 30% of consumers say they trust them.
An immediate awareness of the depth of this discrepancy is crucial. Otherwise, the risk is that companies will focus on the wrong objectives and produce increased costs that are not matched by the generation of real value.
The creation of a solid and trustworthy corporate identity (and image) is linked to many factors, yet PwC identifies a few constants that would demonstrate how trust is a crucial change enabler, from industry to industry, in advancing large corporate renewal programs. Here, we limit ourselves to mentioning two that are particularly significant.
- The companies judged most trustworthy would be those that made “net-zero” commitments and linked their CEOs’ compensation to non-financial outcomes such as employee engagement and gender diversity in the workforce.
- Under emergency conditions, customer trust seems to increase toward those organizations that do not lay off employees but implement work support measures such as layoffs.
Yet, if companies are taking action on sensitive issues such as Diversity, Equity, and Inclusion (DEI) and increasing investments guided by Environmental, Social, and Governance (ESG) criteria, their efforts may not affect customer trust, at least not in the way hoped.
Indeed, there seems to be a kind of disconnect between brands and their target audiences on ESG and DEI issues. While it is undeniable that consumers care more about environmental and social issues and the ethical conduct of companies than in the past, many companies have yet to accurately measure the impact of ESG-driven initiatives on their average consumer.
Consumers today find themselves operating within an economic system characterized by profound uncertainty, and this is probably one of the main reasons why they give greater priority to elements that have a direct impact on their quality of life, such as the availability of affordable products and services. According to PwC, only 27% of consumers recognize companies that invest in DEI and ESG initiatives as more trustworthy, and only 23% say that new information on climate risks helps strengthen their confidence as customers.
The solution, of course, is not for companies to cut their investments in these areas. Instead, the first step in narrowing this perception gap is to identify where businesses and consumers are not aligned and then establish communications to deal with these issues in a truly informative and useful way, using concrete situations to show how they are relevant in people’s lives.
Trust in business as a process: challenges and opportunities
Trust in business is a process that cannot be activated only in times of urgency and as a response to possible crises. Instead, it must be proactively managed by building “trust equity,” a kind of reserve trust that, while it generates value on an ongoing basis, also enables the organization to be more resilient in the event of emergencies. To steward this hard-earned trust legacy over time, companies need to develop a trust strategy.
Trust has also been at the center of thinking about innovation, including technological innovation, for years. Thanks to the integration of digital technologies into the customer journey, as well as advances in artificial intelligence and machine learning, brands can provide increasingly fluid and personalized interactions. While consumers demand more personalization, brands also have an obligation to respect privacy, protect data, and not betray their trust. The real challenge of the near future lies in this: achieving a balance between trust and personalization.
In this post, we have clarified how trust is not only valuable on an ideal and abstract level, but has an immediate impact on business results. We explained why trust in business plays a strategic role within communication and, on an even more general level, in building a relationship with customers. We have dwelt on the different perceptions of trust by brands and customers, urging the former not to underestimate the seriousness of this gap. Finally, we can conclude with a prediction that is also a promise: if the path to building trust in the eyes of increasingly critical and elusive consumers is strewn with obstacles, it is also, however, full of magnificent possibilities.
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