Saturday, October 27, 2007

Satisfaction versus Loyalty

I amy be going over old ground but I think it is time to document some basic issues. Customer loyalty and customer satisfaction are mistaken for each other and otherwise misinterpreted much too often. There are enough differences between these two concepts that I believe should be pointed out.

Some basic Flaws
A logical step in the business process is that if you can truly satisfy your customers, they will remain loyal, and you can achieve the envious position of dramatically cutting the cost of sales by selling to a large satisfied customer base. In other words, the general "leap-of-faith" in one's thinking is that all satisfied customers are loyal customers. Certainly there is a convincing argument that a loyal customer must be a satisfied customer; however, the reverse does not present nearly as strong an argument that a satisfied customer must be a loyal customer.

One statistical approach shows that loyalty increases as satisfaction increases. With this approach, two pieces of information are examined and analyzed for a specific company. The first piece of information is the level of customer satisfaction taken from a survey of customers. The second piece also is taken from the same survey, and it represents the loyalty measure and makes the assumption that if the customer says he would continue to purchase from the company or would recommend the company based on on his experience, he is loyal.

However, the real question is how do you know whether the person asnwering the question actually does any purchasing or has any influence in purchasing or even recommends purchasing additional products or services. A further step would be to be able to verify that the additional products or services did take place. The studies of which I am aware have not shown the relationship to be anything other than statistical for specific companies. Unfortunately, statistical relationships never require cause-and-effect to be valid.

So, what is the real difference between satisfaction and loyalty. Experience tells me, as do the definitions in several dictionaries, that satisfacion relates to the result of a process. the process may be a sales process, product performance process, or a service process. Loyalty relates to a relationship. Customer loyalty does not occur, but customer satisfaction can occur immediately follwoing a successful process. Loyalty can, in fact, survive a negative process. Loyal customers will continue to purchase from a company even though they may have had a bad experience.

When you examine each of these words, it's clear that customer loyalty is somewhat dependent on satisfaction, but satisfaction does not depend on customer loyalty. That's the difference.

Frederick Reichheld noted several years ago that betwen 65 and 85 percent of customers who defect said they were satisfied to very satisfeid with their former supplier. As an example, Reichheld used the auto industry to make his point by showing that satisfaction scores are between 85 and 95 percent, while repurchase rates avereage only 40 percent.

Now that we can see tht satisfaction and loyalty are not the same, it is time show how nicely they link. Many companies have leaped onto the customer satisfaction bandwagon. Companies believe, as I do, that is a good thing to do. A general statement that can be made with some validity is that customer satisfaction is the cornerstone in building the bridge between the company and the customer.

Most companies have limited their vision to building the cornerstone and couldn't see the extension of the vision to customer loyalty. Once the company vision has changed to customer loyalty, customer satisfaction attains a more significant role but it is not the only goal. Customer loyalty also will be affected by finding the right customers in the first place, always having the right products and services to meet their ever-changing needs, and having employees who build levels of trust with the customers through long-term contact with the same customers.

Finally, if you wnat to change the vision from customer satisfaction to customer loyalty, you must change the mearuement system normally used for customer satisfaction. Measures taken of the customer must include those aspects of the business that have cause-and-effect relationships between company operations and the customers. In general, the most direct measure of customer loyalty will be retention rate. A secondary measure could be the share of purchases that a company receives from a customer who usually splits purchases among several vendors (share of pocket).

Customer loyalty must be viewed differently than customer satisfaction. The good news is that customer satisfaction is one of the primary ingredients that creates customer loyalty. The next step is to examine company operations to determine those that most directly affect loyalty and then begin the measurement process.

Monday, October 22, 2007

The Trust Factor in Leadership that leads to Customer Loyalty

People have an instinctive need to feel in control. Think of the incredible amount of time and energy spent on trying to be in control of thoughts and feelings, other people and their behavior, situations and circumstances, and outcomes and consequences. The need for control -- order, integrity, direction, and continuity -- is obvious. Yet, control does not mean ‘controlling’ the actions of others.

Because an organization is a living entity made up of people, mechanical static structures cannot be imposed effectively. Instead, an organization is in control by virtue of the parts and the people working interdependently and responsibly to achieve commonly agreed results. Said another way, an organization is accountable to people, individuals are accountable to the organization and all aspects of the enterprise are accountable to each other for the integrity of the whole. The operative word here is AND. One of the key concepts of interdependent functioning is that no one area operates at the expense of another, each is an integral and necessary part of the enterprise. Thus, over time an individual’s needs are not met at the expense of the company’s; neither are the company’s needs met at the expense of its people.

