Trust - The New Brand
Return on Trust: The New Business Performance Indicator
To
succeed in today’s digital age, companies must think beyond dollars, cents and
convenience, and focus on data ethics. As malfeasance, blunders and mishandling
of consumers’ personal information reaches epic proportions, trust is the new
battlefield for companies to seize the digital high ground, our latest research
reveals.
We
are in the midst of a trust revolution. By our count, 50% of consumers are
willing to pay a premium to transact with companies they trust. The reverse is
equally true: About the same percentage (57%) will stop doing business with a
company they believe has broken their trust by using personal data
irresponsibly, and over a third (37%) said they would take legal action against
the company. Considering the trillions of dollars at risk, we now see ethical
behavior as the new theater for commercial competition.
These
are among the key findings from our latest research report “The Business Value
of Trust,” in which we asked consumers in the Asia-Pacific and Middle East
about the relationship between trust and doing business in the digital world.1 We believe our findings are relevant
not only to companies operating in those geographies but also for any
organization concerned with maintaining trust in the digital business world.
The
digital technologies that pervade our existence are transforming how we live,
work and play. Nearly half of consumers we surveyed said they are always
connected, and more than three-quarters (77%) view social media platforms as
critical to maintaining social relationships. At the heart of these changes is
the data we generate with every digital touch, forming our own personal Code
Halo™.2 However, the scale and speed of these
changes present a major challenge.
The
appropriate use of personal data has become a critical factor in how companies
compete, which has raised important ethical considerations: Is it appropriate
for a health insurance provider to monitor its clients’ Apple Watch data and
adjust their insurance premium as a result? How about a pay-per-view movie
provider charging higher rates to customers living in wealthy neighborhoods
than residents of less affluent areas? These are the types of difficult
questions – ethical questions – that companies must grapple with today.
Business
people have always had to consider ethical issues, but in these unforgiving
times, getting data ethics wrong has greater consequences than ever before.
While 90% of consumers have concerns about privacy, hacking, loss of control,
intrusion, piracy and scamming, few swear off the Internet as a result.
Consumers don’t draw a strong line between privacy and security – for them it’s
all about trust. Trust is not limited to just privacy, security or technology
issues but is the new consumer-provider pact that will increasingly drive
business success.
Trust:
The New Brand
As
companies embark on their digital transformation journey, they will be dealing
with questions of how to build and maintain trust, protect individuals’ privacy
and conduct themselves ethically. The value of trust is now a personal matter,
driven by the endless array of consumer data shared with companies across the
business spectrum.
The
age of data sharing (and over-sharing) has raised consumer expectations exponentially,
as 58% of those surveyed said they demand personalized products and services
from companies in exchange for the data they share. We call this the
“give-to-get” ratio, and managing this trade-off transparently is essential for
trust. Companies that earn the highest trust are those that clearly define how
they will use the information they collect, give consumers full control of
their personal data, and offer fair value in return.
At
Volvo, for example, where consumer trust is deeply embedded in the company’s
DNA and is an intrinsic part of the brand, the automaker collects data around
vehicle capability and services, as well as driver data, to ensure customer
safety. Part of the company’s mission statement is that by 2020, no one should
be harmed or killed in a Volvo.3
Companies
that knowingly misinform or mislead consumers in any way about how their
personal data is used increasingly risk self-extinction. Broken trust not only
has a monetary impact on companies, but it can also undermine brand reputation
and damage employee morale, which is often difficult to measure and remediate.
A Forbes Insights report reveals that 46% of organizations surveyed had
suffered damage to their reputations and brand value as a result of a data
breach.4
Facing
a Multi-Trillion-Dollar Meltdown
Trust
is central to many companies’ value proposition. Roughly 43% of consumers we
studied reported having a high level of trust in institutions across
industries; however, 38% plan to switch to the competition or a digital startup
due to trust issues. Furthermore, 70% told us they are likely to take a digital
approach to conducting business with the new provider. Consider these findings:
- Consumers
trust their banks and utilities relatively more than other companies but
are still likely to switch in the event of an unforeseen incident.
