Saturday, July 30, 2011

Brand Impact on Customer Loyalty

An interesting study of 1,000 adults suggests that consumers seem to be more concerned about ethics of businesses. The study reports that 91% of shoppers are seeking information about the approach of businesses to the environment as they are shopping for goods and services. The study was performed by Warc (which may be found at

Contributions to charities also appear to affect the consumer. Of the 1,000 consumers surveyed, 530 reported that contributions to charities would play a role to purchase or not.

In addition, 74 percent were very interested in learning more about the ethics of a firm before making their purchasing decision.

These results are consistent with the blog of June 1, 2011 which discussed the research into the impact of corporate social responsibility on customers.

The bottom line is that companies are no longer just sources of products and services. Customers are seeing them as a component of their environment and are looking for them to actively participate in the local community and society at large.

Saturday, July 23, 2011

Building Trust from the Customer's Perspective

This is the final blog describing the research of Professors Halliburton and Poenaru from ESCP Europe. As a result of their research where they interviewed 2000 customers in the US and UK over a 3 year period, they asked the customers what they would recommend as ways of building trust. Their responses fell neatly into three categories. The responses are listed in order of the number of responses in each of the categories.

1. Improve communications. There were 568 responses that fell into this category. This category includes communication itself in terms of quality and clarity as well as communication transparency.

2. Provide "customer care" or a sense of being "looked after". There were 438 responses that fell into this category.

3. Ensure a high level of competency and professional conduct from employees. There were 241 responses that fell into this category.

There were a number of other recommendations but with many fewer responses. They include:
1. getting the service right
2. admit mistakes and solve them fast
3. provide efficient services
4. improve security
5. reward loyalty more for existing customers.

The bottom line is that there are a number of lessons that can be taken from this research. Here are a few that seem most important:

1. Get your product or service right!
2. Ensure high standards for front-line staff
3. Admit mistakes, apologize and fix them!
4. Improve communications across the board.

This might not be news to anyone. But now we have some research that seems to back up those experiential evidence we have been using to make decisions.

Friday, July 15, 2011

Drivers for Loyalty and Trust

Carrying on the results from the research reported by Halliburton and Poenaru from ESCP Europe, they examined what they believe are the drivers of trust (and loyalty). They divided the drivers into their framework of emotional trust and rational trust.

Their main observations suggest the following:

The most important influencing factor of EMOTIONAL TRUST is rational trust, followed by front line employees, management policies and marketing communications.

The most important influencing factor of RATIONAL TRUST is front line employees, management policies and satisfaction with previous experience. The breakdown of these factors as they have derived them with their associated weights are:

1. Rational trust - 56%
2. Trust in front line employees - 16%
3. Management policies - 14%
4. Trust in marketing communications - 9%
5. Trust in self-service technologies - 5%

1. Trust in front line employees - 21%
2. management policies - 19%
3. Trust in marketing communications - 18%
4. Trust in past customer experience - 18%
5. Trust in self-service strategies - 15%
6. Reputation - 9%

Perhaps the most important observation is that rational trust plays the key role in customer trust. Emotion trust does not appear until some form of rational trust is achieved.

Recall that this research was done for only three industries in the US and the UK; namely banking, insurance and mobile communications. For that reason, these findings must be tempered with the understanding that they may not apply to other countries or other industries.

The bottom line that we can take away from these drivers is a research base that is logical and backed by a structured experiment. We have a starting point.

The next blog based on this research is a customer perspective of what could help build trust. If this research is valid, the customer perspectives noted in the next blog should mirror these research results.

Wednesday, July 13, 2011

Loyalty is Built on the Three Dimensions of Trust

This is the third in a series of blogs taken from the research of Professors Halliburton and Poenaru from ESCP. The previous blog discussed trust as having two components; namely rational and emotional trust. The research takes these factors the next step by introducing three complementary dimensions of trust built on these factors; namely competence, integrity and empathy. Based on the previous blog, the first dimension would be considered rational trust and the second and third dimensions could be considered emotional trust.

Each of these dimensions can be defined as follows:
COMPETENCE could be considered as the ability shown by the company demonstrated by its personnel.

INTEGRITY is another word for honesty which builds confidence that the actions of the company are true and correct.

Another word for EMPATHY is concern. The companies that show personal concern for their customers take a major step to showing their customers that they are more than a source of revenue.

From these three dimensions the answer to loyalty can be seen to be more than a simple one-dimensional measure. Any measure of trust needs to be reviewed with these three components in mind. While there is no current research that demonstrates that these dimensions are independent, intuitively they appear to have little overlap and hence may, indeed be independent.

Some of the results that have been discovered from their survey between the US and UK include:
1. USA tends to score higher than the UK when looking at banking, insurance and mobile telecommunications
2. Older customers are generally more trusting.
3. There were no gender differences in trust.
4. Part-time and self-employed individuals showed the lowest levels of trust. Retired workers showed the highest levels.
5. Education level had virtually no effect on trust.
6. The length of the relationship between the customer and the company had only a weak correlation.

In any case, measures of loyalty need to include measures of these three components in order to better understand trust. Rather than focus only on top boxes for a loyalty measure, it might be worthwhile to consider adding questions that incorporate these three measures.

The bottom line is that loyalty and trust are becoming more and more important to long-term success of companies. Companies need to consider the research that is being done and incorporating those aspects of the latest research that they believe will improve their understanding of their customers and ultimately add to their long-term success.

Thursday, July 7, 2011

Rational and Emotional Trust

Companies seem to agree that trust by the customer is the holy grail of customer relationship. All companies that measure customer attitudes are measuring trust either explicitly or implicitly. The researchers identified in the previous blog have noted that the main benefit of trust is customer loyalty which then leads to longer term relationships, greater share of wallet and higher advocacy of word-of-mouth. Their survey results indicated that trust drives between 22% and 44% of customer loyalty. The other major driver of customer loyalty is the satisfaction with previous experiences with the company.

The idea that trust has two components makes sense; especially as they are defined.

Rational trust is based on the process the customer follows to assess an organization's intention and ability to keep promises, by identifying guarantees in term of competencies, and predictability of behaviors.

Rational trust would include the following aspects: Knowledge, Competence, Ability, Reliability, Predictability, Creditability and Dependability.

Emotional trust is based on the process the customer uses to evaluate a company according to the qualities and characteristics that show concern and care as well as their willingness to compromise beyond the profit motive.

Emotional trust would include the following aspects: Empathy, Feelings of security, Benevolence, Good will, Personal beliefs and Altruism.

Many sales and marketing executives have noted in non-published discussions that many decisions are not rational. In fact, customer decisions probably consist of both rational and emotional trust. A good example is the decision to purchase a car. The basic need is transportation and yet the emotions often lead us (including me) to add many options that are not easy to rationalize. The care of the salesman or the understanding of the service manager will often play a significant role in supporting the trust. Thus, the trust developed during the purchase of the car includes components of both rational trust (knowledge, reliability, etc.)demonstrated by the product and dealership and emotional trust (feelings of security, empathy) provided by the salesman.

The bottom line is that trust is, as previously stated, the holy grail of relationship management that every company seeks. We can call it customer satisfaction, loyalty or any of a number of names but it all boils down to trust. Do my customers trust me? That is the real question we need to answer.

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