No amount of seminars, workshops or restructuring can resolve an underlying problem of an organization that is unwilling to relinquish its total control in favor of mutual accountability. No leader can possibly have all the answers; solutions come from people closest to the action. As such, effective leaders relinquish control and share power. When trust is high, personal responsibility becomes a practical process because persons have access to knowledge and opportunity and are motivated to empower themselves with performance. Cohesive win-win environments cannot be created; they must be nurtured, much like a garden. Although there is life within a seed, the gardener cannot make it grow. Rather, the gardener can select the best seed and create conditions to maximize growth – correct soil, sunshine, water, fertilizer, weeding, cultivation, time. In an organization, two conditions that will enhance a collaborative culture are 1) a communication system that facilitates open, direct interaction and 2) a compensation system that rewards collaboration among employees.

The essence of leadership is to make sure that the organization knows itself and its fundamental principles, and to embody those values. Leaders must be visible and personally engaged in the enterprise, accessible for honest, direct, open communication and be willing to hold the organization accountable to those principles. The leader sets the tone for the quality of relationships within the organization. Because leaders get results through the committed efforts of others, and most people commit themselves to an effort only if they participate in the decision-making process, essential ingredient of an interdependent operation is an atmosphere of trust. Trust must begin with the respect that stems from a belief in the legitimacy of each person in a relationship and a perceived level of fairness. Consensus and mutual agreement does not mean that everybody is 100 percent sold on every course of action. However, it does mean that persons have a real voice and can block a decision that they cannot live with, provided that they present a viable alternative solution. In order for people to commit themselves to the work of an organization, they must trust their leaders and the leaders have to trust their people. Leaders are required to consistently articulate the organization’s core values, reinforce them in words and actions, and hold persons accountable for their parts of the business in accordance with those values.

To be a credible leader, you must develop a deep understanding and appreciation of the values and hopes of the people around you. Leadership is an interactive relationship; a dialogue not a monologue. Leaders become worthy of trust when persons believe that leaders have their best interests at heart. Credible leaders are not afraid to liberate others by giving them latitude to make choices by keeping them informed, by providing resources, and by encouraging risk-taking and learning from mistakes.

“To become a leader, you must become yourself, become the maker of your own life,” observes Warren Bennis. “Until you truly know yourself, strengths and weaknesses, know what you want to do and why you want to do it, you cannot succeed in any but the most superficial sense of the word.” The need for self-reflection is critical to overcome resistance to and fear of change. Who are you? What do you believe in? What do you stand for? To be credible and trustworthy as a leader, you must first clarify your own values. Your competence gives you the skills to turn your ideas into actions. Trust in yourself and your abilities gives you the resolve to pursue a course of action.

Personal growth, as in a garden, must come from the inside out. As such, leaders must focus first on changing themselves before they expand into other areas of influence. Insight alone does not produce change. Personal change is a process that requires us to challenge old ideas and behaviors, to gain awareness and consider new possibilities, and to experiment with new ways of doing things that are congruent with what we really want. Max DePree observes that, “We cannot become what we need to be by remaining what we are.”

Leaders are measured by their behavior. People expect leaders to be accountable for equity, for treating everyone fairly and balancing the needs and interests of the enterprise with the interests of individuals. Trust derives from a serious pursuit by both leaders and followers. It begins with a personal commitment to respect others and to take everyone seriously. It grows when people see leaders translate their personal integrity into actions. Trust derives from truth telling and promise keeping. Our values and moral purpose need to be expressed and demonstrated repeatedly. In an organization, trust depends on the reasonable assumption that leaders can be depended on to do the right thing. The building of trust requires leaders to hold the enterprise accountable. Leaders must demonstrate competence in their jobs, just like everyone else. Earning trust is not easy. It does not happen quickly. Earning trust is difficult demanding work and comes only with genuine effort. True leaders take time to develop the persistence, patience and discipline that will ultimately result in trust. Trust can only be earned slowly, but it can be lost in the blink of an eye. Once we have built it, we should treasure and protect it. When trust permeates an organization, great things are possible, not the least of which is a true opportunity to stretch and reach our potential.

Leaders face the challenge of creating environments in which people will more likely choose to empower themselves. People who know who they are, who have a voice, and who stand for something are extremely compelling. We need and want people who will say, “The emperor has no clothes.” The way to instigate change is to attract people into a risk-taking process, to teach, exemplify and reinforce a willingness to engage in the enterprise. Despite the popularity of the Dilbert phenomenon and the number of people who identify with its message of cynicism, people are hungry for meaning in their work and in their workplace. In a Fortune 500 survey of managers, Gretchen Spreitzer identifies four dimensions of empowerment: a) a sense of meaning, b) a sense of competence, c) a sense of self-determination, and d) a sense of impact. Managers cannot direct people to be entrepreneurial; they can only hope to inspire them to try something new. People understand values and vision by looking at the feet of the people who matter. Obviously, a manager, by virtue of authority and position cannot empower anybody. Individuals must ultimately decide to empower themselves.

