Extreme Trust: can honesty be a means of competitive advantage? (part 1)

I enjoy reading what Don Peppers and Martha Rogers write.  In fact their point of view spoke to me in such a way that it called me to join up and become a part of  The Peppers & Rogers Group, for a while, back in 2000.  Don and Martha have published a new book Extreme Trust.  In this series of posts on trust I am going to share with you, comment upon and explore topics that are addressed by Don and Martha in their book.

Does trust matter?

Why don’t you take the salesman at his word and buy what he is selling you?  Because you have learnt that what is in the interests of the salesman, to make a sale and take our money, is not necessarily in your interest.  Why don’t you accept the advertising put out by companies?  Because you have learnt that advertising, as a whole, is not truthful – you know that it has been designed carefully, purposefully, to push your buttons so that you buy.  Put differently you simply don’t trust the advertising.

Trust matters.  Why?  Because our lives are tied up with each other.  Heidegger pointed out that the fundamental being of human being is being-in-the-world – we are not spectators in the stands, we are right there in the midst the world.  Who is there right with us and an essential component of the world?  Our fellow human beings!  Our experience of living and how our lives turn out depends on how we conceive of one another (selfish, co-operative, selfless) and how we treat each other (help one another, look out for one another, indifferent towards one another, exploit one another).  Whether we trust one another or not matters, what we trust another with or not matters, who we trust and who we do not trust matters.

How will you compete against the likes of USAA?

Don and Martha start Extreme Trust by sharing a great story and asking a powerful question that gets to the heart of the matter. Let’s start with the story. It is about USAA a financial service company that consistently comes out as the most trusted financial services organisation in the USA.  The culture at USAA if based on a single yet profoundly powerful statement: treat the customer the way that you’d want to be treated if you were the customer.

After the first Gulf War (1991) USAA  sent out refund checks to several thousand “members” (customers).  Why?  USAA figured out that men and women (armed forces) serving overseas weren’t driving their cars in the USA, suspended the premiums for those months, and sent out unsolicited refund cheques when these men and women got back to the USA.  USAA did not have to do this and no-one asked them to do it.  How did this turn out?  Nearly 2,500 of these refund cheques were sent back to USAA by grateful customers who told USAA to keep the money and simply be there “when we need you.”

Now, here is the question that Don and Martha pose: “How will you compete against a financial services institution that customers love so much they sometimes refuse to accept refunds and are loyal into the third generation and counting?”

What makes USAA (and other companies like USSA) so different from competitors?

I have repeatedly asserted that most of what passes for customer-centricity is simply a sham.  Specifically, the philosophical base, the moral grounding, the fellow feeling, that is necessary for customer-centricity to show up as customer-centric, in the eyes of the customer as a moral being is absent.  This is what Don and Martha say on the matter:

“Most businesses and other organisations operating today think that they’re already customer-centric and they are basically trustworthy, even though their customers would disagree……. Being “trustworthy” is certainly better than being untrustworthy, but soon even “trustworthiness” won’t be sufficient. Instead companies will have to be trustable.

..trustability is a higher standard still.  Rather than working to maintain honest prices and reasonable service, in the near future companies will have to go out of their way to protect each customer’s interest proactively, taking extra steps when necessary to ensure that a customer doesn’t make a mistake, or overlook some benefit or service, or fail to do nor not do something that would have been better for the customer”

In short, USAA and companies like USAA (Amazon, Zappos, Apple, Google…) are trustable and as such they practice are built on the three pillars of trustability.

The three pillars of trustability

According to Don and Martha (in Extreme Trust) the three pillars (they use the term ‘principles’) of trustability are:

Do the right thing.  Essentially this is about the distinction between ‘good profits’ v ‘bad profits’.  Doing the right thing involves giving up practices (like exploiting customers) that generate ‘bad profits’.  And it involves coming up with a business model that generates ‘good profits’ by creating genuine value for customers by aligning with the needs and interests of customers and getting a fair return in exchange. Doing the right thing lies in the realm of leadership and strategy.

Do things right.  This is all about operations and operational excellence.  It is about the domain of management and concerns itself with functions, processes and details so that you make it easy for your customers to do business with you across the entire customer journey and generate the right kind of customer experience at each touchpoint that matters.

