–As told to Cynthia Clark
Nearly every business decision we make is based on trust. Unconsciously, we continually evaluate a situation and decide whether we should take the next step. Every time we hesitate before making a purchase, for example, we're evaluating our trust in the company and the salesperson, even if it's somebody we've never met.
Trust is a way that human beings have developed to mitigate risk. When we know and trust someone, we don't mind sharing information with him, lending him our car, or letting him stay overnight in our vacation home. On the other hand, if we don't trust a person we tend to be suspicious of his actions, as well as his intentions.
Similarly, customers put a great deal of emphasis on trust when deciding whether to do business with a company—especially in B2B industries. This makes it essential for organizations to be trustworthy. However, getting customers to trust a company doesn't happen overnight. It's developed over time, based on the actions and interactions between company and customer during the course of the relationship. It starts with companies trusting their clients. People respond positively to being trusted; organizations that trust their customers will likely gain their trust in return. This display of trust includes being transparent and giving customers access to the information they need.
Customer trust—both the giving and receiving of it—starts in the boardroom. C-suite executives need to put themselves in their customers' shoes. This gives them important insight into what their customers need and expect, how they prefer to be treated, and whether the company is delivering on its promises. Customers want the companies they do business with to have their best interests at heart. Demonstrating that by putting in time and effort to understand customers and act on that insight is another way companies can gain trust from their customers and prospects.
Customer trust isn't just a feel-good strategy. There are four significant business benefits from building and maintaining customer trust—in other words, four notable reasons that C-suite executives should care about being trusted by customers and prospects.
1. Trust leads to increased revenue
Every company is concerned about its bottom line, and gaining customer trust is a way to increase revenue and profitability. Customers are more willing to spend money with companies they trust, because they're more confident that they'll get a quality product or service and that the organization will deliver what it promises. Additionally, trust has a high correlation with loyalty. Not only are customers who trust a company more likely to become repeat clients, but they are also prone to become advocates, telling their friends, associates, and social media contacts about their experiences with a particular organization and recommending companies they trust.
When customers and prospects trust a company, they're more willing to believe what the organization says and more likely to consider its offerings of high value. Furthermore, they're more likely to accept an apology when a company does something wrong and even come to that firm's defense. They're also more likely to repurchase from companies they trust, leading to higher profit margins.
2. Repeat business and lower sales costs
Repeat business leads to lower costs for organizations since they don't have to spend as much on customer acquisition. This is especially important in the B2B world, where a trust-based relationship leads to fewer requests for proposals and more successful first bids. Moreover, when a client trusts a company he is more likely to invite that organization to define the requirements, sometimes not even looking at competitors' offers.
Trust not only lowers the cost of interactions and increases customers' confidence in doing business with an organization, but also tends to cut the amount of time that customers take before deciding to enter into a business relationship. Conversely, lack of trust pushes some customers to do business with multiple organizations (e.g., using several financial service firms to manage a portfolio) simply because they don't want to put all of their reliance on one company.
Setting expectations, including a clear explanation of products, services, and processes, goes a long way toward gaining customer trust since we're extremely grateful to people who make us feel at ease. Done well this can increase customer confidence and boost overall sales effectiveness, as well as drive higher average sales.
3. Increased employee satisfaction
Customers' trust in a company has a positive psychological effect on employees. It's human nature to want to interact with people who trust us and whom we trust, while it's difficult to work with those who are constantly suspicious of us or who we're suspicious of. In fact, the work of Harvard Business School professor emeritus Jim Heskett and professor Earl Sasser has shown a correlation between employee satisfaction and customer satisfaction. For example, customer service jobs tend to have high turnover because employees in these frontline positions hear frequent complaints. On the other hand, employees who regularly hear that they work for a great company are happier and more likely to stay with that firm.
Additionally, companies that enjoy customer trust become a magnet for new employees, who want to work for an organization that's trustworthy and well-liked. Just as employees prefer dealing with happy customers, clients like doing business with satisfied, engaged employees whom they feel they can trust. Thus, the positive sentiment among employees translates to positive customer interactions.
4. Lower legal costs
High-trust relationships tend to lower legal costs and increase the power of existing contracts. While this is most prevalent in the B2B sector, it is also apparent in the medical world. Studies have shown that if doctors who make a mistake proactively offer a genuine apology, the patient is less likely to take legal action. The reason: Admitting the truth is an important element of trust that people respond positively to. In fact, the 16 hospitals affiliated with the Harvard School of Medicine have a policy to address adverse situations, which includes expressing regret.
A business relationship that lacks trust is likely to include more disagreements, adjustments, and lengthy negotiations leading to a final contract, which can amount to significant legal costs. On the other hand, if a relationship is based on trust, there is a higher chance of close collaboration, speedier agreements, and non-problematic contract changes.
These four benefits are powerful reasons C-suite executives should be concerned about earning and retaining customers' trust. But there's a caveat: If the primary reason a company is trying to build customer trust is to gain those benefits and become more profitable, then customers won't trust that organization. The only way to get all those benefits is to first, and primarily, be trustworthy—as a way of doing business. Those other benefits will accrue to those whose trustworthiness is genuine.