Mutually beneficial agreements can create a synergy not possible by either party alone. Such win-win agreements require five distinct areas of mutual understanding:
Desired results (specific identification of what is to be done and when; not how it to be accomplished)
Parameters (guidelines, principles and policies within which results are to be accomplished)
Resources (human, financial, technical, organizational support)
Accountability (standards of performance, measurements, time and methods of evaluation)
Consequences (what will happen as a result of the evaluation – good, bad, natural, logical – give reasons why).

In the final analysis, mutually beneficial agreements, logical processes and objective measurements certainly contribute to a company’s effective operations. However, without trustworthy leaders, who are competent and genuine, business models alone will ultimately fall short. A leader’s personal connectedness provides accessibility that engenders trust and respect. Leaders who are congruent about accountability and honesty, in themselves and others, promote trust throughout an entire organization. Effective leaders are always teaching and learning. When organizations learn collectively to understand the customer, they share responsibility for solving the customers’ problems. When organizations function interdependently and have common understanding of the business, it provides the commitment and discipline that drives the execution of the common business goals.

Wednesday, October 17, 2007

Trust is a Process That Leads to Loyalty

In previous blogs, I have suggested that trust forms the basis of customer loyalty. I have discussed how to develop trust and customer loyalty. In this blog I will explore the many ways that trust develops and how it starts at different levels based on circumstances.

In The Beginning

Trust doesn’t always have to start at ground zero. Trust often starts at some other level. If we always assume that there is no trust at the beginning of a customer relationship then there would be no trust during the initial contact between the company and the customer. If this were true, initial customer interactions would be wary or adversarial on a fairly regular basis. Maybe this is why companies employ persons who are disarming as a way to engage customers and dispel their initial mistrust. On a personal note I can say that most car salespeople I have encountered have been quite disarming. The most disarming ones have been successful in selling me a car.

While I am wary and mistrustful of car salespeople, I am not nearly as wary of salespeople in a local computer store. For one thing, I am not going to be spending as much money on a computer as I would on a car, and I know more about computers than I do about new automobiles. As a general rule, I am not mistrustful of people. However, I become resistant when I feel uncomfortable with a sales or service situation or I believe that my interests are not being considered fairly or respectfully.

Let’s explore the starting points of trust by looking at several scenarios.

Starting With A High Level of Trust

There are a number of ways that a company can start with a high level of trust with new or potential customers. The first way is to have a good reputation in the community or industry. For example, customers who shop at Nordstrom usually have a high level of trust because the company has built its reputation on good products and excellent service. In the computer industry, IBM has had a very positive reputation for many years that was built on a foundation of “doing whatever it takes” to get the customer problem fixed. Customers expected that their problem would be resolved because they trusted in IBM’s excellent reputation.

Another way to start with a high level of trust is to have a product with an excellent reputation. Honda has built its reputation on the quality and durability of its automobiles. People have come to trust Honda because of the high quality of the products it produces. When people shop for automobiles, they have a high degree of trust that if they buy a Honda it will be reliable and last a long time. Compaq computer had the reputation of having the highest out-of-box quality for PCs for a long time. They built their reputation by getting the initial bugs out of their PCs by burning them in for a number of hours before shipping them. Hence, the probability that they would function properly when taken out of the box was higher than for most other computer manufacturers. Consequently they were the industry leader for many years because the customer’s initial trust was based on the reputation of the product. This may have been one of the many aspects of Compaq that made them an acquisition candidate for HP.

Reputations are usually built by a combination of word-of-mouth, advertising and experience. It is certainly possible for a company to ‘spin’ or ‘sell’ an image or perception about a product or service that is contrary to the objective reality. However, over time, as customers have their own experiences and talk with each other, the truth will ultimately be known. There are a number of surveys showing that a customer with a negative experience will tell about 10 other people on average and a customer with a positive experience will tell an average of only about 2 other people. In either case, word-of-mouth will influence new and potential customers because most people ask friends about their experiences with products, services and companies before they shop.

Starting With A Neutral Level of Trust

Obviously it is better to start with a neutral level of trust rather than a negative level of trust. This situation often occurs when customers have little or no information about the company, its products or its people. This circumstance can also occur when contact between customer and company has been either minimal or superficial. Often the company’s products or services dictate the nature of such interaction. For instance, in cases where products are extremely similar, customers can be easily swayed by price. In this case, people are more susceptible to influence by marketing information and/or social pressures.