Although respondents revealed moderate trust for banks (58%) and utility
companies (50%), they are still likely to switch their bank (32%) and
utility provider (31%) if trust is compromised. The 2008 financial crash
caused many consumers to lose trust in weakened financial institutions.5
- Trust in
government is gradually evaporating, with only half of respondents
expressing trust in government institutions.
Phone-tapping, e-mail snooping and the push to get tech companies to
disclose consumer data has forced many people to rethink how they engage
with local, state and federal institutions.
- Automotive
companies and retailers are at the highest risk of losing their brand
value. Of all industries, consumers
report the lowest level of trust in automotive companies (36%) and
retailers (37%). In fact, 41% told us they would no longer work with
retailers that broke their trust in terms of managing their personal
information. The Volkswagen emissions scandal demonstrated just how
quickly a company can lose consumer trust. The company’s stock lost 20% of
its value, around US$28 billion,6 following revelations that the
company misrepresented emissions measured and reported in its
diesel-powered vehicles. Volkswagen now plans to reduce investment by
US$1.14 billion a year to offset the financial damage it has suffered.7
Interestingly,
digital startups are gradually gaining ground in the battle for consumer trust.
Approximately 47% of respondents told us they plan to switch to a digital
startup due to perceived trust concerns over how their personal data is being
used, compared with 41% who said they would rely more heavily on established,
pre-digital outfits. In fact, 52% of consumers said they are willing to
consider new products and services from non-traditional channels or digital
startups. It appears that traditional businesses struggle as much to meet the
expectations of digitally empowered consumers as to match the energy and
innovation emanating from digital startups.
Transparency
Is the New Currency
The
lack of confidence surrounding privacy, security and trust represents a
tremendous opportunity for companies that are transparent about their use of
the data. Transparency is the top factor (67%) in determining trust in a
company, our respondents said; in fact, 45% said they are willing to share
their personal data if a company asks upfront for the data and clearly states
its use.
When
consumers know that a company shares the responsibility and concern for
minimizing risk, they are more open and willing to trust the company. The
transparency factor has helped digital native companies, such as Facebook,
Whatsapp and Pinterest, create loyal followings in a remarkably short time
period. The basis of collaborative consumption – the sharing economy – is built
on transparency.
Show
Me that You Know Me
To
succeed in today’s digital age, companies must shift from a data-collection
mindset to a consumer-oriented, value-first approach. As consumers become
increasingly savvy about how companies use their personal information, they
demand tangible and immediate benefits in return – assuming, that is, that
companies keep their personal information private and secure.
About
66% of respondents view their personal information as valuable, and 65% are
willing to share it with companies in exchange for some form of value. This can
even be a simple recognition of who they are as an individual rather than as a
number in a customer relationship management system. Interestingly, another
motivator for consumers to share their personal data is better customer
service, reported by almost 80% of respondents. Not surprisingly, the
information that consumers are least willing to share is their banking and
other financial information (17%).
Negative
feedback from family and friends will weaken consumers’ trust; in fact, 65% of
respondents called this a top factor for not sharing their personal data.
Roughly 63% and 61%, respectively, told us that unethical business practices
and a lack of transparency stop them from sharing data with companies. Some
companies have done extremely well in making the trade-off worthwhile. For
instance, Disney uses profiling data through its MagicBand™ bracelet to enhance
the customer experience, and customers are willing to share their profiling and
location data to gain convenience and a sense of privilege at Disney
entertainment venues.8
Act
Now to Thrive in the Trust Economy
The
biggest threat to companies today comes not from the competition but rather
their own ability to win and keep consumer trust. The increasing importance of
data has changed not only how companies deliver products and services but also
how consumers make decisions. To build trust at every touchpoint throughout the
customer journey, senior executives need to make sure their companies have the
right leadership, culture, organizational design, operating model, skills, technology
and processes. To win the value of trust in the new digital world, we recommend
the following:
- Ensure
“gives” and “gets.” Where there are manageable
“gives” and positive “gets” for consumers, sharing information is a
no-brainer. However, if the “get” factor is wrongly imposed (e.g., asking
consumers to accept terms without explaining the ramifications), trust can
be instantly and badly damaged. Therefore, clear and open communication
regarding give-to-get trade-offs are the foundation for creating the
needed transparency that makes it worthwhile for both the company and its
customers.
