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.

57 comments:

Charles H. Green said...

Good stuff, thank you.

If I may offer a tweak, however? I think there is an important difference between trusting a reputation, a process, and a person.

Trusting a person is the richest. Trusting a process is weakest, because there is very little human involvement. And reputation is in the middle, because while not a direct human connection, it is built on the past experiences of human connections.

These distinctions affect loyalty, because what is increasingly called "loyalty" is nothing more than repeat business--which can be driven by such non-trust-related phenomena as price breaks (consider frequent flyer or other "loyalty" programs).

This is a shame, because loyalty born of personal experience is far richer and deeper.

Loyalty to an airline, they say in the business, lasts about 30 minutes--an earlier flight is sufficient to make a customer switch.

Loyalty to FedEx can be overcome by a new process at UPS, though not without some thinking.

Loyalty to Nordstrom's comes from repeated experiences of a total philosophy; you don't switch easily.

But loyalty to a person is the deepest of all. You don't switch accountants, or physicians, or financial planners, if you have a strong personal connection--unless they radically violate your trust.

The economic consequences for customer relationships are huge. Loyalty based on price-cutting isn't really loyalty worth the name--though if you did a word count on Google, unfortunately that's probably the most frequent use. But loyalty built on personal trust is the basis of the strongest customer relationships.

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