What a retailer knows about its customers improves its ability to build a shelter of trust. With data-enabled customer understanding, that shelter should be big enough to hold billions of dollars in sales.
This much is reinforced in the findings of new research by Accenture Strategy, which assigns a dollar value to trust among organizations. The research estimates that companies that experience a material decline in trust could miss 6% in potential sales, on average. In dollars, that translated to $180 billion among the roughly 3,800 companies in Accenture’s analysis that suffered a material drop in trust.
The findings back up what many retailers should already know: That transactions are largely driven by brand confidence. But that confidence, or trust, often derives from data.
More than three quarters of consumers, 78%, said they are more likely to trust companies that use their data to fully personalize their brand experiences, according to research by Salesforce.com. A similar percentage said they would share more relevant information about themselves in exchange for personalized product recommendations.
How that data is gathered and used is essential to developing that trust.
In Basics We Trust
Accenture calculates its trust-sales correlation by scoring 7,030 companies, across industry sectors, based on growth, profitability and sustainability/trust. This “Competitive Agility Index” revealed 54% of companies experienced a decline in trust, which caused their index scores to drop by two points, on average. Each point equates to a 3% decline in revenue growth.
Based on these calculations, Accenture estimates that trust-losing retailers could risk a 13% decline in revenue. For a $30 billion retailer, that would translate to an unrealized $4 billion.
A look at retailers that rank high in trust supports the Accenture theory. Among the top-rated publicly traded retailers listed in the 2018 Temkin Trust Ratings are Kroger Co. and Amazon, which tied at 22 among 318 entries. Kroger posted fiscal 2017 revenue of nearly $122.7 billion, compared with $115.3 billion in fiscal 2016, a 6% increase. In fiscal 2015, it reported annual sales of nearly $110 billion.
Amazon posted North American sales of $106 billion in 2017, compared with nearly $80 billion in 2016 — a roughly 33% increase — and $63.7 billion in 2015.
(The overall top-rated retailers on the Temkin Trust Ratings are supermarket chains Wegmans Food Markets, second, and H-E-B, third. Both are private and therefore are not required to publish financial information, but H-E-B lists revenue of $25 billion, compared with $23 billion in fiscal 2016-17, according to Supermarket News. Wegmans reports 2017 sales of $8.7 billion, from $7.9 billion in 2015.)
The high presence of supermarkets among most-trusted brands is worth noting because supermarkets tend to be high-frequency destinations, meaning they have more opportunities to gather customer data and parlay it into personalized communications and offers.
Retailers that lost trust — and market share — encouraged less-frequent visits. Among those that fell at least 15 points below industry average on the Temkin is 289th -ranked Sears Holdings, which filed for Chapter 11 bankruptcy protection in October. Revenue at Sears declined to $16.7 billion, from $22.1 billion in 2016. Toys R Us, which also filed for bankruptcy protection and plans to liquidate in 2019, ranked 273rd.
Data Builds Believability
Shopper trust is so tightly linked to data analysis that even shoppers are cognizant of it. They expect offers and communications that make sense to them at the right time, and increasingly they are unwilling to suffer brands that misfire. There simply are too many other options available.
Pretty much all retailers gather data, through a loyalty program, credit card data and/or digital transactions. Transforming that information into a shelter of trust, however, takes expertise. Here are some guidelines.
- Be collaborative. Because consumers know their data is collected, how it is collected and used matters dramatically. When given a choice to choose what and how much information they share, shoppers are more likely to feel valued and believe in the brand.
- Be clear. All communications, from explaining how the retailer uses its data to the special offers available through that data, should be interpreted in a few words. A rule of thumb: Communications should translate seamlessly from online to small handheld devices. Nordstrom is a good example of a retailer that clearly explains how it uses customer data.
- Be as relevant as budget permits. Ideally, a retailer could break down its data into hundreds of unique messages, so each customer sees she is getting an offer special to her (and she actually wants). Tight margins might not allow this in all cases, so merchants should pick their most high-value customers and categories for such intensive communications — and abandon sending risky offers.
- Don’t take advantage. When customers opt in to share specific kinds of data, they expect benefits that reflect it, specifically. If the brand experience is incongruous or indifferent to their needs, they’ll lose trust, and that could be worse than never having been trusted at all. By continuously sending me offers for drinks I never purchase, Starbucks is not persuading me to try something new; it is convincing me it isn’t paying attention to me.
To tie that back to the Accenture findings: Starbucks ranked 195th on the Temkin trust ratings of 318 companies. Its same-store sales in fiscal 2018 rose by 2% in North America, though it saw a 1% decline in transactions. Both figures indicate there’s opportunity for improvement.
If the Accenture theory is sound, then even blockbuster brands have the ability to improve performance through emotional connections, and specifically the insights that enable them.