The role of trust in customer relationships
ECSP and Pitney Bowes conduct new study
Trust is seen as a core requirement in business, but very few consumers actually admit to trusting a provider.
According to The Reader’s Digest European Trusted Brands 2010 study, only 32% of consumers trust international companies, and 13% trust advertising, as opposed to 48% trusting their friends, work colleagues or neighbors.
This contrast can also be found in the findings of the Nielsen Global Online Consumer Survey 2, where 90% consumers trusted recommendations from friends and 70% trusted consumer opinions posted online.
Nonetheless, brand websites came at 70% as well – this indicates that trust may be something that smart service providers may still be able to do something about suggests a new research study by the ECSP Europe Business School and customer data expert Pitney Bowes Business Insight.
For service businesses, especially for ‘service-rich’ organizations who have multiplecustomer contacts, or touch points, often over a long time period, this issue is particularly critical: “More than half of bank customers believe that having a relationship of trust with their financial institution is more important than getting the best value for money,” said Banking Association Chairman, Ken Ferguson, 2010.
A number of trust indices consistently put banking, media and insurance organizations at the foot of the trust ‘league table’.
For example, the Edelman TrustBarometer 20104 rates these three on “how much do you trust these businesses to do what is right?” at 21%, 23% and 41% respectively, compared to 74% for technology and 57% for retail businesses.
This situation has become tougher with increased competition and rapidly changing technology. In addition, new digital technologies and social media enable companies to reachtheir customers in a fast and innovative way, and at the same time customers are encouraged to exchange opinions about products, services and brands. The traditional view of customer relationship management (CRM), centered on a one-to-many interaction with customers, has changed.
Digital communications now allow multi-channel customer relationship management.
Within this context, customers’ expectations have expanded, since participation inthis multimedia environment involves greater empowerment of customers, including ‘co-creation’ of value and communications.
Communication from a service provider is in fact, one of the leading influencers of consumer trust, finds the study, which found that customer communication drives more than 20% of overall consumer trust in a company, affecting not only the length of customer relationships but also business profitability and customer advocacy (i.e. word-of-mouth).
Customer satisfaction with interactive channels is often determined by trust in self-service channels (for 10% – 20% of consumers) and by communications from the provider (15% – 20%). Customer trust is also influenced by a service provider’s management policies and practices, and by a customer’s previous experience. Overall, the study noted that trust can drive up to 44% of a customer’s loyalty to a specific brand.
“Trusted brands build upon each interaction to enable lifetime customer relationships,” said David Newberry, chief marketing officer for Pitney Bowes Business Insight. “Every customer interaction – whether in person, on a web site, by direct mail, or through a call centre – is an opportunity to build or break that trust.”
Levels of consumer trust varied across demographics, including age, income and occupation. For example, older consumers were generally more trusting, specifically those aged over 65.
The study also found that higher income is correlated with higher trust, with those earning more than US$70,000 per year showing the highest levels, in contrast to those earning less than US$20,000 per year.
Retired respondents demonstrated the highest levels of trust, while part-time or self-employed consumers showed the lowest levels of trust.
The consumers surveyed recommended several ways for companies to strengthen trust-building activities, such as improving communications (in terms of quality and clarity), increasing transparency, providing advance information for better deals, and problem solving. In addition, consumers claimed that they actively look for companies that provide high-quality customer care, that give customers a sense of being ‘looked after’, and that demonstrate a high level of competence and conduct from employees.
According to Newberry, “Businesses can enhance the customer experience by empowering customer service representatives to deliver fast, efficient and personal customer interaction, allowing customers to control how they receive information, and tailoring communications for individual messages and delivery channels. This helps to increase sales opportunities, reduce customer churn, and lower overall communications costs, thereby improving ROI.”
A full presentation of the study is available at www.pbinsight.com