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Michael Lowenstein, Ph.D., CMC, is Thought Leadership Principal for Beyond Philosophy

In classic psychological terms, trust is considered more a ‘feeder’ of emotion.  We typically see emotions (as defined by experts like Paul LeDoux, Sylvan Tompkins, Paul Ekman, and Robert Plutchnik) as including surprise, interest, joy, rage, fear, disgust, shame, and anguish, and also happiness and sadness, or acceptance and anticipation.  As regards both b2b and b2c customer-supplier relationships, lack of confidence and belief is driven by insecurity and egotism, and ability to be confident is based on feelings of safety and acceptance.  The name of the emotion-based game is ‘trustworthiness’.

Customer behavior research studies consistently show that elements of vendor trust, represented by image and reputation, are significant drivers of loyalty and disloyalty, advocacy and alienation, bonding and rejection.  Consumer financial service industries, such as banking, investments and insurance, are sectors where trust and confidence play a particularly important role in key elements of the customer life cycle:  selection, loyalty, and defection.

Retail banking, in particular, has seen both success and failure because of customer trust.  Big national and large regional banks are particularly vulnerable.  Since the financial meltdown of 2008, many have been singled out for charging excessive fees (which is often, as well, a surrogate for service-related issues).  Furthermore, in an industry that had relied on customer stability (or at least inertia), large retail banks have seen churn rates of 10%, or more (per J.D. Power annual studies).  Since 2008, the rate of big and large regional bank defection has been increasing while, at the same time, less exposed small banks and credit unions have seen rates of customer acquisition go up and defection rates decline.

In banking, customers identify elements of confidence and reputation – feeling like they belong, having the bank ‘go the extra mile’ for them, providing consistent and reliable service, being strong and stable, and exhibiting personalization – as important in their choice process and also their continuing relationship.  If banks cannot learn to get the basics of emotional trust right, or reinvent themselves to do so, they are likely to experience the pain of ever-increasing defection rates.

It should be noted that these findings on the impact of image and reputation and their relationship to advocacy are not unique to the financial services industry. In truth, virtually every company in every b2b and b2c industry is vulnerable to the erosion of reputation and resulting business impact. As noted by Dr. Leslie Gaines-Ross, EVP and Chief Reputation Strategist for international public relations firm Weber Shandwick:

“There is an increasingly critical connection between brand and service promise, corporate and brand reputation trustworthiness, the transactional experience (as delivered by people, processes, communications and culture), and downstream customer behavior. Any small ripple in reputation change (such as through a product-related issue, online rumor or executive miscue), brand performance or customer service can have a tsunami-like effect on business outcomes which may last indefinitely. This is especially true now because of the permanency provided by social media.”

So, in the interest of optimizing relationships, the financial services industry would be well-served to treat ‘trust’ and ‘trustworthiness’ as a critical core emotional driver of downstream customer behavior, and to assure that confidence, represented by a positive image and reputation, is a major focus. As noted, this is sound advice for any organization.

Republished with permission from CustomerThink.com