- Give
customers a delete button. Customers
should have a complete 360-degree view of their information and full
control over it. A good example is the Metadistretti e-monitor, which
provides cardiac patients with control over how much data goes to whom,
using a browser and an app.9 Patients can set up networks of
healthcare providers, family members, friends, fellow users and patients,
and share their desired data with each.
- Be quick
to respond to failures. In spite of the
world-class technology infrastructure in place, history shows that
organizations can’t promise customers that nothing bad will happen to
their digital information. Winning organizations need to recognize,
understand and proactively manage potential issues. For instance, after a
recent cyber-attack, Vodafone was quick to notify customers and banks of
the incident, which helped maintain consumer trust and confidence.10
This
article is adapted from The Business Value of Trust, a report from the
Cognizant Center for the Future of Work on how trust is reshaping business
models across industries. It fully explores the ethical battlefield of digital
business across a range of industries, and highlights the factors that
determine how consumers think about trust, the economic value associated with
it, the risks inherent in a “give-to-get” formula and recommendations on how to
succeed in this new landscape. To learn more, please visit http://www.futureofwork.com/.
Note:
For more on the give-to-get equation, read our book Code Halos: How
the Digital Lives of People, Things, and Organizations are Changing the Rules
of Business, by Malcolm Frank, Paul Roehrig and Ben
Pring, published by John Wiley & Sons. April 2014 http://www.wiley.com/WileyCDA/WileyTitle/productCd-1118862074.html.
Code
Halo™ is a trademark of Cognizant Technology Solutions.
Footnotes
1 Cognizant’s Center for the Future
of Work surveyed 2,404 consumers in APAC and the Middle East in late 2015 and
early 2016. Full results of the study will be presented in our upcoming report
“Digital Consumer Trust 2.0.”
3 Jack Hershman, “Volvo Group CIO:
Data and Trust as Currency in the Digital Age,” Hot Topics, https://www.hottopics.ht/stories/consumer/volvo-groinup-cio-data-and-trust-in-the-digital-age/.
4 Doug Drinkwater, “Does a Data
Breach Really Affect Your Firm’s Reputation?” CSO, Jan. 7, 2016, http://www.csoonline.com/article/3019283/data-breach/does-a-data-breach-really-affect-your-firm-s-reputation.html.
5 Jeff John Roberts, “Twitter’s
Transparency Report Is Scary, But Not Always Helpful,” Fortune, Aug. 12,
2015, http://fortune.com/2015/08/12/transparency-reports/.
6 Ivana Kottasova, “Volkswagen
Stock Crashes 20% on Emissions Cheating Scandal,” CNN Money, Sept. 22, 2015, http://money.cnn.com/2015/09/21/investing/vw-emissions-cheating-shares/.
7 David Amerland, “The Cost of
Losing Trust,” Medium.com, Oct. 15, 2015, https://medium.com/@davidamerland/the-cost-of-losing-trust-97d764a1e696#.n0sclvwsa.
8 Timothy Morey, Theodore Forbath, Allison Schoop,
“Customer Data: Designing for Transparency and Trust,” Harvard Business
Review, May 2015, https://hbr.org/2015/05/customer-data-designing-for-transparency-and-trust.
10 Dateme Tamuno, “Trust in the
Digital Age: How Far Is Too Far?” Customer Think, Nov. 3, 2015, http://customerthink.com/trust-in-the-digital-age-how-far-is-too-far-a-vodafone-and-talktalk-case-study/.
Author
Manish
Bahl is a Cognizant Senior Director who leads the company’s Center for the
Future of Work in Asia-Pacific. A respected speaker and thinker, Manie has guided
many Fortune 500 companies into the future of their business with his
thought-provoking research and advisory skills. Within Cognizant’s Center for
the Future of Work, he helps ensure that the unit’s original research and
analysis jibes with emerging business-technology trends and dynamics in Asia,
and collaborates with a wide range of leading thinkers to understand how the
future of work will take shape. He most recently served as Vice-President,
Country Manager, with Forrester Research in India. He can be reached at Manish.Bahl@cognizant.com
| LinkedIn: https://in.linkedin.com/in/manishbahl |
Twitter: @mbahl.
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