What role does trust have in the retail sector? Jai Breitnauer finds out why we need a good relationship to make a purchase.
Edelman, the world’s largest independently owned public relations group, has been publishing their annual Edelman Trust Barometer since 2001. The report looks at consumer trends across business, government, NGOs and media, surveying 33,000 people across 28 different countires to determine how much faith they have in these insititutions. The recently released 2017 report is a damning indictment on the state of trust in the 21st century, revealing the largest-ever drop across all four areas since the survey began.
The report noted that in every one of the countries studied, the status of the CEO had dropped, leaving trust at an all-time low of 37 percent. They also found that 53 percent of global respondants felt the current overall system had failed them, including 49 percent of those in the top income quartile.
“The implications of the global trust crisis are deep and wide-ranging,” says Richard Edelman, president and CEO of Edelman. Yet, of the four institutions, the report noted business is viewed as the only one that can make a difference with three out of four respondents agreeing a company can take actions to both increase profits and improve economic and social conditions in the community where it operates.
“Business is the last retaining wall for trust,” says Kathryn Beiser, global chair of Edelman’s corporate practice. “Its leaders must step up on the issues that matter for society. Business must also focus on paying employees fairly, while providing better benefits and job training.”
Trust is seeded in your own backyard
So how can retailers further promote trust, and what benefit is it to business?
“We believe that in the 21st century, companies will be sustainable only when they have integrated ethics in their culture, strategy and day-to-day practice,” says Martin Smith, country manager for L’Oréal New Zealand.
The 100-year-old multinational was one of the first companies that realised the key to the trust relationship lies within the company itself. Smith notes that L’Oréal encourages a workplace environment where employees can speak freely, be treated fairly and where integrity is central to their offering. They have been recognised by Episphere seven times as one of the world’s most ethical companies.
“If a corporate/staff relationship is suffering, then the staff/customer relationship will suffer,” says psychologist and corporate trainer Kim Goodhart of Real TV. “This could be staff doing the bare minimum of what is required, or it could be ‘quiet revenge’ like taking extra stationery or being deliberately rude to customers. In the other direction, when staff are empowered, they go the extra mile.”
But forging a good trust relationship within a corporate structure isn’t always easy. It has to come from the top down, for a start, and often relies on a good personality being in a lead role.
“The person at the top needs to care in order for trust to radiate through a business and that also needs to be communicated effectively,” says Goodhart.
Goodhart starts by making a film about the business, because it’s important to communicate the origins, highs and lows, and vision to employees. Goodhart says that warts-and-all honesty is essential to building trust.
“To stand there and say, ‘We’ve been through tough times and come out the other side’, it’s really valuable. It aligns people to the business and its values, it excites them.”
Real TV then moves on to offering regular company video updates. These show how goals are being tracked and values are being adhered to, and share success stories among the employee community. The final stage in their work is about tackling blocks in the system, which often occur not because people don’t want to be helpful in professional situations, but because they don’t have the tools to approach the task in an effective way.
“We create videos that are a discussion piece – if people can see someone else in a situation they can relate to, then they can work through the problem and contribute to the result,” says Goodhart.
Building trust in this way works. Mitre 10, one of Real TV’s first clients, notes they’ve had a 16 percent YOY sales increase since they began working on building trust with the company. Goodhart notes that a modern concern with people, rather than the old-fashioned exclusive focus on profit margins, results in a better trust relationshop and company performance.
“According to research done by Gallup, companies that successfully engage their employees and their customers experience on average a 240 percent increase in performance-related business outcomes,” says Goodhart. “The world is changing and keeping up with that change is more and more important.”
Building a trustworthy brand
Once you’ve got your team on board, you need to get the consumer on side, because that is the relationship that will ultimately drive business growth.
Business partners Chris Ayson and Richard Starr from Parcel, a new premium boxed wine launched in Farro Fresh in mid-December, are not only building a brand from scratch, but having to regain consumer confidence in a product format that many wine drinkers had lost faith in.
“There was no premium bag-in-box wine offering in New Zealand or Australia, yet it’s common in Europe and the US. In Scandanavia, 60 percent of the market is in boxed wine. But here, people perceive the format as poorer quality or not as sophisticated,” says Starr.
“It’s not the format’s fault that low-grade wine has been used in the past, but hopefully we can get people over that ‘80s hangover,” says Ayson.
