Beyond Philosophy LLC. Michael FEBRUARY 2016 BEYONDPHILOSOPHY.COM

Transcription

1 Beyond Philosophy LLC Michael FEBRUARY 2016 BEYONDPHILOSOPHY.COM

2 Corporate Trust and Reputation and Customer Advocacy Behavior: Is There Linkage (and, If So, How Much)? Michael Lowenstein, Thought Leadership Principal, Beyond Philosophy 2

3 The purest treasure mortal times afford is spotless reputation Richard II, William Shakespeare Along with a proactive, customer-focused enterprise culture and strong brands, corporate trust, image and reputation are among any organization s most valuable stakeholder relationship assets. Trust and reputation go hand-in-hand, and must be protected. A superior reputation does not necessarily translate to stronger business results; however, a bad reputation can be detrimental to a company s future. Any public and negative impact on reputation results in a corresponding, or greater, decline in stakeholder trust; and any erosion of trust will surely impair business results. 3

4 Overall Effect of Reputation on Customer Behavior A 2008 study by the CMO Council found that almost 100% of customers surveyed said they would either scale back or terminate relationships with companies that fail to build customer trust. Customers need to see that a business has proactively worked to build a solid foundation of trust. For many organizations, the first, and most essential, step in building trust is understanding why their business may not have as positive a reputation as it once had, or should have. In the Spring of 2010, the highly respected Reputation Institute, in collaboration with American Banker, published the results of a study measuring the reputations of 30 large U.S. banks. This online research program among close to 7,800 consumers found that governance, or how a bank is perceived to behave in its level of transparency and business dealings, accounted for close to 16% of the overall reputation score. This was the single greatest contributor to reputation, higher even than the effect on reputation of bank products and services. 4

5 For Reputation Institute, one of the key takeaways of the study was that, unlike other consumer products and services, banks were both challenged and struggling to recover from the negative sentiment caused by their role in the recession. Another was that banks needed a theme that not only resonates with the public interest but elevates the sense of esteem, trust, and admiration they engender. The reputation of banks and financial companies has dropped significantly since According to a new Edelman Trust Barometer survey (covering over 5,000 adults in 23 countries), less than one-third of Americans now trust banks to do what is right. Of close to 20 industries covered by the Edelman study, companies in the financial sector - banks, insurance companies, and financial services - are at the bottom three in terms of consumer trust and reputation. Edelman concluded that, because the perception of transparency and honest business practices is so important, companies in these industries haven t recovered trust levels in U.S. since the financial crisis. 5

6 Banks often pay lip service to reputation among its constituents; however, reputation carries both opportunity and risk, not only for banks but for every organization. Why is corporate reputation so important? Why is it critical for companies to do everything possible which will create, optimize, and protect perceived stakeholder reputation and sentiment? The Proven Linkage Between Perceived Reputation And Advocacy Behavior Utilizing a proprietary customer advocacy research framework, our studies have repeatedly identified direct, and significant, linkage between downstream advocacy behavior and customer experiences, service transactions, strategic relationships, brand positioning and messaging, and even loyalty program components. There is also direct business outcome linkage, in the form of customer behavior, between advocacy level and strategic corporate reputations and customer trust. That is the subject of this white paper. In sum, advocacy monetizes at a stronger, and more consistent, rate compared with other key customer research measures in active use. 6

7 A consistent theme of this research framework is that customer behavior in the marketplace is a direct reflection of advocacy level. For example, Advocates have a strong willingness to explore new products from their primary bank - 50% will consider vs. 5% of Alienated customers who will consider new products. Advocates are virtually certain to have a continued relationship with their primary bank compared to Alienated customers, who are virtually certain of not continuing. When Advocates add products and services, they will do so with their primary bank. When Alienated customers add products and services, they will do that at competitive banks, not the primary bank. So, banks must pay close attention to whatever elements of communication, image and experience drive customer behavior. Trust and reputation are high on the list of these leveraging elements. In a major U.S. bank study, there was a significant degree of variation in levels of advocacy behavior created by the fifteen banks covered: 7

8 Beyond creating superior customer experiences, banks that earned high levels of advocacy did so in significant part because of their solid reputations and the trust and confidence they have been able to engender among customers. One of the key confirming elements of Market Probe s customer advocacy research is the behavioral impact, both positive and negative, of informal, brand-related communication sent and received by customers. The most recent Edelman Trust Barometer study findings identified the degree to which customer trust protects, or undermines, reputation. 8

