Earning Customer Trust—and Trusting the Customer

Posted by Alan See on June 23, 2008

8 comments | 6020 reads

Last week I listened to a story about a small shoe repair shop as told by one of their long-time customers. It’s a heart-warming business story that I think you’ll enjoy. Blairsville Shoe Repair is located on Booger Hollow in the North Georgia mountain area. The sole proprietor is a cobbler at night - he holds down a delivery job during the day. His shoe repair business is built on a self-service model and depends on the honor system. Customers leave their shoes for repair in a converted newspaper vending machine located on his front porch. Shoes that are ready for pick-up as well as the money folder are also in the machine. Yes, the money folder - customers pick up their shoes and leave their payment, and in 25 years he has never come up short.

In the global economy we read plenty about earning the customer’s trust. However; you don’t see too much written about trusting the customer. Can you earn the customer’s trust without trusting the customer? Small businesses produce 52 percent of the U.S. GDP according to Hector V. Barreto (“The Engine of America”), the administrator of the Small Business Administration from 2001 to 2006. My guess is that there is still a fair amount of “Booger Hollow” style trust holding those relationships together.

Alan See

Alan See is CMO and Vice President at MindLeaders. His background also includes time as an associate faculty member at the University of Phoenix where he facilitated courses in Marketing and Management Theory. He holds a bachelor of arts in business and an MBA from Abilene Christian University.

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Andrew Rudin

June 29, 2008

"Dealing with cash makes us more honest." But . . .

Alan: interesting ideas. For great insight on this topic, Dan Ariely talks about this in his new book, [i]Predictably Irrational[/i], "Why We Are Dishonest, and What We Can Do about It", and "Why Dealing with Cash Makes Us More Honest."

Through experiments, he concluded that the more detached people become from actual cash, the more likely they are to make dishonest choices. Based on your example, it's unlikely that anyone would steal from the cobbler by removing money from his envelope. Similarly, Ariely makes the point that Jeffrey Fastow (Enron) wouldn't likely mug people on the streets of Houston, stealing wallets and purses. What concerns the author is that Mr. Fastow's physical detachment from the money he stole caused him to ignore--or not even see--the ethical dilemnas he was faced with. You can add Skilling, Lay, and other white collar criminals to the list.

I'm interested in your thoughts in whether you think Booger Hollow might be as trusting a place if the proprieter of Blairsville Shoe Repair offered a "Frequent Customer Card," entitling his clients for a free repair for every tenth punch on the card.

Do you think his clients would be just as honest if they could punch the holes themselves with a conventional hole puncher? After all, it's not [i]exactly[/i] money. . .

Sometimes I wonder whether even the most puritanically honest person hasn't--even once--used the office copier for personal business . . .

Alan See

June 30, 2008

The Ethics of Buyers

My experience with the merchants in the North Georgia mountain area has been from the position of a tourist and not a long-time resident. However; based on several trips to the area over the past 6 years I get the feeling that the Bible belt is snug, and a hand shake is often good enough. In other words, you could probably trust them not to over punch the card. But you raise an interesting question. What is the ethics of buyers? Is the ethics of buyers to a large degree the reverse side of the ethics of sellers? In many situations the seller must disclose defects to the buyer, but with a few exceptions, the buyer does not have to reveal hidden virtues to the seller. The assumption is that the seller, having the property in his own hands, should know its worth (“Business Ethics” – Thomas Garrett).

In the ALM space free software evaluation downloads are common practice and also tricky business when it comes to the registration process involving the deal influencers (software engineers & QA analysts) associated with those downloads. You see, research shows that only 40% provide accurate phone numbers. That explains the fact that 67% dislike phone calls from sales reps. In short, many would be users don’t want too many strings attached to the initial evaluation. And yet the vendor is giving up true value in the form of free use of their software for an extended (generally 30 days with options to renew) period of time. That means a product may actually be used gratis for a short-term project (in a like manner - how many people bought a large screen HDTV just before the Super Bowl, and returned it after?). It also means you risk getting shoppers who don’t have a budgeted project in play – they really just want to be able to state on their curriculum vitae that they have had exposure to your application.

Booger Hollow trust is a two-way street and it’s certainly a challenge that both large and small companies must evaluate as it relates to their customer experience strategy.

Alan See
Blog: Welcome to Marketing 101

John Todor

July 2, 2008

This Personal

In spite of the fact that the cobbler and customer never see each other there is a personal connection. As a customer I know the cobbler did this for me. If I rip him off I violate the personal trust that he put in me via the trust payment system. However, when it becomes a corporation that act and treats me with anonymity, people don't have the same sense of violating trust or ethics. Companies like the Container Store that emphasize an authentic employee-customer connection avoid this problem.

As for the punch card, I am not a big fan of this sort of discounting. I know a lot of people thing of frequent customer cards as a reward and something that should stimulate loyalty. However, there is a tacit signal that value delivered is not really worth the price charged. If you keep coming back you get a lower overall price. What's the alternative? Offer a more compelling experience for the same price. In the case of the cobbler, he could shine the shoes.

Alan, I think these opportunities are a prime way from the nations small businesses to differentiate themselves from the likes of Wal-Mart. It is somewhat ironic that people will actually go out of there way to have these experiences. And, they become least price focused.

John

John I. Todor, Ph.D.
Author of Get with it! The Hands-on Guide to Using Web 2.0 in Your Business.

