Properly Utilizing Trust and Scale - Maintain

Company Of One: Why Staying Small Is the Next Big Thing for Business - Paul Jarvis 2019

Properly Utilizing Trust and Scale
Maintain

GLEN URBAN HAS BEEN STUDYING trust as it applies to consumers and businesses online for twenty years. The rise of the internet, making possible not only digital purchases but consumer reviews of those digital purchases, has given consumers a great deal of power.

Urban’s research has consistently found that trust highly correlates to a person’s propensity to consider, try, or buy a product. This finding predates the internet and goes back to family-run stores where one-to-one relationships were built; since these stores could be trusted to keep their promise to provide a good product at a fair price, purchases became multigenerational business transactions built on personal relationships. The internet has amplified these relationships and scaled them through the use of tools like social media, software, and newsletters. Trust, transparency, and communication are still absolutely required, but your relationships with customers can be scaled in a way that doesn’t require scaling your business scale at the same time.

Urban found that the verified-purchase reviews that Amazon and eBay allow consumers to post help build trust when people want to learn more about products they might want to buy. While this review system can sometimes be “gamed” and companies can hire people to fill the hopper with good reviews, Amazon and eBay are constantly working to make sure that doesn’t happen.

In some industries, like airlines and cell phone providers, trust either doesn’t exist or is routinely broken. Cost pressure and consumer preference for the lowest price have forced these industries to cut costs to the bone, even to the detriment of how they treat their customers, which has created a huge lack of consumer trust.

Even wealth management services have been changed by the internet. As opinions and information are shared online, the model of high-pressure sales that prioritizes commissions over fund performance is being challenged by new robo-adviser services like WealthSimple. Traditional banks give 50 percent of their fee to a salesperson as a commission, but WealthSimple and similar robo-management services give bonuses to their advisers based solely on client feedback and happiness. Their fees are published on their websites for anyone to compare to other wealth management services they might wish to use.

Ellevest, a wealth management company that has built a new approach to women-focused investing (based on risk preferences, gender pay gaps, and women’s longer life expectancy), has a fiduciary duty to act in their clients’ best interests at all times and to not use their clients’ assets for their own gain. Consumer trust increases when the ulterior motive of selling a product just to make a commission is removed from the transaction. This is why transparent companies like WealthSimple and Ellevest are rapidly acquiring new customers, without much churn.

Urban has found that trust is a strategy that starts before a product is even developed. A trust-based company of one begins with creating something that genuinely solves a problem; then the company rigorously tests the product’s validity before honestly communicating its benefits and outcomes to customers. In this strategy, holding on to customers becomes more important than churning out old ones and constantly acquiring new ones.

Car dealers have a villainous reputation for pulling the wool over customers’ eyes by doing everything from selling known “lemons” to altering odometers. In looking at the impact of the internet on car sales, Urban found that the internet has removed dealers’ ability to scam customers by allowing them to share information like dealer invoices for car prices, safety ratings, VIN-based car reports, and even dealer reviews. You can now walk into a dealership knowing as much as, or more than, the person trying to sell you a new or used car.

When dealers found out that people were sharing this information, their first thought was to stop it by any means necessary—but the internet being what it is, they couldn’t. Fast-forward to now, when car dealerships and salespeople mostly have embraced the new transparency and now work to get customers the right car for the right price. If they don’t approach a sale in this way, customers will know (since they know what others have paid for similar cars) and they’ll talk (by leaving poor reviews on rating websites). This is why some car manufacturers, like Mazda, now have fixed prices instead of negotiated prices, because if customers know what everyone else has paid for a car, they’ll feel taken advantage of if they don’t also get the lowest price. Everyone pays the same amount, and everyone is happy.

With the rise of consumer power from increased sharing and forced transparency, businesses have had to adapt to create win-win scenarios where they make a sale and keep the customer happy. But how do businesses balance trust and cost? Airlines, for one, won’t be able to find this balance and grow trust until they become open about checked bags costing money, get rid of hidden fees, and never kick passengers off flights due to overbooking.