9 When a company is distrusted, 57% of consumers will believe negative information after hearing it one or two times, compared to 15% who will believe positive information after hearing it one or two times. Conversely, when a company is trusted, 51% of consumers will believe positive information after hearing it one or two times, compared to 25% who will believe negative information after hearing it once or twice. These are compelling findings indeed. Looking at overall bank advocacy study results, there was a significant difference, for example, in high trust-related and confidence-related attribute scores (top two box on a ten point scale) among bank customers whom our framework identified as Advocates vs. those who were Alienated. Of the attributes which addressed basic and extended elements of reputation and image, the only elements which would benefit from additional attention were those which represented customer pro-action and altruism: 9

10 Is a strong and stable blank Is a warm and welcoming bank Has a good reputation Has earned my trust and confidence Always looks out for my best interests Always treat me fairly Values my business They go the extra mile and often impress me I feel like I belong at this bank Advocates A l i e n a t e d 84% 5% 81% 1% 87% 2% 87% 1% 62% 0% 84% 2% 70% 0% 60% 1% 70% 1% When analyzed according to their potential leveraging impact on customer advocacy and alienation behavior, we offer two banking results as examples. In the multivariate analysis shown below for the first bank, there are some moderate image-related negative behavior drivers, i.e. creators of alienation, principally the image effect of a lack of consistency. On the positive side, this bank can build greater advocacy based on the leveraging impact of a reputation and image which comes from pro-action. 10

11 The second bank has a considerably greater image and reputation challenge among customers. The single greatest contributor to alienation is the inability to earn customer trust and confidence. This is sure to undermine and destabilize many customers who might otherwise be fairly ambivalent about the bank, but who remain based on inertia, also creating bank distrust within other stakeholder groups. While this bank has created some positive image-related perceptions - the sense of customer belonging, and image of pro-action - evident among their advocates, the strength of the negativism associated with low trust and confidence is clearly the first priority for relationship and image fence mending. 11

12 The findings, and image and reputation potential effect, just presented can hardly, however, be isolated to companies in the financial services industry. In truth, virtually every company in every b2b and b2c industry is vulnerable to reputation attack and resulting business impact. As noted by Dr. Leslie Gaines-Ross, Chief Reputation Strategist for international public relations firm Weber Shandwick: There is an increasingly critical connection between brand and service promise, corporate and brand reputation trustworthiness, the transactional experience (as delivered by people, processes, communications and culture), and downstream customer behavior. Any small ripple in reputation change 12

13 (such as through a product-related issue, online rumor or executive miscue), brand performance or customer service can have a tsunami-like effect on business outcomes which may last indefinitely. This is especially true now because of the permanency provided by social media. To further illustrate this point, we offer two additional corporate image and reputation impact examples. A mid-sized supermarket chain was caught between companies which offered a destination-type unique grocery shopping experience and larger chains which, though fairly commoditized in respect to the shopping experience, focused on sharp price and quantity discounting. The marketing and image creation strategy of our example chain was focused around visibility in the community and store service. This had some level of resonation among customers who were already advocates (strong and vocal customers) for the chain, but it appeared somewhat disingenuous to customers who were less positive about their shopping experiences at the chain. The result, among customers who were nega ive to neutral, was that there were trust and brand fit issues to be addressed. 13

14 Critical to Reducing Alienated Critical to Building Advocates The second one is from a major high-tech business-tobusiness company. Our advocacy study collected customer insights having to do with key elements of reputation and image (stable company, positive reputation, reliability, trustworthy company, industry expertise, market leadership, stands out from competitors, investment in the future, etc.) as well as related areas of performance which contribute to relationshipbuilding (ease of doing business, risk reduction, strategic relationship management, understands business objectives, etc.). 14

15 Study results exhibited both challenges and opportunities to advocacy-building. Among all of the image, reputation and relationship diagnostics, the one which most leveraged more positive behavior was Reduces commercial risk, a performance component which definitely speaks to greater customer assurance and trust. There was also positive perception of company reputation. On the negative side, reputation was about as potentially undermining of customer behavior as it was a contributor to advocacy. In addition, level of trust in the company was a co-equal key potential negative behavior driver, along with reputation. The combination of these two elements strongly suggests that further work needs to be done which will a) specifically identify what is behind the poor image of this company among its customers, and b) once this further discovery research has been completed, initiate a tactical and strategic corporate communications program with stakeholders to turn the situation around. 15