Starting With a Negative Attitude

In this case, the person has no trust and a negative perception about a company. The trust has either been broken or not allowed to develop. A former customer may be dissatisfied or hostile or a prospective customer may have a negative attitude about dealing with a company because of influence or personal experience of a peripheral nature. This situation can be remedied only if the company is aware of the problem and is willing and able to engage with the disenfranchised customer. Obviously the customer must be willing to deal with the company on some level and at some point.

Developing Trust Within a Customer Relationship

First of all, let’s understand two important things: 1) There is more than one aspect to the earning of trust, and 2) The elements of trust depend, in part, upon the people and their circumstances. For instance, in dealing with a highly technical product or service, keeping promises, paying attention to details and responsiveness might be the customer’s top priorities. On the other hand, in a frequent and on-going relationship of a non-technical nature, having the customer’s best interest at heart, maintaining effective communication, and emotional care and concern may be paramount.

Trust is essentially the confidence and faith that implies an absolute and assured belief in something or someone that will not fail you. It can be trust in a person (a sales person at Nordstrom) or in a product (Honda) or in a process (Fed EX). It implies not only an attitude or feeling but also an objective expression in action, such as the reliance on a physician’s skill. It implies conviction and certainty about the credibility and reliability of a person or thing. When customers develop this kind of attachment to a company, they are loyal. Obviously there is a reciprocal engagement to mutual advantage when this level of trust exists.

It is possible to describe key aspects of a trusting relationship. The following elements are significant components in the building of trust that is the foundation for loyalty.

Confidence. Customers need to feel secure in the belief that you will deliver what you say, each and every time. You must keep your promises! Your accountable behavior demonstrates your reliability and consistently. Customers don’t want to worry about whether or not you will come through. They need to concentrate on their own business.

Reliance. Be proactive in responding to your customers. Pay attention to what matters most to your customers then deliver it flawlessly. When you pay attention to the details, consistently over time, you earn confidence and respect. Look for ways to be genuinely helpful to your customers and welcome the opportunity to serve; go above and beyond. Be clever and creative about solving their problems. Be the ‘go-to’ guy and deliver the goods, consistently and cheerfully. Sam Walton’s attitude towards customers describes this element well.
“Exceed your customers’ expectations. If you do, they’ll come back over and over. Give them what they want and little more. Let them know you appreciate them. Make good on all your mistakes, and don’t make excuses … apologize. Stand behind everything you do. “Satisfaction guaranteed” will make all the difference.”

Effective communication. Listen actively and respectfully, giving full attention to understanding your customer’s meaning. Then, take responsibility for communicating your meaning so that your customer accurately understands you. Good communication is based on reciprocity and mutual understanding. It requires patience and persistence to ensure that the lines of clean clear communication remain open. You can’t serve a customer effectively if you don’t understand him and know what he needs and wants.

Emotional investment. Care genuinely about what your customer needs and wants and be empathic to those needs and desires and demonstrate that concern with your enthusiasm and energy. A positive attitude is an outer expression of your inner feeling. Pay attention and connect emotionally in order to understand what they feel and why. Surveys show that approximately 68% of customers who defect, leave because of the perception of the company’s indifference. Enjoy your customers and appreciate the opportunity to serve them. Put them at ease and make it easy for them to deal with you. The L.L. Bean credo expresses this idea very well.

“A customer is the most important person ever in this office, in person or by mail. A customer is not dependent on us; we are dependent on him. A customer is not an interruption to our work; he is the purpose of it. We are not doing him a favor by serving him, he is doing us a favor by giving us the opportunity to do so.”

Consistency. You must have a clear and consistent focus about your own business. Who are you and what business are you in? Consistency builds credibility. Be authentic and congruent over time so that your customers can depend on who you are and what you stand for.

The Final Analysis

Although people, their companies, their relationships, their situations and processes are unique, there are, nonetheless, a few common denominators.
Think about your own experience of being a loyal customer. What specifically is it about that relationship that has caused you to trust? Now, think of another example. Are your reasons and processes the same for how you have come to trust? The development of trust in any relationship is an unfolding process; a progression through necessary stages. The gradual growth and differentiation through a series of changes in the relationship is an unscientific process. Although we sometimes offer our trust on good faith to someone, or something, it must still be developed through experiential verification over time. Because trust must be earned over time, it is a precious commodity. It can be lost in a moment and can take years to rebuild.

Friday, October 12, 2007

Building Trust (and loyalty) with Customers

The logic that is being built in this series of blogs is that building market share can be created through loyalty and customer loyalty is built upon trust. This blog will take the next step and discuss some specific ways that trust can be built. It will include ways that can easily be taught to employees so that customer interactions will be positive and will increase the level of trust with your organization.