Proactively.  In Don and Martha’s words “Knowing that a customer’s interests is not being well served and doing nothing about it is untrustable.  Not knowing is incompetent…. A company might be scrupulous in its ethics, completely honest in its brand messaging, and highly involved in tracking its customer satisfaction, but will it be proactively watching out for its customers interests?  If it wants to succeed in the age of transparency, yes.

What gets in the way of being a “trustable” enterprise?

Why aren’t more companies, even most companies, like USAA, Apple, Amazon, Zappos and the like?   This is a domain I have tackled several times and I say it is addiction to ‘bad profits’.  What do Don and Martha say?

“The fact is that far too many businesses still generate substantial profits by fooling customers, or by taking advantage of customer mistakes or lack of knowledge, or simply by not telling customers what they need to know to make an informed decision.”

Why become a “trustable” enterprise?

Don and Martha are clear that companies don’t have a choice – the tide has turned, customers have the power, and by wielding this power customers will force companies to become “trustable” or die.  This is how they put it:

“.. lots of traditional, widely accepted, and perfectly legal business practices just can’t be trusted by customers and will soon become extinct, driven to dust by rising levels of transparency, increasing consumer demand for fair treatment, and competitive pressure…… Things that companies, governments, and other organisations never meant for people to know they will know.”

“Transparency will increase because of technological progress, and progress is inevitable.  It cannot be avoided or slowed down.….. As important as our social nature is.. social media and other interactive technologies have injected it with steroids.”

What is my take on this?

My thinking and philosophical orientation is in line with that being shared by Don and Martha in their new book Extreme Trust.  As such it is no surprise to me that I am enjoying reading it.  Nonetheless, there are areas in which I find that I am not in agreement with Don and Martha.  They make the distinction between “trustworthy” and “trustable” and in my world that occurs as contrived.

In my world you are either pregnant or you are not pregnant you cannot be half pregnant.  In my world, either I can trust you because I know that your care for me and are looking after my interest or I know that I cannot trust you.  In my world most companies do not merit my trust – I, the customer, simply show up as a wallet to be emptied.  And then there are companies that I do trust because they have done the right thing.  How does the right thing show up as the right thing in my world?  When the company takes a course of action that leaves me better off and it costs the company money. When I hear about what the company is doing to contribute to a ‘good world’.  When I hear about the postive experiences of other customers.

I am 100% in agreement with the power of transparency.  The potential for the kind of disruptive change that Don and Martha are speaking about lies in us wielding technologies that unconceal that which has been concealed from us.  Great example in the UK are the MPs scandal.  Once UK politicians used to lecture the world on honesty, moral uprightness and look down on less developed countries on the account of their corruption.  For many years the UK politicans got away with being corrupt and then the bubble burst.  UK politicians are not in a place to lecture anyone.  Another example is Rupert Murdoch and the News of the World phone hacking scandal.  For many years Rupert, some would claim, was the Kingmaker and pretty much got what he wanted.   He even got the Conservatives to hand him BSkyB on a plate.  Then came the disclosure that a dead girls phone was hacked and the moral revulsion of the ordinary folks forced a public enquiry on a reluctant prime minister, the closure of a newspaper and the abandonment of the BSkyB takeover.

In the next post in this series I will share more of what I learn as I progress reading through Extreme Trust.  I will conclude the series of posts with a review of the book as a whole so that you can decide if you want to read it for yourself.

How to cultivate strong customer relationships: focus on the “sliding door” moments and ATTUNE

Don and Martha say practice the Golden Rule

In their latest post – “Empathy, Self-Interest and Economics” – Don Peppers and Martha Rogers spell out the importance of the Golden rule.  They point out that at a behavioural level only psychopaths conform to the view of human nature taken by neo-classical economics.  To business leaders they say:

“Companies that want to earn their customers’ trust have to be willing to act in their customers’ interest—sometimes even when the customers’ interest conflicts with their own (at least in the short term). This is why i-Tunes will remind you that you already own a song you are about to purchase, for instance. And it’s why USAA won’t sell you more insurance than you really need, even if you mistakenly ask to do so.”

“The point is that having empathy for others is a critical part of human nature, and if you want your business to succeed, then you have to show empathy for customers, also. That means treating a customer the way you’d want to be treated yourself, if you were that customer.”

Is the UK utility industry listening to Don and Martha?