16 Further Linkage Proof Colleagues at Weber Shandwick generated a seminal report - The Company Behind the Brand: In Reputation We Trust - where, based on image and reputation, the potential for behavioral impact was studied among 1,375 adult consumers in the U.S., U.K, China and Brazil. 16

17 It also included 575 executives in companies with revenue of $500 million or more. Study fieldwork was in October and November, The results of the study were indeed eye-opening. From the insights, Weber Shandwick identified six new realities of corporate reputation, each serving as a reminder that reputation and image matter - a great deal. 1. Corporate brand is as important as the product brand(s) 2. Corporate reputation provides product quality assurance 3. Any disconnect between corporate and product reputation triggers sharp consumer reaction 4. Products drive discussion, with reputation close behind 5. Consumers shape reputation instantly 6. Corporate reputation contributes to company market value 17

18 About two-thirds of consumers said they avoid buying a product if they don t like the company behind the product, and an equal proportion increasingly check product labels to see what company is behind the product they are buying. These results were even stronger in China and Brazil. So, what influences consumer perception about companies? 88% of respondents said what people say. This is higher than online reviews (85%), online search results (81%), company web sites (74%) and social networks (49%). Everyone understands that the influence of social networks is rapidly growing, and the Weber Shandwick report concludes: Once companies figure out how to use social media to demonstrate their receptivity and customer focus, social media will be the consumer s best friend. Finally, regarding the impact of corporate reputation on company market value, executives in the study estimated that 60% of their firms market value is attributable to its reputation. This high value is reflected in the fact that 86% of the executives reported that their companies have increased efforts to build company reputation over the past few years. 18

19 Concluding Thought Leslie Gaines-Ross offers a fitting final observation on the increasing importance of trust and reputation on stakeholder behavior, and how to protect and enhance it: Going forward, to generate lasting trust, positive reputation, and continued consumer confidence for brands, products and services, companies will need to focus on customercentric leadership, as well becoming more transparent and authentic. They will have to ramp-up inclusion of employees and customers, and more actively engage in offline and online dialogue with all stakeholders, particularly their advocates. Successful companies will, at the end of the day, stress inside-out and outside-in advocacy in all of their actions and processes to both drive positive business outcomes and be accountable to all of their constituents - even the virtual ones. 19

20 Our thoughts... Beyond Philosophy help organizations moved to the next level of the customer experience. There are have many case studies that highlight our work. One of our clients Maersk Line, improved their net promoter score by 40 points in 30 months that have a 10% rise in shipping volumes as a result of our work. 20

21 Summary Beyond Philosophy help organizations moved to the next level of the customer experience. There are have many case studies that highlight our work. One of our clients Maersk Line, improved their net promoter score by 40 points in 30 months that have a 10% rise in shipping vol-umes as a result of our work. Beyond Philosophy help organizations moved to the next level of the customer experience. There are have many case studies that highlight our work. 21

22 Additional Resources You may be interested in reading some of our other White papers that can be found here on our web site: FEBRUARY BeyondPhilosophy.com Share this on 22

23 About Beyond Philosophy Beyond Philosophy are literally the world s first dedicated Customer Experience company. Founded in 2002 by our CEO, Colin Shaw, we have built an excellent reputation of being Thought Leaders in Customer Experience. This is not what we say, it s what other say. We are proud that Colin Shaw our CEO, has been recognized by LinkedIn as being one of the world s top 150 Business Influencers and by Brand Quarterly as one of the Top 50 Marketing Thought leaders over 50 and written 5 books on Customer Experience. Beyond Philosophy help organizations moved to the next level of the customer experience. There are have many case studies that highlight our work. One of our clients Maersk Line, improved their net promoter score by 40 points in 30 months that have a 10% rise in shipping volumes as a result of our work. Beyond Philosophy provide three services. Consultancy services both strategic and tactical we can help guide you to improve your customer experience. Training services we can train your CX team on how to improve your customer experience as well as your front time team with our memory maker training. Specialized research services we provide some innovative research techniques that discover what drives and destroys value your organization. 23

24 If you d like further information and please contact Beyond Philosophy LLC on our website Beyondphilosophy.com. Follow LinkedIn - Colin Shaw Periscope Facebook - Beyond Philosophy Beyond Philosophy LLC, USA. 550 North Reo Street Suite 300 Tampa, Florida Toll Free: +1 (866) Outside USA: +1 (813) Beyond Philosophy Europe. London, UK: + 44 (0) Beyond Philosophy LLC All rights reserved. 24