Ethical Treatment and the Golden Rule

The basis for building trust with customers is ethical treatment. In a book entitled Business Ethics in a Changing Culture by Richard Chewning, the author notes:

“…Ethics, as an expression of reality, is predicated upon the assumption that there are right and wrong motives, attitudes, traits of character, and actions that are exhibited in interpersonal relationships. Respectful social interaction is considered a norm by almost everyone.”

He goes on to say “the overwhelming majority of people perceive others to be ethical when they observe what is considered to be their genuine kindness, consideration, politeness, empathy, and fairness in their interpersonal relationships. When these are absent, and unkindness, inconsideration, rudeness, hardness, and injustice are present, the people exhibiting such conduct are considered unethical. A genuine consideration of others is essential to an ethical life.”

Perhaps the simplest expression of ethical treatment is the Golden Rule. While there may be some business situations where the Golden rule may not be tenable, the general application is a worthy ingredient in any customer interaction. This may become very difficult in a sales situation when the salesperson feels enormous pressure to make the sale, sometimes to the extent of not finding the “best” solution for the customer but rather the “best” solution for the salesperson or the company.

In an article by Anna Muoio entitled The Experienced Customer which was published in Net Company magazine (Fall, 1999), she notes that a company should “let the customers reveal themselves at their own pace – so they can learn to trust you and so that you can serve them one at a time. Don’t force them to follow a one-size-fits-all, information-gathering approach.”

Some eCommerce Examples

There are some excellent examples of how companies on the web have developed techniques for letting customers reveal themselves at their own pace. The following list represents just a few ideas of how to “let customers reveal themselves”

1. Lands’End website ( allows customers to order swatches of fabric at no cost so they can see and feel the fabric before they make a purchase.
2. ( has a customer bill of rights that is honest and fair and conveys the essence of the Golden Rule.
3. The website for the Gap ( allows a customer to put an outfit together online. The website builds the outfit and keeps track of the costs so that the customer can visually see the outfit on the computer screen and know the price at every stage of the purchase.
4. ( has offered an unmatched guarantee. It will reimburse a customer 110% of the purchase price within one year if the customer is not satisfied with the purchase.

In each of these examples, the company is providing the customer with some form of reassurance that they will get ethical treatment. The customer that comes to your website is really in a self-service environment. That fact is often overlooked and often the website design may be pretty but it may also be confusing. The website should offer the same friendliness as a personal contact. It should be easy to use, intuitive to understand and allow the customer to get information that will help make a purchase decision.

The Big Blue Example

For those or us who can remember the computer industry in the 1960’s and 70’s will remember the impact of “Big Blue” (IBM for those of the younger crowd). IBM had a very high market share of the large computer users. If fact, it dominated the market to the extent that some competitors said at the time, “we worry each day that Big Blue will do something that will put us out of business.” During this period of time IBM was not the industry leader in technology nor was it the low cost alternative.

How could a company with technology that lagged the industry simultaneously charge some of the highest prices in the computer industry and stay in business? The answer was commitment to the customer that was total and complete. When a customer purchased a computer system from IBM there was complete trust that the system would be installed properly and all aspects of the system would meet the customer’s requirements. Although this wasn’t always the case, the perception continued.

When competitors would compete with IBM, the phrase that most of them heard when they lost the bid was that the company could depend on IBM to make sure that everything would work. The person at the company would say something to the effect “I can’t be fired if I select IBM.” What that person was also saying was that he trusted IBM and so did his management. If he selected another vendor and the system did not work as specified, he ran the risk of being fired. But if he selected IBM and it did not work, he was still safe because he had selected “the best” alternative (rightly or wrongly).

Even when the personal computer was first introduced in the early 80’s IBM was the vendor of choice and held the largest market share. It was the same criteria for PCs that was used for the mainframe computer systems; namely, if I select IBM I can’t be fired for selecting the best (even if it costs more). I know this is true because at the time, I owned a small computer repair company that built PCs. Our price was less than ½ the cost of the IBM. We were completely unsuccessful in selling to large corporations and the answer we got when our bid was turned down was the one noted above “I can’t be fired for buying IBM but I can if I buy your computer and we have problems.”

The lesson: IBM had such a huge reputation of total customer commitment that companies blindly trusted IBM to do what was right, and even if it cost more, the security of buying from a trustworthy company was worth it.

Some Other Examples

IBM used a strategy of total customer commitment to build loyalty. There are some other strategies that have also worked.

Nordstrom has taken the strategy of delighting their customers. In general, Nordstrom trains their employees to pursue excellence in customer service. They empower their employees go out of their way to exceed customer expectations – another way of saying delight the customer by giving more than expected. They are taught to use good business judgment in making decisions regarding refunds-on-the-spot with no questions asked. With this strategy, Nordstrom has been one of the fastest growing retailers in the US and has had higher than industry average profit margins (even with refunds-on-the-spot). They have built loyalty on a base of giving a little more than the customer expected rather than just enough or just a little less.