It doesn’t look like the Tops in utilities industry in the UK are listening to Don and Martha.  Npower has been slapped with a £2m fine by the regulator Ofgem.  Why? According to Marketing Week:

“Ofgem says Npower failed to record all details of the complaints it received and did not put in adequate processes to deal with complaints. It was also accused of not giving dissatisfied customers enough information about the Energy Ombudman’s redress service.”

Now you might be tempted to think that this is a one-off, an aberration.   Well British Gas (the major player) was fined £2.5m back in July.  Why?  Well in the words of Marketing Week:

“Ofgem’s investigation found that British Gas had failed to re-open complaints when the customer reported and unsatisfactory resolution; failed to provide customers with key details about the service provided by the Energy Ombudsman and failed to put in place adequate processes and practices for dealing with complaints from small businesses.”

And Marketing Week goes on to write EDF Energy is also currently under investigation from Ofgem over the way it handles its complaints.”

So where are we at?  Two of the six big players that dominate the gas and electricity market have been fined for mishandling customer complaints and a third player (EDF) is under investigation for the same offence.  What does Npower have to say:

“A small number of processes were not correctly adhered to. Ofgem is now satisfied that all problems have been rectified and we are fully compliant with our obligations to our customers. We have zero tolerance for this type of issue and we’ll continue to work hard to make sure our customers are put first.”

I don’t know about you but to me that sounds like a load of bull: if Npower really did have a zero tolerance for this type of issue then it would have made sure that an effective complaints management process, team, system was in place.   When you lookmore deeply at the industry you see that the structure has been designed to extract profits at the expense of customers: complex pricing, too many confusing tariffs, bills that are difficult to understand……

Making the customer relationship work: what we can learn from John Gottman

I you do operate in a competitive industry then you might be able to learn from the research of John Gottman – he is been studying what makes marriages work (or not) for over 40 years.  In a recent article he sets out the key things that he has learnt:

“What I found was that the number one most important issue that came up to these couples was trust and betrayal. I started to see their conflicts like a fan opening up, and every region of the fan was a different area of trust. Can I trust you to be there and listen to me when I’m upset? Can I trust you to choose me over your mother, over your friends? Can I trust you to work for our family? To not take drugs? Can I trust you to not cheat on me and be sexually faithful? Can I trust you to respect me? To help with things in the house? To really be involved with our children?”

“.zero-sum game.” You’ve probably all heard of the concept. It’s the idea that in an interaction, there’s a winner and a loser. And by looking at ratings like this, I came to define a “betrayal metric”: It’s the extent to which an interaction is a zero-sum game, where your partner’s gain is your loss.”

“But how do you build trust? What I’ve found through research is that trust is built in very small moments, which I call “sliding door” moments, after the movie Sliding Doors. In any interaction, there is a possibility of connecting with your partner or turning away from your partner.

In his article John provides a good illustration of such a sliding door moment when he saw the sadness on his wife’s face.  Here is what he says about that:

“I had a choice. I could sneak out of the bathroom and think, “I don’t want to deal with her sadness tonight, I want to read my novel.” But instead, because I’m a sensitive researcher of relationships, I decided to go into the bathroom. I took the brush from her hair and asked, “What’s the matter, baby?” And she told me why she was sad.  Now, at that moment, I was building trust; I was there for her. I was connecting with her rather than choosing to think only about what I wanted. These are the moments, we’ve discovered, that build trust.”

ATTUNE: how you cultivate trust and build strong relationships

John Gottman’s graduate student has taken their work on trust and broken it down into the idea of being in attuenment and has come up with an acronym (ATTUNE).  If I replace “partner” with “customer” we have:

  • Awareness of your customers’s emotion;
  • Turning toward the emotion;
  • Tolerance of two different viewpoints – yours and your customer’s;
  • trying to Understanding your customer – to look at the situation through his/her eyes;
  • Non-defensive responses to your customer;
  • and responding with Empathy.

My take on this

How you handle a complaint from a customer is a “sliding door” moment.  It is also a great opportunity to practice ATTUNE as complaints are high emotion events that you can use to build or rupture emotional connection.  Given that is so I continue to be surprised at how few companies do well in the complaints process.  If Npower and British Gas had taken such an approach (call it a customer friendly approach) to the complaints made by their customers then they could have: gotten insights into customer needs; learned where their business practices were failing customers; built a better relationship with customers; and avoided a fine.

Customer Experience: what is in unlimited demand yet in limited supply in the modern world?