Putting good-quality wine into a box format is important to Starr and Ayson. They see boxed wine as offering the consumer less waste (as it lasts for six weeks); better storage options as they’re small and stackable; and boxed wine is more environmentally friendly - the new 1.5 litre Parcel wine box has an 87 percent lower carbon footprint than a 750ml standard glass bottle.
“The main way we are trying to communicate quality is through good design,” says Starr, who knew from the outset they wanted a ‘modern retro’ look and bold, screen-printed colours. The team spent four months on the design and packaging of the product, subjecting their prototypes to rigorous market research to make sure they had conveyed Parcel’s values. Making the quality clear to the consumer via design is essential to winning their trust – but ultimately the proof is in the drinking.
“We come from wine backgrounds, we wouldn’t be doing this unless we believed in the product,” says Ayson. “Good wine comes first, the format second – it just so happens we think boxed wine is an excellent format.”
Meanwhile, for French cosmetics giant L’Oreal, winning and maintaining customer trust is an ongoing programme that involves everyone from the CEO to the factory janitor.
“We believe trust is granted when a consumer aligns on several key personal values, and recognises those shared values in a brand and company,” says Martin Smith. “Today ethics is no longer a ‘nice to have’ but a fundamental prerequisite for any business’ licence to operate as it reflects on a company’s set of values. And it will become a competitive advantage for leaders in this area.”
A 2015 Mintel report backs Smith’s assertions, having found that 56 percent of US consumers stop buying from companies they believe are unethical. But knowing who to trust as a consumer isn’t always easy. Smith notes that globalisation and technology have resulted in increasing choice, and therefore increasing confusion, especially over product legitimacy. “Consumers naturally resort to brand provenance to guide them”.
Smith says that L’Oréal is committed to responsible advertising, ensuring all claims are backed up by solid scientific data.
“We believe we can also lead positive change in business practices which will impact the industry and our wider stakeholders.”
Reputation, Smith says, is essential for Kiwi consumers making brand choices, and that reputation is built not just through good products and services, but also though positive corporate citizenship. L’Oreal has worked hard to build its reputation in this area.
“Kiwi consumers know they can do good for New Zealand by choosing brands that do good for New Zealand,” says Smith. L’Oréal’s ethical credentials include Pureology partnering with Sustainable Coastlines; Kiehl’s relationship with the Garden to Table Trust; and even the L’Oréal Citizen Day, an opportunity for employees to role up their sleeves and make a difference in their community.
“Last year, we partnered with Refugees As Survivors NZ and built sustainable gardens at the homes of refugee families across Auckland.”
These sorts of activities not only make companies like L’Oreal a place people are proud to work, but when communicated effectively to the consumer, it makes people proud to be a buyer of the brand.
Faith no more?
Even the most responsible companies can be derailed by a scandal, however. L’Oréal itself suffered some setbacks in the 1990s, when animal rights activists (wrongly) bundled it up with companies involved in vivisection. L’Oréal’s response was to take its now 30-year-old abstinence from animal testing and apply it even more broadly to its suppliers globally.
“The [L’ Oréal] group has invested more than NZD $1 billion in international research on alternative testing methods, including reconstituted skin models like Episkin,” says Smith. “That’s why [The Body Shop founder] Dame Anita Roddick had the faith in L’Oréal’s vision to end animal testing and decided to leave her legacy to the group.”
Another scandal that can derail a brand or company from within is redundancy.
“[This is] an example of a special situation that needs to be handled with care, not to damage trust,” says Goodhart. “It’s always important to allow people into the full story and explain why a decision has been made. If you just throw a new idea at someone their brain goes into crisis mode and this can compromise trust. If you explain why – the stages you went through, the options you considered – people can be remarkably forgiving.”
In recent times, some good Kiwi brands have been damaged by bad decisions. One good example is Cadbury and palm oil. Whittakers had been number two for chocolate in New Zealand for years, but as soon as the company announced it didn’t use palm oil, it shot to number one and is still there despite Cadbury’s best efforts.
On the other hand, a carefully handled crisis can actually bring a company much success. When Emerson’s sold to Lion, many craft beer drinkers were concerned by what the drinks giant might do to this home-grown brand. Lion’s response was to invest in a multi-million-dollar new brewery in Emerson’s origional Dunedin home, creating jobs and becoming part of the community.
