Wednesday, June 15, 2011

More About Trust

Two professors from ESCP Europe Business School have published a comprehensive review of the business and academic literature along with a survey of 2000 consumers in the US and the UK. Their findings are worth taking some time to report and interpret. The title of their report is "The Role of Trust in Consumer Relationships."

Their research focused on banking, insurance and mobil phone network companies and included interviews with executives in these businesses.

As a beginning consider some of the statistics they uncovered.
1. 32% of consumers trust international companies and 13% trust advertising compared to 48% trusting their friends, work colleagues or neighbors.
2. 90% of consumers trusted recommendations from friends and 70% trusted consumer opinions posted online.
3. The Edelman trust indices show that banking, media and insurance organizations score 21%, 23% and 41% respectively compared with 74% or technology and 57% for retail.

The bottom line is that customer relationship management has been centered on one or one-to many interactions with customers. This has changed with the digital communications media which now provides multi-channel relationship management. Companies can no longer afford to manage all the possible media that is available to their customers. Thus, trust appears to be gaining in importance as a way of building trust-based relationships that transcend the multi-channel media.

This report will be further discussed in future blogs.

Tuesday, June 7, 2011

Customer Satisfaction Impact on Purchase Intent

The annual survey performed by ForeSee Results provide evidence of the relationship between customer satisfaction and purchase intent. The annual survey results are based on more than 22,000 visitors to the top 100 e-retail web sites. (The top web sites are defined by sales volume as reported in the 2011 Internet Retailer top 500 Guide).

The report shows that when compared to dissatisfied visitors, highly satisfied visitors to the retail websites are:

1. 68 percent more likely to purchase online
2. 46 percent more likely to purchase offline
3. 61 percent more likely to purchase from the retailer the next time they are in the market for a similar product (based on likelihood scores).

The bottom line is that the statistics continue to demonstrate that companies that pay attention to customer satisfaction increase their likelihood of increasing their sales more than other companies.

Wednesday, June 1, 2011

Loyalty Impact of Corporate Social Responsibility

There is an interesting study documented by two professors at the Tuck School of Business at Dartmouth College. The authors Kusum Ailsesfi and Jackie Luan collected data from more than 3,000 grocery shoppers. Their objective was to determine if Corporate Social Responsibility (CSR) performance correlated with financial performance. They measured customer perceptions of the retailers' CSR on four dimensions as well as other variables including price, quality, etc. The results are noted below:

The first dimension is CSR performance (which included environmental friendliness, treating employees fairly, community support, sourcing from local growers and suppliers) all showed positive influence on customer's attitudes toward the retailer.

The second dimension is the economic return which is significant. If the retailer is able to improve the customer's perception of the company's CSR activities there was a gain of approximately 1.7% of share of wallet. This could translate into a sales lift of 10% to 15% for the average retailer in the study.

The third dimension is the price impact when higher prices were considered rather than higher share of wallet. The researchers found that a one-unit increase in customer perceptions of employee fairness translates to a price premium of about 12%. A similar increase in local sourcing of products translates to a price premium of about 16%.

The fourth benefit of CSR is that customers appear to patronize the company because they see personal benefits from the CSR initiatives and because the initiatives resonate with their own values. While high prices may be considered bad, they are considered fairer if they can be attributed to good motives such as CSR efforts. The researchers found that the perception of employee fairness accrues as much as 15% increase in share-of wallet.

The bottom line is that this research is showing that CSR is perceived positively by consumers. When consumers see that companies are spending their money on activities that reflect their own personal values, they appear to be willing to respond with their wallet. You might say that companies will can do well by doing good. The best news is that when companies participate beyond their walls everyone seems to benefit.

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