The Role of Trust in Consumer Relationships
Trust plays a major role in marketing environments where consumers and service personnel interact often. This study explores which employee behaviors create or destroy consumer trust.
The authors developed a theory in which consumer loyalty is determined by two types of trust:
- the trust a consumer has in management policies and procedures, and
- the trust a consumer has in front-line service personnel.
They also suggest that the degree to which a consumer has either kind of trust in an organization depends on three key elements:
- operational competence of employees,
- their benevolence, and
- employees’ problem-solving orientation.
To prove their theory, the authors conducted a mail survey of customers of a clothing store and an airline, and found strong support that consumer trust does consist of these three elements. The authors also discovered an interesting asymmetry in the way behavior affects trust. Employees who performed poorly on the benevolence dimension (i.e., treating consumers rudely) had a stronger effect on trust than those who treated their customers politely. However, personnel who scored high in problem-solving had a stronger effect on trust than those lacking problem-solving skills. The employees’ behavior had a stronger effect for the retail store than for the airline.
The extent to which trust influences loyalty is strongly influenced by the overall perceived value of the business. That is, for businesses that are perceived to offer high value for the money, trust is a stronger determinant of loyalty than for businesses offering lower value for the money.
An important finding of this study is that companies should realize the important effects which managerial policies and front-line service personnel have on consumer trust. The fact that trust is such a strong determinant of consumer loyalty justifies organizational efforts to foster trust in consumer relationships.
“Consumer Trust, Value and Loyalty in Relational Exchanges,” Deepak Sirdeshmukh, Jagdip Singh, and Barry Sobol, Journal of Marketing, Vol. 66, January 2002, 15-37.
Consumer Satisfaction and Repurchase Loyalty
Repurchase loyalty is often a key factor in determining the financial contribution consumers make to a business. In this paper the author evaluates how the quality of a business’ performance influences consumer satisfaction, and how satisfaction affects repurchase loyalty.
The author conducted a mail survey on consumer perceptions of four seafood product categories. Results of the survey showed that consumers form overall impressions of quality by integrating various aspects of products and service performance. The perceived quality of the products determines consumer satisfaction, and as expected, consumer satisfaction determines repurchase likelihood.
Importantly, while there were strong positive relationships between quality and satisfaction, and between satisfaction and loyalty, managers should not assume that “good enough” performance is sufficient to build the kind of consumer relationships most organizations seek.
Given the preponderance of product categories, businesses should focus on the different aspects of service and personal interaction that can generate differences across competitive offerings and engender consumer loyalty.
“Comparative Evaluation and the Relationship between Quality, Satisfaction and Repurchase Loyalty,” Svien Ottar Olsen, Journal of the Academy of Marketing Science, Vol. 30, No. 3, 240-249.
Loyalty Is Not Always Profitable
In this debunking of some of the literature promoting customer loyalty programs, the authors argue that “the relationship between loyalty and profitability is much weaker—and subtler—than the proponents of loyalty programs claim.” Specifically, the authors found “little or no evidence to suggest that customers who purchase steadily from a company over time are necessarily cheaper to serve, less price sensitive or particularly effective at bringing in new business.
The authors studied the dynamics of customer loyalty using four companies’ customer databases. The companies included a high-tech service provider, a mail-order company, a retail food business and a brokerage house. Two of the companies were in the U.S. and two in Europe. These databases allowed the authors to “compare the behavior, revenue and profitability of more than 16,000 individual and corporate customers over a four-year period.”
Key findings: According to the authors’ research, loyal customers expect to get something in return for their loyalty. They “often exploit it to get premium service or price discounts,” and a loyal customer “is often more price sensitive than an occasional one.” The authors also find fault with common models for measuring the value of loyal customers and offer an “event history” model that they see as more helpful.
“The Mismanagement of Customer Loyalty,” Werner Reinartz and V. Kumar, Harvard Business Review, July 2002, pp. 4-12. A detailed explanation of the model used in the author’s research can be found in “On the Profitability of Long-Life Customers in a Non-Contractual Setting: An Empirical Investigation and Implications for Marketing,” Werner Reinartz and V. Kumar, Journal of Marketing, Vol. 24, October 2000, pp. 17-35.
Customer Satisfaction Won’t Guarantee Loyalty
Companies often make the mistake of believing that customer satisfaction and customer loyalty are directly correlated, but that might not be the case, according to the authors of this study. It’s not just satisfaction, but “complete satisfaction” that “is the key to securing customer loyalty and generating superior long-term financial performance. In fact, the authors say, “where competition is intense … there is a tremendous difference between the loyalty of merely satisfied and completely satisfied customers.”
Key findings: The authors’ research uncovered a number of key findings, including the following:
- Providing customers with outstanding value “may be the only reliable way to achieve sustained customer satisfaction and loyalty.”