Another very different strategy for building trust and loyalty has been taken by Southwest Airlines. They have chosen to dignify the customer during a period in airline travel when other airlines are treating their customers with less and less dignity. (Some people say that they feel more like herded cattle than people when dealing with their airline. Southwest has taken the course of making the relationship with its customers as pleasant as possible and still minimize its costs. The executive vice president, Ms. Colleen Barrett has said, “we will never jump on employees for leaning too far toward the customer, but we come down on them hard for not using common sense.”

The Bottom Line

There are a number of strategies that can be used to build customer trust as noted by the examples above: such as commitment to customers, delighting customers and dignifying customers. They all have several ingredients that are common. The following list appears to capture some of these common elements.
1. The corporate mission is clear and it is frequently and unambiguously voiced by upper management.
2. Employees are given responsibility to take action and make decisions on the spot.
3. These organizations work hard at reducing internal bureaucracy and internal politicking.
4. They are frequently asking the customer what is important and how are they doing.
5. They focus their products and services to be what the customer wants.
6. They encourage teamwork.
7. They work at being a partner with their customers – they try to build the partnership at every interaction whether sales, service or accounts receivable.
8. They exemplify trust in all their interactions with their customers. They do this by treating customers in ways that convince them that the company will never take advantage of a customer even when the customer is most vulnerable.

Thursday, October 11, 2007

Trust: The Key to Loyalty

It seems intuitive that customers must have some trust in the company in order to be loyal. This blog will consider the concept of trust and identify some elements that may develop trust and loyalty.

The first question is, “What is trust?” Webster’s dictionary defines trust as “assured reliance on the character, ability, strength of someone or something.” The word was probably borrowed from the Old Norse word traust that meant help, confidence, or firmness. The German word trost and the Dutch word troost originated about the same time with similar meanings. These ancient words give a little better sense of trust, especially the notion of confidence.

The Oxford Dictionary defines trust as “a firm belief in reliability, honesty, veracity, justice, strength of a person or thing; reliance on truth of statements without examination; confident expectation; accept without evidence.” Webster’s New Dictionary of Synonyms describes trust as “confidence, reliance, dependence, faith in the fact of feeling sure that a person or thing will not fail him.” Trust implies an absolute and assured resting on something or someone; often suggesting a basis upon other grounds than experience or sensible proofs. The point is that trust implies a deep reliance upon a person or thing.

A Personal Service Story

As I was thinking about trust and what it is, I recalled a personal example. Several years ago I bought an Audi. The car had a sunroof and one day the sunroof decided not to close. I took it to the dealer and found they could not schedule it for repair until the following day. Since there was a slight chance of rain, I decided to seek an alternative. I found a small repair shop that specialized in German cars. The owner came to the car and removed a panel in the roof inside the car and quickly examined the sliding mechanism. He commented that this was a simple repair, got his screwdriver and within less than 5 minutes the sunroof was completely operational. When asked what the charge was he said “No charge but please keep him in mind the next time my car needed service. He began to earn my trust and loyalty in three important ways:
1. He was competent
2. He was proactive in wanting to solve my problem
3. He did not take advantage of me – even though he could have.

He has remained consistent and congruent in these behaviors over time and I still trust him and am a loyal customer.

The ideas of Dr. John Richardson and Linnea McCord in their article Trust in the Marketplace are very similar. They note that there are three aspects of trust that relate to interaction between consumers, employees and companies in the marketplace:
1. Consumers and employees must have confidence in organizational promises or claims made to them.
2. Consumers and employees require that integrity and consistency follow a known set of values, beliefs, and practices; clear expectations.
3. Consumers and employees require concern for the well-being and respectful treatment of others.

In short, a company should meet customer requirements and expectations consistently over time and to demonstrate that they (the customers) are valued and appreciated.


It may be easier to describe and understand untrustworthiness or lack or trust rather than trust. We are all aware of examples that demonstrate untrustworthiness and its implications. One current high profile case is Firestone tires on Ford Explorers. It seems that both Firestone and Ford did not disclose some important relevant information to the public. Now that the information is known, the reputation of Firestone (and to a lesser extent Ford) is tarnished and trust in Firestone tires has been seriously damaged. Because the nature and extent of injury and loss of life that is directly attributable to tire defects (Firestone) and their use on Ford Explorers, the damage to the credibility and reliability of one or both of these companies may be permanent, or at least long-term. The new CEO of Firestone is now appearing in commercials that focus on Firestone’s commitment to producing quality tires. These commercials are certainly an attempt to respond to the public’s lack of trust in Firestone tires and to recover from sales losses that resulted from the disclosures of their failure to deal forthrightly and swiftly with information about defective tires.

