Building trust can build company profits.
In the business world today, consumers and businesses do not trust institutions and organizations as much as they did in the past. One reason for this is that unscrupulous businessmen have taken unfair advantage of others and, in some cases, broken the law. Arrests and penalties within the financial services industries is one example. Understand why extending trust is more important than ever before and you will take proactive actions to increase customer trust in your business and the keep the trust of your employees.
Customer Retention
Customers who have a reason to distrust a company are less likely to do business with that company for an extended period of time. Excessive customer attrition is more costly than most businesses think. Consider the lifetime value of a customer. Lifetime value is calculated by multiplying the annual sales of the average customer by the number of months a customer remains with a company. For example, if a customer spends $2,000 a year with a company and is with that company for an average five years, the lifetime value of that customer is ten thousand dollars. If a company has one hundred customers, the value of those customers is $1 million. A simple 10 percent increase in customer retention would deliver an added $100,000 to the bottom line. Reducing attrition also reduces new customer acquisition cost, since fewer new customers are needed to replace customers that leave the company. Acquiring a new customer is much more expansive than keeping an existing one. Another hidden cost of customer attrition resulting from a lack of trust is negative image. A consumer who leaves a business for bad service may tell others about his experience, thus damaging the company's reputation. A bad reputation not only makes it harder to acquire new customers but also to keep existing ones.
Sales
Extending trust has a direct impact on customer acquisition. If prospects trust a potential supplier, they are more likely to do business with it, thereby increasing the conversion rate of prospects into customers. A higher sales rate translates into a lower customer acquisition cost.
Employee Trust
Internal employee trust is equally important. A trusted company has an easier time getting employees to support company initiatives. In addition, employee retention rates can be improved. Employees are more likely to remain with employers they believe in and who have not taken advantage of them.
Gaining Trust
To engender trust, do what you say you are going to do. Be reliable. Be ethical and have high standards. Demonstrate to others that you can be trusted. For example, when someone tells you something in confidence, keep that confidence. When you make a commitment to someone to do something, do it -- and let the person you know that you've done it.