The Customer Value Equation

My approach to the Customer is fundamentally one of creating superior value for the Customer.  In an earlier post I spelled out my formula for creating superior value:

Value = Benefit – Effort – Risk – Price +/- Treatment

If you want to create more value for the Customer then you can focus on any of these five levers.  In this post I want to focus upon the last one “Treatment”. Fundamentally “Treatment” is how you leave your Customer feeling.

The Values Proposition:Do Small Things With Love

In Why Is It So Hard to Be Kind? William C Taylor shares the story about how his father was treated as an economic object (“I-It” in  Buber’s terms) by his Cadillac dealer even though he had been a loyal Cadillac customer.  Then William contrasts this to the way that he was treated (“I-Thou”) by a Buick Dealer.  To cut a long story short the Buick dealer: honoured an expired loyalty certificate that the Cadillac dealer would not honour; allowed William’s father to take the car for the weekend – without being asked; and then built an amazing bond with William’s father.  How? In William’s words:

“Monday rolled around and my father found himself being rushed not to the dealer but to the hospital, with what turned out to be a medical problem that required surgery (He’s doing great now, thanks.) As he was lying in his hospital bed, thinking about whatever it is we think about in these moments, he realized that the Buick Lacrosse was sitting in his garage! So he called the dealer from the hospital and asked how he could get the car back. “Don’t worry about the car,” he said. “Just get better.” And the next morning, what should arrive at the hospital but a lovely bouquet of flowers and a nice note from the Buick dealer!

In a follow up post William shares his visit to a retinal specialist and this is what he says about his experience:

“This doctor did an utterly competent exam, explained my situation, and offered a sound course of action. So I’m fine. Yet I keep thinking back to the experience, not because of the quality of the medical care I received, which was superb, but because of how uncaring the experience felt.  As I sat in the waiting room, it seemed more like the offices of a payday lender or a bail bondsman than that of a highly credentialed surgeon. “If you arrive late, your appointment may be rescheduled,” one sign warned. “Copay is due upon arrival,” another signed explained.  My fellow patients and I were nervous, anxious, worried about our eyesight. Yet it felt like the doctor thought of us as a collection of truants, tightwads, and general layabouts.”

William goes on to write:

“There is a temptation, amidst the turmoil, for pundits to conclude that the only sensible response is to make bold bets — new business models that challenge the logic of an industry, products that aim to be “category killers” and obsolete the competition. But I’ve come to believe that a better way to respond to uncertainty is with small gestures that send big signals about what you care about and stand for. In a world defined by crisis, acts of generosity and reassurance take on outsized importance.”

“Nobody is opposed to a good bottom-line deal,” I concluded at the time. “But what we remember and what we prize are small gestures of connection and compassion that introduce a touch of humanity into the dollars-and-cents world in which we spend most of our time.

“As the value proposition gets rewritten in industry after industry, it’s organizations with an authentic VALUES PROPOSITION that rise above the chaos and connect with customers. Few of us will ever do “great things” that remake companies and reshape industries. But all of us can do small things with great feeling and an authentic sense of emotion.”

James G. Barnes said something very similar when he published his book Secrets of Customer Relationship Management.  What was the subtitle? “Its All About How You Make Them Feel

What does Frederick Richheld have to say?

In Profiting From the Golden Rule Frederick Richheld stresses the importance of the “I-Thou” orientation.  In his words:

Our system of financial accounting rewards quarterly profits, but struggles mightily to place a value on ethical behavior

“Reputation is earned through the simple, age-old concept of the Golden Rule: treat others as you yourself would want to be treated. Each time you live up to the Golden Rule, your reputation is enhanced; each time you fail, it is diminished. And the mathematics of long-term financial success — revenues, profits, cash flow — square perfectly with this scorecard.”

“We all want to be treated with honor and respect in ways, large and small, that enrich our lives. Such experiences not only make us happy, we want to share them with people we care about. By recommending an experience, we’re signaling our trust that our friends will be treated similarly. Recommendations also signal to businesses how customers view their relationship with the company. When customers feel so well treated that they enthusiastically recommend a company to friends, they are promoters. When treated so badly they recommend avoiding the company, they are detractors. Both have direct and measurable economic consequences.”

What is in unlimited demand yet is in limited supply in the modern world?

We strive to deliver something for which there is unlimited demand–being treated with honor and respect. There seems to be a very limited supply of that in today’s world.” CEO Dan Cathy, Chick-fil-A (an award winning US company)