“Scandal can have a massive effect on a brand, and therefore on our decision to stock them,” says Peter Dudfield, merchandise manager for Liquorland Limited. “The backlash a brand can receive nowadays would be phenomenal – and instant too, on social media. We have to take our customers’ opinions into consideration. We don’t take decisions lightly but the consumer now has so much say. Brands have to be very careful these days.”
As Dudfield points out, the biggest indicator of brand trust is purchase – the consumer effectively votes with their feet.
“We use a lot of data [around purchasing choices] when deciding what products to stock, and also look at global trends, especially around spirits,” says Dudfield. “There is also the issue of trust between the supplier and Liquorland. The supplier needs to continue to invest in their brands both above and below the line in order to grow their business. If they don’t grow, they’re not part of our future long term.”
Dudfield also notes that a good backstory is increasingly important when winning consumer trust.
“A lot of those international names we deal with have a huge amount of history behind them, whereas with the craft or artisan market what you get is provenance – you know where the product has come from, even down to who has had a hand in making it. The customer likes that,” says Dudfield. “Consumers are more interested and aware of where products are from and you can’t pull the wool over their eyes with some fictitious rubbish.”
The importance of social
Social media has revolutionised the way we interact over the last decade, and not just our relationships with friends. The way we do business is also heavily influenced by the likes of Facebook and Twitter, and consumers have more power to take on – and take down – a company or brand they’re unhappy with.
Being able to work social media well can be key to business success, and we’re not talking about your ability to digitally whitewash (or greenwash, or pinkwash) your customers. For the brand or business seeking to promote their authenticity and provenence, then an open and honest relationship on social media is the best way forward. But of course, you have to have some authenticity and provenance to start with.
The 2010 Reader’s Digest European Trusted Brands study found that only 32 percent of consumers trusted international companies, and only 13 percent had trust in advertising. Yet, 48 percent trusted their friends, work colleagues or neighbours. The Nielsen Global Online Consumer Survey 2009 found that 90 percent of consumers trusted recommendations from friends, and 70 percent trusted the opinions of other consumers posted online. So it stands to reason that even a highly-polished ad campaign will fall short if people on social media are telling their connections what your company is ‘really like’.
Here’s an example. TalkTalk, a UK telco born out of the once-publicly-owned British Telecom organisation, regularly tops British polls for worst internet service provider and worst customer service. Last year it suffered a number of embarrassing security leaks, further tarnishing the brand and seeing customers leave in droves. Apparently, even cheap deals weren’t drawing people back in. So what did TalkTalk do? It turned to social media. It advertised a list of ‘promises’ via its customer care handle, to a scathing response.
Graeme Burton of Computing.co.uk expertly detailed where TalkTalk went wrong in an article from August 2016. He pointed out that most people follow companies on Twitter when they want to complain, so for a start TalkTalk targeted its campaign at its most disgruntled customers instead of seeking out new ones.
“Would you advertise in a newspaper if the readers could all write about their mostly negative experiences with your company underneath it?” asks Burton, who goes on to note its second catastrophic mistake. This was TalkTalk’s failure to recognise how disgruntled customers become connected by social mediums like Twitter, quickly spreading their personal experience and warnings via a public forum that will put prospective customers off.
“Companies can be forgiven an awful lot by their customers if they are price competitive. But if their service consistently fails to reach a certain standard for enough of them, expect everyone to know about it,” says Burton. “Rather than invest in marketing, companies like TalkTalk need to invest in bringing their core products up to standard so that people have something positive to write about on social media.”
This last point is key, and echoed by Ron Guirguis, former managing director of corporate and public affairs for US communications marketing firm Edelman. The firm’s annual Edelman Trust Barometer looks at how consumers perceive business and marketing claims. Speaking to online community business2community.com in 2015, Guirguis notes businesses have to be more accountable for their actions these days.
“People don’t just buy products anymore, they buy the companies that make products, the values they represent and what they stand for,” He says: “If you’re not doing these things, you can’t PR-spin your way out.”
This story originally appeared in NZ Retail magazine issue 748 February / March 2017
The Register provides essential industry news and intelligence, updated daily. And the digital newsletter delivers the latest news to your inbox twice a week — for free!