With the internet giving customers unlimited knowledge and price transparency we’re seeing reductions in customer retention rates and brand loyalty. This, combined with scandal after scandal by businesses previously trusted, has evoked a sense of cynicism around brands and their motives. Simply put, almost like a toxic cocktail, this has ripped apart brand trust and caused consumers to become smarter in their purchasing; increasingly regarding brand names as less important than prices. This change in consumer mind-set is beginning to reduce even luxury brands down to a similar decision making process to that of a can of beans.
The loyalty ladder is a concept first devised by Andrew Payne to explain the potential stages of a business developing a relationship with a consumer. The higher they climb, the more trusting they are. We are now seeing businesses tumbling down the loyalty ladder and instead we are viewing them in a much more suspicious light.
Even larger well-respected brands can’t escape these changes and they too are now reaching out for potential solutions to these fast developing trust issues. With scandals such as the horse meat, sweat shop revelations and even trusted and loved VW Group who was fraudulently passing emissions, it is no real surprise that customers are searching the internet and gaining knowledge before making their purchasing decisions.
Brands are also not always measured by what they say but instead by what they do. Paradoxically, the strategies businesses use to succeed in markets can often be the root cause of these trust issues. In VW Group’s case for example, the software that was used to pass these emissions tests allowed them to sell their vehicles with defective engines but may have caused an irreparable degree of reputation damage. Peppers and Rogers in their book ‘In Extreme trust: Honest is competitive advantage’ explain this well by saying, “un-trustable business strategies thrive in our economic system largely because they can be highly profitable.” Simply put, penny pinching doesn’t constitute sustainable strategy.
This falls true with VW Group and perhaps many of the recent scandals. To change this, Peppers and Rogers argue businesses must learn to manage their marketing strategies to portray images that ensure the customer can see that they are benefitting from the transaction as much as the company is from their business.
You might ask, so what now for VW Group? Peppers and Rogers would probably argue the best thing to do is to accept full responsibility for the scandal and begin to rebuild trust through immediate, honest change. Much of this can be done through building two-way relationships and perhaps social media could be used as a potential medium for starting to rebuild this lost trust. Before the emergence of the internet – in particular social media – brands were limited to only speaking to consumers through their offline marketing efforts and this rarely made it possible engage them in two-way conversations. With trust in brands waning, social media could be one way that a brand could start to develop deeper reciprocal relationships with their customers, showing a better understanding of individual needs.
Through these more ‘honest’ marketing strategies we may see customers climbing back up the ‘loyalty ladder’ and trusting brands once again, which is something that both brands and marketers need to take responsibility for.