- Poor service or product quality may not be the main reason for low satisfaction levels. “Often the company has attracted the wrong customers or has an inadequate process for turning around the right customers when they have had a bad experience,” the authors say.
- Different satisfaction levels may reflect different issues and therefore require different corrective actions.
- Relying solely on the results of customer satisfaction surveys to determine the health of the business can be dangerous.
The authors conclude by saying that customer satisfaction information can still be “a critical barometer of how well a company is serving its customers,” but that it’s necessary to create survey vehicles that more clearly delineate “what customers are saying when they provide various responses.”
“Why Satisfied Customers Defect,” Thomas O. Jones and W. Earl Sasser, Jr., Harvard Business Review, November-December 1995, pp. 88-99.
Advice on Building Customer Relationships
The author of this article looks at a number of the professed strategies for creating and developing long-term customer relationships and uses an anecdotal approach to discuss how different companies are using these strategies.
For instance, in describing how companies can deepen relationships by “selling more than product,” the author looks at how companies like 3M and Ford have “built competitive advantage by offering better service.” The author also describes how some Weyerhauser employees work for their customers for a week in order to gain insight into how customers use Weyerhauser products and to discover problems that might arise in their use. Companies’ employee retention efforts are also reviewed as a potential key to improving customer loyalty.
While the article offers little in the way of research-based findings, it does offer plenty of anecdotal detail on the strategies a number of companies are using to deepen customer relationships and promote loyalty.
“Why Some Customers Are More Equal Than Others,” Rahul Jacob, Fortune, Sept. 19, 1994, pp. 215-224.
Getting Smarter About Selling
The authors use the fall from grace of Sears, Roebuck & Co. resulting from unsavory sales practices to demonstrate how a number of companies are overhauling their sales practices as a first step toward building stronger and longer-lasting relationships with customers.
Branding the trend “smart selling,” the authors look at how selling and service are now seen “as the latest and best arena for capturing customers.” They look at how companies as diverse as DuPont and Home Depot are involving top management, focusing on problem solving and attacking the issue of compensation in order to more closely align themselves with their customers.
“Smart Selling,” Christopher Power, Lisa Driscoll and Earl Bohn, Business Week, Aug. 3, 1992, pp. 46-47.
Building Relationships by Getting Into Customers’ Heads
“Few companies have bothered to look carefully at the broad context in which customers select, buy and use product or services,” says the author of this article. Too often, companies are focused on how to fine-tune their own offerings and “fail to see how these products and services can fit into the real lives or their customers.” The result, the author says, is that “they’ve missed chances to expand sales and deepen loyalty.”
Key learning: By making use of what the author calls “customer scenarios,” companies “can often find creative ways to expand its reach into the lives of buyers, helping them save time, use products and services more effectively and fulfill supplementary needs that may not involve the company’s offering at all.” The author describes how three U.S. companies currently use customer scenarios to get closer to customers and offers a step-by-step process for how companies can create such scenarios for their own customers.
“Get Inside the Lives of Your Customers,” Patricia B. Seybold, Harvard Business Review, May 2001, pp. 80-89.
Buying Behavior Hinges on Expected Rewards
This article argues that “buying behavior is essentially a form of work behavior,” and as such, it emphasizes the role of reward and measurement systems in motivating purchasing activities. Previous models, the authors say, were less focused and descriptive in nature. The authors’ proposed model puts purchasing activity in the context of the formal and informal rewards that the buyer can anticipate as a result of his choices.
Key finding: The authors’ model should enable future researchers to better understand the specific rewards and measurements—both intrinsic and extrinsic—that influence particular purchasing performance outcomes.
“A Reward/Measurement Model of Organizational Buying Behavior,” Paul F. Anderson and Terry M. Chambers, Journal of Marketing, spring 1985, pp. 7-23.
A Model for Studying Loyalty
This study examines “the relationship between perceived quality performance, customer satisfaction and repurchase loyalty.” The model defines loyalty in terms of “self-reported repurchase behavior instead of repurchase intention” and looks at satisfaction “as a mediator between quality and repurchase loyalty.” The model was tested and “found to be an acceptable representation of the data across four products and for both comparative and noncomparative evaluations.”
Key finding: According to the author, “the results support the idea that people form their attitudes about the performance of products, brands or stores by learning about the different characteristics of the objects and integrating these values into a more global affective evaluation. This affective evaluation (satisfaction) is used as a predisposition to compare alternatives and guide final choice and loyalty.” The intervention point for marketers, the author adds, “is performance quality of their offerings.”
“Comparative Evaluation and the Relationship Between Quality, Satisfaction, and Repurchase Loyalty,” Svein Ottar Olsen, Journal of the Academy of Marketing Science, Vol. 30, No. 2, summer 2002, pp. 240-249.