Gwynne Young

July 2, 2008

Punch cards

I have had a number of those cards, for a free pizza lunch, for a free sandwich and for a free dog wash. Maybe I'm naive, but it has never even occurred to me to punch it out or sign it myself. On the other hand, I don't think that the card has ever encouraged me to frequent a particular business. In fact, whenever I've finally earned my "free" item, I always feel a little uncomfortable. I feel as though the business might not treat me as nicely because I'm not paying this round. And I feel a bit guilty, for some reason. (I don't worry all that often because most of the time, I forget my card and later wind up with a handful of starter cards all over the house.)

I recently handed over my card at the do-it-yourself dog wash place and discovered afterward that there was a new owner. She took my card, no sweat. But I didn't see any new cards being offered, and I wondered if it was fair of me to ask her to honor the previous owner's loyalty plan. (I'm sure I worry more than other customers.)

On the third hand (doesn't everyone have three?), I've always been a little skeptical of these cards because way too often, they get canceled at the drop of a hat. One bookstore I go to has changed its loyalty plan three times in the last five years. None of the plans influenced how often I shopped there. Time and convenience (whether buying online from Amazon was easier) played a bigger role.

What this boils down to is that the card is a gimmick that, to me, is doing next to nothing to earn my loyalty. I go to the dog wash place because it's nearby and well stocked; the owner(s) are always on premises and friendly; and I don't have to have a ton of dog hair clogging up my home plumbing. I used to go to the sandwich place because it was near where I used to work. I would go to the pizza place because it was near where I shopped. I would go to them still, even without a punch-card, if circumstances hadn't changed.

Gwynne Young, Managing Editor, CustomerThink

Andrew Rudin

July 3, 2008

"Frequent-buyer" programs are detached from cash . . .

Interesting points. My mention of the punch card was less about its merits for marketing and CRM, but to provide an example of mediums that businesses create that have connections to cash, but don't involve the [i]transfer[/i] of cash--legally or otherwise.

[i]Predictably Irrational[/i] proves in a research scenario that people have an alarming propensity to act dishonestly when the medium used isn't money. To bring this back to Alan's blog, based on Ariely's book, it didn't surprise me that people wouldn't blatantly steal cash from the shoe repairman.

Gaming the system also works in the reverse, as Gwynne points out in the example of loyalty cards. A retailer wouldn't likely steal cash directly from its customers. What's far more common is to sell gift cards that carry many usage restrictions (including expiration dates). It's so well known that the cards don't get used to their face value that the retail industry has adopted an operational term for the unused value, [i]breakage[/i]. You can be sure that the every major retail chain's CFO knows the ratio of [i]breakage[/i] in his or her company's net profit.

Is that stealing? No way! But then again . . . I'm not so sure . . .

In any case, thanks Alan for providing a provocative topic!

Francis Buttle

July 3, 2008

You can't separate trust from commitment

Hi Alan,

I can't help but notice that your MBA is from a Christian institution whose mission "is to educate students for Christian service and leadership throughout the world". Is your position on trust related to these core values?

Trust emerges as parties share experiences, and interpret and assess each other’s motives. As exchange partners learn more about each other, risk and doubt are reduced. If trust is absent, conflict and uncertainty rise. Lack of trust clearly provides a shaky foundation for a successful customer-supplier relationship.

Commitment arises from trust, shared values, and the belief that partners will be difficult to replace. Commitment motivates partners to co-operate in order to preserve relationship investments. In the business-to-business context, these investments, which serve as exit barriers, may be either tangible (e.g. property) or intangible (e.g. knowledge). Such investments may or may not be retrievable when the relationship dissolves.

Commitment means partners forgo short-term alternatives in favour of more stable, long-term benefits associated with current partners. Where customers have choice, they make commitments only to trustworthy partners, because commitment entails vulnerability, leaving them open to opportunism.

Francis Buttle

Alan See

July 4, 2008

Trust Formula

Hi Francis,

I appreciate your observation. Yes, I completed my MBA at Abilene Christian University – it’s a private school located in Texas. In fact, I’m the moderator for the ACU Business School Alumni group on LinkedIn. To my knowledge ACU was one of the first to require a course on “Business Ethics” as a core requirement for an MBA program, and I’ll admit that my thoughts on trust in many ways still reflect my ACU experience. Like you, I also believe that most customer relationships will not grow without trust. As a result I tend to think about customer trust in terms of a formula. Your company trust factor (or number) is based on the following:

Trust = (Rapport X Credibility) / Risk.

Rapport: A relation of harmony, conformity, accord, or affinity. A sense of shared understanding. Know me and let me know you.
• Being contacted when I want to be by the method that best suits the nature of the contact
• Being made to feel important

Credibility: Worthy of belief or confidence. Provides the basis for confidence. Your actions and words are in congruence.
• Being offered services and products that are relevant to my needs
• Flexibility in the way I deal with your company

Risk: Exposure to the chance of injury or loss; a hazard or dangerous chance. Safety and security are not an issue.
• What are you going to do with my personal information?
• How are you going to use it? How does that benefit me?

As you might guess the objective is to build a really high trust factor by increasing rapport and credibility while decreasing risk. It’s a simple formula – that usually pays big dividends.

Alan See
Blog: Welcome to Marketing 101

Daryl Choy

October 15, 2008

Is that all?

The Trust Formula is interesting. It's like trying to quantify the unquantifiable.

However, should capabilities, relevance, results be also included in the formula?

Exactly, how do people build trust?

Daryl Choy
Make Little Things Count
wisdomboom.blogspot.com

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