Wednesday, April 15, 2015

Trust has greatest value where choice is highest and price sensitivity lowest

Trust - the output of the 10 Principles of Open Business - is essential for success in today's open economy.
But we should note that its value varies across market segments. Trust will attract the right staff, keep the organisation honest and true to its beliefs and inspire people to perform at their best. But its impact on consumer action varies depending on choice/ease of switching and price sensitivity.
This may explain why even when we lose trust in something we don't always stop using it.
The graph included here illustrates my plotting of some market segments and institutions which shows us which should put the greatest efforts into building trust for the purpose of impacting consumer behaviour.
Where it's very difficult to switch (ie your daily commute by train) trust has some value but building it won't encourage more commuters to use a rail company. They just may feel a little better about the next price hike, a little safer while on board.
While there is no option when it comes to your police service you could argue there is little requirement to build trust to change user behaviour (though trusting the service does of course encourage people to be more open with it, even if we can't go and share our intel with an alternative organisation).
The key area for trust as an investment in behavioural change seems to be where both the cost of both switching and the price sensitivity is low (the top right quadrant).
Here we find the banks, the media, transport. Most retail vendors would fall here. Topically - politically parties appear a standout. Trust should be everything to them.
My positioning of supermarkets on this grid may explain why - despite the repeated crises of trust in our supermarket giants (even Open Business advocates Tesco) - there hasn't been a mass exodus of customers. Tesco's market share is down less than 2% year on year according to Kantar (Oct 2014). But that's based on spend, not numbers of customers. Customers are less likely to have left Tesco for Aldi or Lidl over issues of trust than they are over issues of price. They have added an Aldi run to their routine Tesco buys, not abandoned it completely.
These positions aren't fixed. IF through Open Business or other investment in building trust (and blockchain is being advocated as one such tool by The 10 Principles Co-author Jamie Burke) organisations can make trust a competitive advantage they can become more resistant to start-ups and new-comers who do not have a trust bank already established.

The rate of change is so rapid it's difficult for one person to keep up to speed. Let's pool our thoughts, share our reactions and, who knows, even reach some shared conclusions worth arriving at?