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

As many marketing and public relations consultants, academics, economists, and business writers have observed, today we’re living in a reputation economy, where trust and customer experience – even more than product or service features – are coin of the realm, as real as legal tender.  Trust is core to reputation; and customer trust can build or demolish organizations.  Trust creates, what my colleague Colin Shaw calls, an emotional bank account.  At Target, though, trust was broken with data breaches affecting 110 million customers (40 million accounts, and the theft of 70 million more customer records), whose bank security has been significantly impaired, with massive withdrawals.

Let’s look at the financial impact of Target customer distrust.  In January, 33% of U.S. households shopped at Target; but this is down from 43% in January, 2013.  Its fourth-quarter, 2013 earnings fell 46% to $520 million, from $961 million in 2014, and sales were down 5%.  According to research, the sharpest declines came from one of Target’s key customer groups – Gen Xers – and from fringe shoppers who don’t purchase as often.  Gen X customers, those between 32 and 49, declined to 38% from 53% in 2013; and, equally disturbing, many of these shoppers were previous long-term, loyal Target customers.

While Target senior executives have tried to address and reduce customer anger over the company’s failure to protect their purchase data with promises of identity theft protection and free credit monitoring, there continues to be a genuine lack of belief that similar incidents couldn’t occur again in the future.  Media commentators call this “the long tail”, where the combined effect of persistent negative offline and online informal communication makes near-term recovery a challenge.  As one financial analyst noted:  “Probably 5% to 10% of customers will never shop there again.  It’s just the nature of the beast.”  The company may, indeed, hack-proof customer records, but some long-term damage has been done to Target’s reputation, and the emotional connection they had earned with customers.

That said, there is some light at the end of the tunnel.  This same financial analyst also expressed the opinion that  “…. in this day and age, customers have slowly become immune to the breach.”; and he predicted that shoppers’ emotional reaction to the hacking will begin to subside in a few months.  So, time, as a healer of wounds and a contributor to the rebuilding of trust, could work somewhat in Target’s favor.

There are other ways that Target can reset its public reputation, and restore its emotional bank account with customers.  One of them, which we haven’t yet seen, is to use stakeholders – employees, and the customers themselves – to help make deposits into the emotional trust account.  Businesses create (or destroy) perceived value and sets of expectations for stakeholders, and it is through the stakeholders’ lens and agenda that image can be built, or rebuilt.  Most companies find that stakeholder opinion is favorable, or at least passive and benign; but, in light of current perceptions, the re-nurturing and management of Target’s public image will need to be aggressively pursued.  This is a challenge, but also an opportunity.

It’s especially important that brand reputation-building be internal as well as external.  The whole organization (not just executive spokespeople) have to believe in the brand.  Employees need to share in and communicate brand positivism and passion, and do it with genuine excitement and emotional attachment.  Otherwise, how can current, former, and prospective customers be expected exhibit this behavior?

Target employees can play a genuine role as trust ambassadors; and there are proven models, and excellent examples, for how to effectively achieve this.  One of these is Boots, the largest pharmacy chain in the U.K.  When Boots’ loyalty program was about launch, it started with employees, who were actively encouraged to make personal use of the program.  As a result, whenever customers had any questions, Boots’ store staff were already using, and advocating for, the program.  They were able to help customers well beyond the normal call of duty, as well as being highly enthusiastic spokespeople for Boots and the program.

Customers are the other key stakeholder group which can be leveraged to positive effect in this reputation and image rebuilding effort.  Target would be well-advised to identify active customers who, despite all of the negative publicity, continue to be bonded with, and advocates for, the brand.  Customer testimonials can be presented to the public – in formal ways, such as through electronic and print advertising flights, and in informal ways, through online postings and customer communities.

Customer and employee word-of-mouth represents high trust:  Studies show that over 90% of consumers consider it the best, most reliable source for ideas and information about brands, products, and services.  Word-of-mouth, in a word, is trustworthy; and Target needs this to work in its favor. The reconstituted Target brand message needs to be delivered by credible sources, and employees and customers are the best way to start doing this.

Republished with permission from CustomerThink.com