Companies usually lose customer trust and confidence when they either mislead, misrepresent or exaggerate claims about their products or services. The loss of customer trust is very expensive and very difficult to restore, if not impossible.

A look at e-commerce

In a recent study of 50 e-businesses, six components were identified as being important in developing trust:
1. Provide state-of-the-art security
2. Show legitimacy (by aligning with an established brand)
3. Fill orders promptly and accurately
4. Assure customers they are in control of the buying process
5. Treat customers with care (be sensitive to their mood)
6. Allow customers to chat with other customers.

These components reflect for the need for businesses to cultivate qualities of competence, pro-active attitude, concern and respect. The chat room is the internet version of providing assurance to the customer that he/she is receiving a fair deal and good value by allowing them to communicate with other customers, who are otherwise invisible and unbiased, to discuss the products, prices and services.

A trustmark

Another study discusses the concept of a “trustmark.” The author of the study defines a ‘trustmark’ as:

“a distinctive name or symbol that emotionally binds a company with the desires and aspirations of its customers. It’s an emotional connection – and it’s bigger and more powerful than the uses that we traditionally associate with a trademark…”

The key point about the trustmark is that it emphasizes the key differences between satisfaction and loyalty. Satisfaction is a passive state. Customers can be passive about your company, products and services and still claim that they are satisfied. For example, I bought my wife’s computer based on price, features and availability. While it was an excellent deal, my experience with the store was very good, and my wife is very happy with the laptop, I am not necessarily loyal to that brand of computer. Hence, my attitude about the computer company is passive; I have no emotional investment in purchasing from them again. Now, base on performance and experience with the computer, my satisfaction could grow into loyalty. It should also be said that, in this example, my wife will form her own opinion about the computer based on her individual experiences. At this point, she is predisposed favorably towards the company because she’s engaged with it and her needs and expectations are being met.

On the other hand, loyalty and trust are not passive states. They are active in the sense that loyalty and trust require an emotional connection to the company through a variety of means: experience with products, services, employees, word-of-mouth awareness, advertising, promotion, image, share of heart. A loyal customer trusts that the company will meet and/or exceed their expectations in connection with the delivery of its products and services. It is the emotional link that brings the customer back and acts as a barrier to competitive pressures. When a customer gives a company his trust, he is simultaneously relinquishing some of the wariness that would normally be present in a decision-making process to purchase a good or service. The loyal customer expects that they can rely on certain assertions made by the company to provide quality and service at the best price. The same customer, when dealing with a company to which he is not loyal, will have a more skeptical attitude and challenge the information provided by the company. Consumers are more educated than ever. They have vast resources for information and easy access to a multitude of options.

The emotional connection lubricates and smooths the way for the buying process. For example, once I trusted the Audi mechanic, the buying process for service is simple: take the car in and describe the problem. I know that the problem will be fixed and that the price will be fair and competitive. There would be no extra parts or hidden or bogus costs. I am able to ‘enjoy’ the process, as much as I can enjoy spending money on car repair, rather than being on edge and wondering whether I’ve asked the right questions or whether the job will be done right.
Trust is built, one transaction at a time! People want to know where they stand with each other. They may not always like what they hear, but if they can count on what is being said as being true, then they are in a position to decide how they want to handle the situation or the relationship. Customers and employees have the option to choose the companies with which they invest their precious time, energy and money. Often times, the only face of the company is presented by the employee who is serving the customer. The company is understood through multiple means (advertising and marketing, multiple employee contacts, public relations, word-of-mouth information, images).

It is the emotional connectedness that impacts people over time. The concept of ‘share of heart’ comes from this idea of touching the emotions of a customer through some type of exchange or contact, personal or otherwise. That is why companies work so diligently to create a positive experience with each customer. Sometimes it is personal, sometimes by association. This is the reason that many companies engage in significant community service efforts and contributions, to demonstrate their regard for things that are important to their customers and to earn good will and respect.

Wednesday, October 10, 2007

Auto Dealership Loyalty

A brief press release of a survey of UK motorists indicated a dramatic decline in customers' loyalty to their dealerships between 2005 and 2007. The survey was performed by Capgeminis Cars Online 07/08 study that included 2800 consumers. The loyalty plunged from 46 percent to 32 percent. It appears the decline is primarily the result of increasing demands from customers on dealers. However, the UK motorists do not appear to be buying their cars online as much as other Europeans. Only 15% of UK motorists indicated they were likely to buy a car on line compared with the European average of 18%.

