Trust, reputation and the profit margin
For years advertising agencies and businesses large and small have understood that word of mouth is the most powerful marketing campaign of all. Forbes magazine recently called Word of Mouth Marketing the most important social media, and cited a Nielsen poll showing that 92% of consumers believe recommendations from friends and family over all forms of advertising. When someone recommends a product or service, they are not just saying they liked it; they are putting their own reputation and credibility on the line. Obviously, people are more likely to recommend a brand they trust to a friend or relative. But what does it mean to be a “trusted brand”?
According to Entrepreneur magazine, trust is established by building a relationship with the customer. The author laid out five key values that aid in the construction of such a relationship: ability, concern, connection, consistency and sincerity. Arguing that those companies showing these strong values have the highest level of trust, and by no coincidence, strong profitability. Companies such as Southwest Airlines, McDonalds, IBM and Disney were on top of the list of most trusted brands. However trust is fragile for both new and well-established organizations.
We need only look back a short period of time to see how the erosion of trust has destroyed well established organizations, as well as the effect it has had on public perception of corporate culture. From the Enron scandal to the sub-prime banking fiasco, mistrust of corporations large and small is rampant, and for good reason. The more recent issue with Volkswagen’s erroneous fuel economy numbers is yet to be played out, however VW has estimated it will cost them $7.3 Billion in the long run. In the short run, VW stock plummeted more than 35% and the company reported a whopping $1.9 billion loss in the third quarter, down from almost a $3 billion profit a year ago. As pointed out in the subsequent investigation, VW fell victim to a weak internal values structure.
Leadership must establish corporate values that drive internal, and subsequently external, trust, and as always, leaders must walk the talk for this to be successful. Values must be communicated throughout the organization and modeled by the CEO and other leaders within the organization. One of our clients, a $4 billion public company, recently instituted an internal value structure where their employees where asked to follow three simple actions that exhibited the value of respect: Show up on time, look good, and be prepared.
Leaders seen as good communicators and those that lead by example are invariably trusted and consequently high performers. Simple things go a long way as well. Whether its starting and ending a meeting on time, or quickly solving an issue, every action taken by the leadership sets the tone and either builds or erodes trust within the organization. A well prepared leader who treats others with respect, who always acts ethically and transparently, sharing pertinent information while committing to confidentiality of information not meant to be shared, and who is consistently honest and straightforward, will earn the trust of their colleagues and subordinates and build a strong reputation for their company and themselves.
Organizations that build this type of internal trust and reputation by having a moral and ethical internal value structure, will then be seen externally at a higher level and will reap the benefits. These benefits range from stronger external relationships with suppliers and consumers to more resiliency in times of crises, all ultimately adding to the bottom line.
