-

Why Transparency Matters for Brand Loyalty

As customers become more empowered and informed they are reassessing their expectations about the transparency and honesty of major brands. Openness and authenticity are now critical to sustaining brand loyalty.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.

It’s no surprise that the issue of trust is paramount for the most successful businesses on the planet.

Warren Buffet – Founder of the Berkshire Hathaway investment fund – is the world’s most successful investor and third richest man. His concise description^ of the issue of trust and transparency in business is commonly cited: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

Buffet knows a thing or two about great customer experience. Loyal clients who invested $1,000 with him in 1964 when he started his fund, have seen it rise in value^ to $13 million today.

Steve Jobs, founder of Apple, was even more succinct. The man behind some of the most iconic brands and best customer experiences of the early 21st century, is widely credited with saying: “A brand is simply trust”.

But in the age of digital and social media, the foundations of transparency and trust are being transformed along with everything else. The 2018 Edelman Trust Barometer noted renewed optimism about the credibility of businesses, but it found that ‘dishonesty and a lack of transparency in business dealings’ were still a common barrier for 45% of respondents.

Trust is at a premium

Trust is at the heart of the consumer revolution that is currently underway. Highly informed customers, with instant access to information and market intelligence through social media, expect companies to be completely open. They will no longer tolerate those that suppress or misrepresent the truth about their operations and practices. Honesty and transparency – even about mistakes and problems – are becoming premium corporate values.

Beyond considerations of basic decency, there’s a good business case for companies to respond to these concerns. Transparency makes trust possible and trust is an essential foundation for any enduring relationship. Good relationships allow companies to build loyalty with their customers. Without loyalty, they become merely a commodity competing on price.

It’s not easy being transparent. But it’s better than the alternatives for businesses that are genuine about their commitment to delivering great customer satisfaction.

The trend towards being transparent is growing, perhaps informed by a social media culture that prizes sharing. For companies, that means embracing openness and abandoning secrecy. Corporate communications should be more of a dialogue or conversation rather than the top-down command and control approach that used to prevail.

No more secrets

Even our secret services acknowledge this new sensibility. Until the 1980s, Britain hadn’t even officially admitted the existence of MI6, its foreign intelligence agency. Now, the heads of MI5, MI6 and GCHQ are well-known, accountable public figures.

Sharing previously suppressed information can be difficult, but it’s also cathartic. The BBC discovered that in 2017 when it published details of its top earners^ – anyone being paid more than £150,000 – for the first time. After the initial outrage, the act has had a positive impact on the BBC’s reputation and is improving gender pay equality.

Research increasingly supports the fact that transparency about pay is very positive. It builds trust among colleagues and makes them more productive. Technology company Buffer has taken it further than most by publishing every employee’s salary details online^. Buffer reports that it has a very positive effect on its culture and is well received by clients.

No industry has demonstrated the power of trust and transparency as a major factor in brand success better than news providers. In the era of fake news, it is highly revealing that traditional news outlets, such as long-established newspapers, are now far more trusted and considered much more transparent than social media sources (61% trust versus 24% trust – Edelman Trust Barometer, 2018).

Beyond considerations of basic decency, there’s a good business case for companies to respond to concerns about honesty and transparency.

The competitive edge

It’s easy to understand why. The key findings of Label Insight’s major 2016 transparency study^ indicated that the vast majority of consumers (94%) would be loyal to a brand that offers complete transparency. Better still, from the C-Sat point of view, nearly three-quarters of respondents said they would be happy to pay more for a product that was completely transparent in all aspects. Almost 40% also said that they would switch to a brand that was more transparent than competitors.

Outdoor clothing brand Patagonia has made a virtue of its transparency^ being completely open across all channels about how its products are made and its work to improve the environment, all based on its mission of delivering quality products without damaging the planet. Patagonia has a section on its website called the Footprint Chronicles^ which shares its journey towards getting better at what it does. The company doesn’t pretend to be perfect and readily admits to trying to do better.

With so much in the way of online sharing of customer experiences, on sites such as TrustPilot, TripAdvisor, Yelp and Glassdoor, companies are faced with a choice: become more transparent or stay secretive.

But, paradoxically, companies that do manage to suppress information about themselves are not trusted. Information abhors a vacuum and if you are not providing the information then audiences will source it or speculate about it for themselves. You don’t want customers asking what you’ve got to hide or why you are acting so furtively.

From advocacy to antipathy

Lack of transparency and honesty is hugely damaging. When one major global manufacturing brand was recently found to have been lying to its loyal customers, they felt disappointed and betrayed. Trust went into freefall. Its social media advocacy went into meltdown.

In the wake of the scandal, positive recommendations of the company, which had been healthily above the industry average, fell by two-thirds. However, the real damage was with negative posts which rocketed by 2,000%. This reflects the fact that nearly 90% of customers^ rely on other customers’ reviews when making a purchasing decision, rather on what companies say about themselves.

Being honest and open about pricing is vital. Customers hate feeling tricked into paying for hidden extras, whether it’s an undisclosed service charge at a restaurant, a surcharge on a taxi journey after midnight or a hefty fee to take luggage onto an aeroplane. Being transparent about your quality process can allow you to charge a higher price, as Fairtrade produce retailers have shown.

Straight dealing on data

In addition to important new obligations under the General Data Protection Regulation, consumers have their own expectations when it comes to data transparency.

Easily accessible, plain English policies, stating simply how customer data is used, counts as transparent. On the other hand, a 30-page document of impenetrable legalese, with no clear means of opting out of the terms, is not.

The recent exodus of users from the Facebook platform was largely down to customers finding out the hidden truth about the company’s business model. When users learned that Facebook was selling and sharing their personal data with hundreds of third parties, including Cambridge Analytica, they were outraged.

Transparency can take many forms, from sharing how you improve your supply chain, reducing use of plastic, and use renewable sources to using your own people, rather than actors, in your media activities.

Trust is the key to brand success and transparency is trust in action. Those companies that embrace it will greatly increase customer satisfaction as those customers move from mere awareness of the brand and affinity for it, through to advocacy.

*
Insight

Create a World Class C-Sat Culture

Great customer satisfaction doesn’t just happen spontaneously. It emerges from a corporate culture that prioritises the customer’s experience.

*
Insights

Why Customers Choose Companies that Care

Being a good corporate citizen is becoming essential to deliver customer satisfaction and build loyalty.