These numbers suggest that relationship loyalty does not appear to have a large role in automobile purchasing in the UK. It may also indicate greater price elasticity for car purchases there. It will be interesting to see how this trend will compare with the car purchases in the US where loyalty to dealerships has been near the same levels as those in England.

Thursday, October 4, 2007

Loyalty in Virtual Relationships

Jim Kane, a partner in the Brookeside Group located in Boston has posed a very interesting concept. Jim is suggesting that since loyalty is based on relationships many of those relationships are now becoming virtual in many areas. He posits that the same elements that exist in human relationships now exist in virtual relationships. There are six elements that he believes affect loyalty. They are:
1. Integrity - the customer must perceive the company/virtual person to be honest and fair.
2. Competency - the customer believes the company/virtual person can deliver what it commits to.
3. Recognition - the customer believes he/she is being perceived as an individual.
4. Proactivity - the customer will see the company/virtual person as a trusted advisor.
5. Saavy - the customer believes the company/virtual person understands the challenges the he (the customer) is facing.
6. Chemistry - the customer likes working with the company/virtual person.

Mr. Kane notes that he is not aware if a human works at Amazon, yet Amazon and the virtual people do all of those things very well.

These virtual relationships are occuring every day in the online, internet-driven, e-commerce-oriented world.

I think one of the most important aspects of this view of customers as both physical and virtual through technology is that the technology that companies use is now directly affecting customers. As Mr. Kane so aptly puts it "CIOs are essentially building relationships with the company's customers through technology." The down side to this technology connection is that if the customer interface is not done properly, the technology can affect the customers in a negative way and create a barrier to customer loyalty.

The bottom line for me is that we must become more aware of the impact of the technology used by a company and pay close attention to its impact on customers.

Wednesday, October 3, 2007

The New Science of Customer Relationships

There is a large number of people making a living by telling companies how to improve customer relationships. Some of them are just mouthing words and platitudes while some have some real knowledge to impart. I believe the reason so many are working in this area is because customer relationships are recognized by the business community as an important component of customer loyalty. I believe, based on the recent work published by Dr. Daniel Goleman, that we may have a science that will allow us to examine customer relationships in a more systematic, scientific way.

Dr. Daniel Goleman, the author of "Emotional Intelligence" has a complementary book that appears to indicate the science of human relationships. This new book is titled "Social Intelligence, the Revolutionary New Science of Human Realtionships."
I do not intend to either review nor abstract his book on this site. Rather, I am offering some brief excerpts that have convinced me that this may be a science that gives those of us in the customer loyalty field some insight that has always been obvious but difficult to translate into a systematic, repeatable set of rules that would withstand the rigor of scientific scrutiny.

According to Dr. Goleman, people seem to be programmed to want to connect with other people. He postulates there are two roads to connecting with another person; namely the "low road" and the "high road." The "low road" is circuitry that operates beneath our awareness, automatically and effortlessly, with immense speed. For example, quoting from Dr. Goleman, "when we are captivated by an attractive face, or sense the sarcasm in a remark, we have the low road to thank.

The "high road" is very different since it runs through neural systems that work more methodically and step by step with deliberate effort and is generally part of our consciousness. Dr. Goleman notes "as we ponder ways to approach that attractive person, or search for an artful reposte to sarcasm, we take the high road."

The low road is very emotional and traffics in raw feelings whereas the high road is cooly rational and relatively cerebral and looks to understand what is going on.

So, what does this mean for those of us who analyze customer loyalty? Since I am a believer in the three variable model for customer loyalty (customer relationships is one of the three variables and, in my mind, the most important variable), I see the work of Dr. Goleman as foundational to our building a comprehensive theory about how to train employees. I think one key is the work of Dr. Goleman since it provides a model for understanding what creates and builds a strong customer relationship.

Customer relationships are built on rapport between the customer and the employee. Three elements appear to be required to provide the rapport; namely mutual attention, shared positive feeling and a well-coordinated nonverbal duet. More information about these are described in Dr. Goleman's book.

One of the errors most often made by employees when dealing with customers is simply not paying attention to the customer. Mutual attention is necessary and that means the customer should be given the undivided attention of the employee.

One of my pet peeves is to have an employee at a store where I want to make a purchase start to wait on me before he/she has finished some task. I am not given the undivided attention of the employee and the first thing I feel is that I am not worth their time. I will usually stop interacting with the employee until I have their undivided attention. I will stand quietly and wait until the employee stops or finishes the taks. Sometimes the employee "gets it" and does a great job of recovery by giving me great service while other employees will become rather distant and do whatever it takes to get rid of me ASAP. The store with the latter type of employee will not get much of my business in the future.

I intend to examine the implications of this work by Dr. Goleman and design ways that employees can be trained to build those lasting customer relationships.

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