Service Providers: why trust matters and what you can do to cultivate it (Part I)

Thomas Cook – one of the big brand name UK based travel companies – has seen it share price drop by 85% to 10p and have now bounced back up to 30p.  Why? The shares dived when investors lost confidence in Thomas Cook’s ability to survive.  The shares recovered when Thomas Cook was given a lifeline of £100m.  Competitor – Thomson – has made the most of this opportunity with its latest advertising: “You can smile with Thomson because you’re in safe hands. Another holiday company may be experiencing turbulence, but we’re in really great shape.”  Clearly Thomson is seeking to undermine customer trust in Thomas Cook whilst building up confidence in itself.  This got me thinking about the critical role that trust plays in the commercial relationships – in winning new customers (expanding market share) and retaining existing customers (customer loyalty) – especially in services businesses like travel, insurance, banking, telecommunications etc.

What do we know about trust and why it matters?

We, human beings, do not like to be faced with uncertainty, vulnerability or risk – these three factors take an emotional toll on us.  We prefer to work on ‘autopilot, which is simply another way of saying that we prefer to trust and developed societies work on the foundations of trust.  Just think if you were not able to trust anyone for anything: what would life be like?  Here is what the literature says on trust:

Trust rests on three complimentary pillars: competence, integrity and benevolence

I am likely to trust you if you occur to me as being credible, honest and benevolent.  Said differently: “Customer trust is based on the expectations that the service provider can be relied on to deliver its promises, to care for customer needs and demonstrate competence”.

Everything (all touchpoints) contribute to trust

The organisation (corporate reputation), the front line employees, marketing communications and self-service technologies all play a part in trust.  Trust in the overall organisation (like Thomas Cook) is based on what customers hear and read about the organisation – that includes management polices and practices.  Trust is also a function of the customer’s interactions with representatives of the organisation.

Trust has two dimensions: rational and emotional

Think of trust as a two sided coin, one side of trust is based on a rational process and the other side on an emotional process.  Using the rational process the customer determines the service providers competence and reliability – its ability to keep the promises it makes to customers.  Through the emotional process the customers comes to a conclusion about how much (or little) the company cares about customers and their needs.  Customers look for indicators like responsiveness, flexibility, willingness to compromise and act beyond the profit motive.  This is where being known as a company that values both social good and profit matters – it helps customers form that emotional bond quicker.

Here is my take on this: whilst both rational and emotional matter the emotional bonds matter more.  Why?  I don’t care how competent you are if I suspect that you do not care about me – that you are simply in it for the money.  Given the choice I will look for someone who shows me that they care about me and are competent in their chosen profession.

Building trust takes time

Trust builds up through the accumulation of previous experiences (interactions) with the services provider.  Experience is a lived phenomenon and customers can accumulate these experience by directly interacting with the service provider  and by exposed to / tapping into word of mouth and corporate reputation.  For the first time in history, I, the customer can determine how much to trust you simply by tapping into social media where your customers are already talking about you which is why sites like TripAdvisor are incredibly popular and influential. Last week I drove 60 minutes to see an optometrist when there is one within ten minutes of my home. Why? Because this chap came recommended through my personal network.  I was not disappointed and I’d happily drive 60 minutes to see him again.

Trust takes the risk out – it acts as a safety net

Why did I turn to my personal network for a recommendation and then drive 60 minutes to see the recommended optometrist? Because my son’s wellbeing was at stake and I did not want to take any chances.  This is what the literature says:  “In situations of  perceived risk or vulnerability, trust has the role of a safety net, helping the customer to make a decision by minimising uncertainty and risk. The insecurity about the long term horizon of delivery, as well as the inability to test the service before actual consumption makes trust a valuable decision factor for customers of service organisations.

I will set out what you can do to cultivate trust in Part II (coming soon).

How the relentless focus on efficiency drives poor customer experience

Back in early 2008 I met up with Bob Greenberg – the founder and CEO of R/GA the digital agency renowned for their work on Nike+.  Prior to meeting Bob I had studied his background and had come to the firm view that Bob is a genius.  So I was surprised when Bob shared with enthusiasm how he was going drive up efficiency by introducing video conferencing  and thus cutting out all the cost and time wasted by people travelling between offices.  This is identical to the argument used by many in the CRM field and now in the Customer Experience field!

I cautioned Bob that as you drive up efficiency you drive down effectiveness. I mentioned that should focus on effectiveness and accept a certain level of inefficiency: that they go together like two ends of a stick.  He looked puzzled and I could not get my point of view across convincingly even though I just knew that I was sharing a valuable insight with him.

I have struggled to convey this insight to executives working in the realm of customer experience improvement.

Then a couple of days ago I received the latest newsletter from Vanguard.  In this letter they shared a story that a reader of theirs had shared with them – a story that beautifully explains how you drive down effectiveness (the customer experience) as you drive up efficiency:

“I’m a reader of the systems thinking review, and a trade union rep in the public sector with responsibility for a helpline. I find myself arguing with managers who are keen to manage performance using metrics for advisor availability, utilisation, call length, and adherence to roster.  I recently had one of those moments where the penny drops; it was in relation to the management of efficiency.

I was staying in a Hotel, a 20 storey building with two lifts. The restaurant was on the 1st floor, and each morning I would travel down from my room on the 14th floor to the restaurant for breakfast, afterwards I would return to my room to brush my teeth and pick up my papers, and then travel down to ground level and go to my training course. For most of the week one of the lifts was out of order, and the service from the single lift was pretty rotten, you had to wait and wait, usually with other hotel guests stood around tut-tutting and sighing.

Towards the end of the week the second lift came back into service and I noticed something surprising (to me at least.) With two lifts I’d expect the service to be twice as good, waiting times to be halved. But the improvement seemed much better than that. Basically you pushed a button and the lift came. The improvement was huge – though I can’t say I stood around with a stopwatch gathering detailed stats on how two lifts performed compared to one.

As I thought about this, something else occurred to me. The single lift system was much more efficient than the two lift system, from the point of view of the lift and the use of “lift resources”.  With one lift out of order the remaining lift was in nearly constant motion. It started at the bottom picking up passengers waiting in the underground car park, then at street/reception level and then at the restaurant on level 1. It then travelled upwards, dropping the passengers off at their floors. Once it reached the top it changed direction straight away to start picking up the passengers who were by now already waiting to go down, stopping several times to pick up a number of passengers, and of course dropping them off at various lower levels. The lift was highly “available” it was working all the time, and it was highly “utilized” maximizing the number of passengers riding on each journey. But as I said before the service was pretty rotten for the passenger.

Improving the efficiency of the lift would not improve the service to the passenger at all – in fact it could only make it worse.

For me it was one of those – “Oh now I get it” moments.” One lift represents economies of scale, two lifts economies of flow. Concentration on individual unit efficiency can lead to a worse service, and if you try to improve things by going further down the route of more and more efficient use of resources, service will get worse and worse.

As a result of this story I am more able to share my insight with the next executive that I meet.  Thank you, to whoever shared that story with Vanguard.