“Most good relationships are built on mutual trust and respect”. This powerful quote by Mona Sutphen is truer now than ever for the eye-wateringly fast paced world of online and offline retail.
Why Is Trust So Important for Retailers?
To answer this question properly we first must take a small detour into the world of neuroscience and psychology, so we can explore how deeply important and ingrained the concept of trust is to the human species. It’s only once we have this broader understanding that we can apply the principle of trust properly to the retail context.
The concept of trust is deeply hardwired in our brains. More specifically, trusting someone is associated with many positive emotions and is an amazingly persuasive force. Conversely, distrusting someone is associated with negative emotions.
Study on The Power of Trust
In a recent study published in the Journal of Neuroscience, participants were told they were playing an investment game with three different players: a close friend, a stranger or computerised slot machine. In fact, they were always only playing with a computer programmed with an algorithm “that systematically reciprocated actions worthy of trust exactly 50 percent of the time”.
Interestingly, “based on perceptions of trust, the participants reported positive interactions with the close friend to be more rewarding than interactions with a stranger or slot machine”. And, most crucially, were then more likely to “invest with this player”.
How Trust Relates to Retail Success
Well, if retailers take the time and effort to foster true trust with their customers they can, in time, move from being a cold, impersonal entity, that the customer has no real feelings toward, to a “friend”. When that shift happens, the customer will very likely perceive the retailer with positive emotions and will thus very likely “invest” with the retailer over extended periods of time.
It is well documented that deep mutual trust is an essential component in developing customer loyalty, and customer loyalty is arguably the biggest asset a retailer can have.
Customer loyalty means customers that spend regularly and repeatedly, over an extended period, reduce the need for the organisation to constantly spend huge sums on marketing and advertising with the aim of attracting new customers.
Research by HarvardBusinessReview shows that “increasing customer retention by five percent” can result in a “25-95 percent” increase in company profits. This is unsurprising as Bain and Company found a direct correlation between the amount of time a customer has been with a retailer and the amount that customer spends. Their research revealed that “apparel shoppers purchase 67% more per order after shopping with a company for 30 months than they spent on their initial purchase”.
In addition to bolstering profits, loyal customers can also simultaneously reduce retailer’s expenses as they are a lot cheaper to market to than new customers. According to Paul W. Farris, loyal customers have a “60-70% percent chance of converting online” compared to the “1-3% conversion rate” that SmartInsights reports for new online retail customers.
Customer loyalty also means you can more effectively fight off competition, as loyal customers that trust you are much less likely to jump ship to your competitors at the drop of a hat, despite your competitor’s numerous efforts to cull them away.
— Answer Digital (@AnswerDigital) June 22, 2018
Loyal customers can ultimately become brand ambassadors, and promote the retailer and brand through word-of-mouth marketing, often unintentionally.
In short, fostering and maintaining consumer trust in your retail company and brand creates a strong positive feedback loop that keeps customers with you – increasing your profits while simultaneously decreasing your expenses, and strengthening your brand.
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