Trust as Currency
Defining a New Metric in Consumer Products Industries
confident expectation of something; hope.
“Trust” is a term we hear used a lot these days—it’s a small word with great weight. Different people assign different meanings to it depending on their lived experience, but most can agree that trust, at its core, means that an individual or entity will deliver on their promises, and that their actions will consistently match their claims and commitments. Even on a good day, reliably delivering on our promises as individuals is a challenge. It’s all the more difficult for a multinational company with a complex global supply chain that stretches from raw materials to store shelves.
A recent survey found that since the pandemic, a large majority of executives (75 percent) have had a more difficult time building and maintaining trust with their customers.1 The same survey found more than half (55 percent) of consumers say that once a company has violated their trust, they will never give it their business again. Alarmingly, the percentage of consumers who have taken action to settle a score against a company through measures such as pestering or public shaming in person or online tripled in just two years, from three percent in 2020 to nine percent as of 2022.2
And trust doesn’t just play out with customers—employees and suppliers also rely on trust as relationship capital—80 percent suggested that the most important thing companies must do to earn trust is practice what they preach.3
How did we get here, and what does trust actually mean in the context of consumer products industries? How do we measure it, quantitatively or qualitatively? And how has it become the new currency? To delve into these complicated questions—and understand the heightened importance of trust in consumer products today—it’s a good idea to take a step back, consider the foundations of modern business and what’s changed.
1. Adobe Trust Report, Adobe, 2022.2. National Customer Rage Survey, 2022.3. Adobe Trust Report, Adobe, 2022.
Generally, when companies were first formed, there was only one true metric: financial. According to Dr. Venkat Venkatraman, Professor of Information Systems at Boston University, equity came from shareholders. The company used it to create value by marketing and selling products and services delivered in the marketplace. Customers normally paid a premium, successful companies performed well, and shareholders benefited monetarily.
Historically, it was about bargaining and power—the company bargained with suppliers to get the lowest costs. It demonstrated power to customers through extracting the most financial value to maximize revenue for shareholders. Sometimes there was competition, which could drive prices down, but supplier and customer choices were far more limited than they are today.
“In that pre-digital, pre-internet era, the shareholders were the most important stakeholders, and they didn’t ask a lot of questions about the suppliers the company worked with, how the company operated, how the company’s products were manufactured, or how the company treated its workers—because they didn’t have to,” said Dr. Venkatraman. “The metric was solely based on their financial reality and was easily determined in the stock exchange and stock price.”
As a species, humans desire communication and the feeling of being connected to one another.4 Even before the internet era, there was mass media. Knowledge sharing through news, publications, catalogs, and other platforms allowed people and broader society to gain new insights about the products and brands they chose. With new insights into corporate practices, activism took root locally and around the world. No longer could a massive oil spill be a private matter or a tainted medicine be swept under a rug. Corporations used their public relations machine to manage crises like these to retain some control over how they were perceived. Consumers and broader society were more aware than in previous times, but not even the most dedicated activist could know everything.
4. “Social pain and the brain: Controversies, questions, and where to go from here,” Lieberman, M. D., Eisenberger, N. I., Crockett, M. J., Tom, S. M., Pfeifer, J. H., & Way, B. M., Annual review of psychology, 2013.
Today, with social media and digital news platforms—as well as globalization and connected capitalism—the balance of influence has shifted. There are still shareholders and stock price is still a metric. But there are now other critical stakeholders with skin in the game. When something goes wrong in consumer products-related industries, it’s no longer just the shareholders that hear about it. Employees, suppliers, customers, consumers, and broader society might all be affected by—and have an opinion about— an overpriced cleaning product, a dangerous chemical in our shampoo, dubious labor practices, or the recall of a certain food (fig. 1). All stakeholders are implicitly voting with their wallets and voices for companies that consistently do the right thing.
Fig. 1: Traditional Financial Model versus New Trust Value Chain Model.
New Trust Value Chain Model
STAKEHOLDERS
Where the shareholder might have asked, “What is the potential ROI on this product?” or “Will this new product create value or drive up the stock price for the company?” Today, a supplier asks, “Is this a company we want to work and partner with?” The employee asks, “Is this a company I want to work for or tell my social network to work for?” The customer asks, “Is this a company I want to buy from or tell my friends to buy from?” And broader society asks, “Is this company consistently doing right by our planet and our communities?”
These kinds of questions can’t be answered in concrete financial terms. When the only transparency was stock market value, all the signals were in one place. Today there is a new, complex web of connectivity. Now we have different signals, and they cover all stakeholders. The forces of global social media, customer demands, immense amounts of data, and stricter government regulations and compliance are driving a more intangible currency: Trust.
Trust is the single most valuable equity that you can have to ensure long term success. I tend to say trust comes on a donkey and leaves in a Ferrari. It takes ages to build trust and a trusted brand. But you can break that trust very easily by doing something that you shouldn’t.”
In the context of consumer products industries, trust is not legalistic. “It’s not an explicit written contract,” said Dr. Venkatraman. “It’s an implicit contract with suppliers, employees, customers, and society. Each of these groups has the power to influence the financial well-being of an organization.” Consumers might trust a product more if it’s built using sustainable practices. Suppliers need to trust that a company is negotiating for resources in good faith vs. squeezing them for maximum profit. Employees gain trust when they believe a company is serious about investing in their career growth through training opportunities and giving them purpose. And from a broader societal perspective, a neighborhood might welcome a new office or manufacturing facility, trusting in the company’s positive impact.
At the end of the day, a trusted company has a much higher chance to retain customers who will continue to buy from it; employ workers who will continue to be productive and actively recruit better talent; partner with suppliers who will continue to be transparent; and court governments that will invite it to build offices and factories in their cities. In fact, the overall benefits for companies that are trustworthy are significant—recent research suggests that these companies outperform the S&P 500 by levels as high as 30 to 50 percent.5
5. Lawrence A. Cunningham, “Opinion: Why high-quality, trustworthy companies have beaten the S&P 500 by 30%-50% ,” Market Watch, July 3, 2021.
To make trust your corporate currency, Dr. Venkatraman suggests thinking through the following four steps and their associated questions and action steps to develop a systematic plan.
Phase 1 Earning Trust
What are the drivers of trust for each stakeholder—employee, supplier, consumer, and broader society? What are your priorities as a company, and how well do they match stakeholder expectations? Are you working to articulate the rationale as clearly as possible and communicate your commitment, key actions, and resources you have committed to earn the trust of each group? Have you thought about assigning responsibilities within the leadership team for your different stakeholders?
Phase 2 Monitoring Trust
Are you monitoring developments in the external marketplace (and internal organization) that could likely cause direct impacts on trust? What could be likely negative (or positive) sentiments in the relevant communities, and what responses are in place?
Phase 3 Restoring Trust
It’s inevitable that trust will be broken and needs to be restored. Are you developing routines with responsibilities and action plans to restore trust in the event that something goes wrong?
Phase 4 Measuring Trust
Are you linking trust to performance metrics that drive your business? There’s no one equation that shows how valuable trust is for every company. You must develop and refine the equation for your setting. Use specific indices such as Net Promoter Scores (NPS) and track them over time and relative to competitors. Develop scores of employee engagement from internal surveys and link to relevant metrics from external sources such as Glassdoor to tie employee satisfaction to customer satisfaction.
