The Future Belongs To Brands That Build Trust
Goldman Sachs is back in the headlines, much to its dismay, I’m sure. In a March 14 New York Times op-ed, ex-Goldman head of US/Americas Equity Derivatives in Europe, the Middle East and Africa, Greg Smith, excoriated his former firm, accusing it of having a “toxic and destructive” culture that ensures the “interests of the client continue to be sidelined.”
The bottom line, or the “basic truth,” as Smith puts it, is simple: “If clients don’t trust you they will eventually stop doing business with you.” With his dramatic, audacious farewell, Greg Smith has put trust front and center again for business leaders, and, no less so, for brands as well.
But it is important to understand the nuances and overall context of trust in order to get it right. From my experience in tracking consumer attitudes I see two sorts of trust, one institutional and the other transactional. Both affect brands but only one can be managed by brand marketers.
Institutional trust is an element of broader societal trends and is less about institutions per se than about how people feel about themselves. Institutional trust has been on the decline since the mid-1960s – for people of all political ideologies – as conformity and regimented social norms have given way to individuality, autonomy, diversity and self-determination. People have less use for big institutions because they no longer believe such institutions fit their values. Such institutions used to fit; now they don’t.
Ronald Reagan is often given credit for teaching America that ‘government is the problem,’ but his message resonated only because it found an audience already attuned to the idea that big institutions were no longer relevant, and not just government but all big institutions.
There is nothing that brands can do about the decline of institutional trust. All brands can do is align themselves with this sentiment in order to be on-trend. This kind of lack of trust is best characterized as mistrust. It is not rooted in perceptions of fraud or insincerity. Rather, it is rooted in misgivings about the role and position that institutions should play in people’s lives, even when such institutions are operating honestly and efficiently.
On the other hand, transactional trust is about proper dealings, and it is well within the power of brands to control. It is fundamental to brand success. When it is violated, people feel abused and violated. Distrust is the reaction, a much stronger sentiment than mistrust.
Transactional distrust can find further warrant in institutional mistrust, but for well-managed brands that nurture and uphold the integrity of relationships with their customers, transactional trust can thrive notwithstanding institutional mistrust. Greg Smith is not sounding an alarm about the societal institution of banks; rather, he is sounding an alarm about the transactions that Goldman Sachs has with its clients. In doing so, Smith puts his finger on the one thing that brands need to do most nowadays to safeguard trust – transparency.
Smith claims, only somewhat mockingly, that there are three ways to be a leader at Goldman Sachs these days, each of which involves getting clients to unwittingly do something that is not in their best interests. Whether or not the specifics are true, the underlying message is that opaqueness makes this possible. The only way to ensure integrity and thus allay the questions clients and customers are sure to ask in the future is to be totally transparent.
Every industry needs to be open and observable in today’s marketplace of social networks and light-speed accountability. Slip-ups are costly. The Futures Company US MONITOR research, quoted in stories about the Greg Smith resignation, shows that the percentage of people who have little or no faith in the fairness of investment companies has jumped from 26 percent in 2008 to 41 percent last year. The firestorm triggered by the behavior and bailouts of financial services firms in the wake of the financial crisis has made customers angry and doing business more problematic. These institutions are not in danger of going out of business, but the costs of servicing and placating customers rise with distrust, consequently eroding margins, undercutting morale and inviting regulations.
There is no excuse for tripping up on transactional trust these days when it is obvious from the travails of others that transparency needs to be core to every business practice. Brands must take this to heart. Invite customers inside; indeed, let customers decide what the brand should be. That is the best way to empower people while sustaining the power of brands, thus bringing together the often-discordant dimensions of trust – institutional and transactional – in a way that will secure the continued brand loyalty of customers.
Contributed to Branding Strategy Insider by: J. Walker Smith, Executive Chairman, The Futures Company
Sponsored by: The Brand Positioning Workshop