Your customer's trust is harder to earn now. How do you develop their trust, and consequently, their loyalty?

January 23, 2006


Aloha from the Boomerang Team~

We've sent you information before about the need to build trust with your customers before you can build loyalty. This new article from Peppers and Rogers advises that it's harder than ever to engender trust, which creates a need for a new set of solutions. This article has broader applications than solely for the Retail industry.

We like the focus on relationships and taking time to develop them in a credible way. We hope you’ll find it to be of value.

Also, you’ll be hearing from us soon regarding new technology applications that we’re introducing to Hawaii that are cutting edge and terrifically effective.

To your success,

Matt Heim and Lora Williams

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LOYALTY ABUZZ AT NATIONAL RETAIL FEDERATION SHOW By Don Peppers and Martha Rogers, Ph.D.

We've been writing a lot and hearing a lot lately about ways to engender consumer trust. In fact, we think it's the most important element in building long-term customer value. At last week's National Retail Federation event in New York City, our emphasis on customer trust was validated with research.

The research came from the Adjoined Consulting and SAS study, "Retail Demand Insights 2006: What Drives Consumers?"

It shows very clearly that consumers connect trust to loyalty. And loyalty, whether or not you're a retailer, is an important factor in customer value. Comments by Kathy Mance, NRF Foundation Vice President, couldn't have expressed our feelings more accurately: "The more trust and goodwill a retailer builds, the more likely it is they will have a long-term loyal customer base."

According to the study, the number of shoppers stating that they were long-term loyal customers dropped in 2006 to 77.2 percent compared to 83.8 percent in 2005, and the issue here goes straight to the relationship between trust and loyalty. The report identifies the types of information customers will trust you with -- and what they won't trust you with. According to the study, the overwhelming majority of consumers are willing to give retailers their name (89.8%), email address (78.1%), and street address (60.7%), and about half (46.8%) are OK with retailers keeping records of past transactions. But very few consumers are willing to give more personal financial information like income (12.5%), job title (12.1%), employer (10.9%), or net worth (8.2%).

The biggest issue in the report, which surveyed more than 10,000 consumers during 2005, is that consumers will not give you financial information about themselves.

That is a huge disconnect. Not only does it make it difficult to build a loyalty program for retailers, it makes customer valuation models for any business difficult to build. It is challenging, if not impossible, to calculate the long-term value of a customer without financial information. If 12 percent of your customer base will give you financial information, it creates a big problem when it comes to analyzing your customers' potential.

In our opinion, retailers trying to increase customer loyalty need to refocus on relationships more than on loyalty programs. In the short term it's only reasonable to expect that a consumer will be reluctant to give you any more than a superficial amount of personal information. But in the long term, if you use that information responsibly to build a relationship that the customer values by providing personally relevant offers and communications, then customer trust will build. As the customer sees a genuine benefit from your use of his personal information, he will trust you with more of it. It's that simple.

Make customer loyalty a long-term customer strategy.

The more you make it a short-term grab for your database and to hit a manufactured revenue number, the more you risk alienating the very customers you're trying to attract.

Here's another interesting fact from the report. When it comes to reaching new customers in 2006, television (31.7%) is still the preferred method, followed by direct mail (21%) and word-of-mouth (17.7%).

But what customers say about your company is more important than magazine, Internet, and radio ads and many other more traditional methods of advertising.

You can bet that one instance of breaching customer trust will be talked about by your customers over and over again. You can also bet that one instance of showing an understanding for customer information and working to build trust will be talked about as well. You control the conversation.