In studying how trust is built between companies and consumers, Urban has found that there are three aspects of trust: confidence (“I believe what you say”), competence (“I believe you have the skills to do what you say”), and benevolence (“I believe you’re acting on my behalf”). He’s found countless instances of companies that advocate for their customers. This is a long-term investment in honesty and transparency, and every company of one needs to employ it from the start.

TRUST BY PROXY

Why is this important to you and your company of one? Because the power of recommendation—or word of mouth—lies in its ability to create trust by proxy. If your good friend tells you that a product is worth buying, you’ll listen because you trust your friend; some of that trust is then passed on to the product they’re recommending. This works online to some degree as well: the people you follow have earned a bit of your trust, so you tend to trust their recommendations.

According to Nielsen, 92 percent of consumers trust recommendations from family or friends over any other form of advertising. The Word of Mouth Marketing Association found that a word-of-mouth conversation drives sales five times more than paid online media and is responsible for $6 trillion in annual customer spending. A study done by Verizon and Small Business Trends found that small business owners rated referrals and recommendations as their number-one way to acquire new customers, and that they greatly surpassed acquisition of new subscribers through search engines, social media, or paid ads.

So why isn’t word-of-mouth marketing, or referral marketing, leaned on very often in businesses of any size? There are several reasons. Some businesses expect word of mouth to just happen organically, without any effort on their part. Another reason is the difficulty of measuring recommendations, which can happen via any medium from a coffee shop conversation to a private (untrackable) message on social media. Another reason businesses don’t rely on referrals is that they’re hard to quickly scale. That may be bad for a large business focused on exponential growth, but it’s fine for a company of one. You don’t need massive growth or scale to realize profits; since you can see benefits with much less mass, you can capitalize on products and consumer relationships that build referrals.

Companies of one can truly benefit from word of mouth because it’s easier for a company of one to create these kinds of personal relationships and stay more closely connected with customers. Urban found that smaller businesses thrive on recommendations because they can focus solely on their specific audience and build relationships with them (even if they do that digitally). Small companies can take complaints and personally resolve them.

So how do you turn your customers into brand advocates and fuel conversations in which they share your business with the people they know? A study at Texas Tech found that while 83 percent of customers are willing to provide referrals, only 29 percent actually do so. For most businesses, this represents a huge missed opportunity to push happy customers to actively promote what you sell. Obviously, you need to have a good product with good customer service in place first; otherwise, no amount of incentives will create advocates for your product. In my own business, I doubled the amount of sharing for one of my products by automatically sending an email a week after purchase asking customers, if pleased with what they purchased, to share their satisfaction with others—using links with prewritten content provided.

A Harris Poll study conducted on behalf of Ambassador Software found that 88 percent of American consumers would like some kind of incentive to share products they like, and that number increases to 95 percent among eighteen- to thirty-five-year-olds. Incentives are another way to evangelize users, but they can be tricky. Sometimes offering cash incentives reduces trust if people find out that profit was the sole reason for promoting a product. Consumers are happy with incentives like small discounts, exclusive “swag,” special offers, and access to premium features. They also like double-sided incentives: this is when both the referrer and the purchaser get a bit of a deal, such as, if I refer you to buy a rainbow widget, we both get $30 off our next order of rainbow widgets. Double-sided incentives have the bonus of increasing the likelihood of not one but two repeat sales.

Rewarding loyalty in your best customers is also a great way to incentivize recommendations. MailChimp is fairly well known for sending its loyal customers exclusive swag, like well-designed T-shirts (most don’t even have the MailChimp logo on them) or “Freddie” action figures (Freddie is the name of the chimpanzee in the logo). People then post photos on social media—tagging MailChimp—that show them wearing their new shirt or the action figure on their desk, for all their followers to see.

Our friends at Ugmonk, whose story I told in Chapter 7, enjoy a great deal of word of mouth built on the quality of their products—Ugmonk shirts are so stylish that people want to share them on social media—as well as on the human touch in their customer service (they provide a replacement shirt, when necessary, without even asking the customer to return the original shirt). Founder Jeff Sheldon has seen the built-in virality of having a product that draws attention: the last time he was at an airport, three people stopped him to ask where he got the Ugmonk shirt he was wearing, with its distinctive designs. By focusing on slowly making his products better and more stylish for his niche audience, he’s created a sustainable method of growth simply through referrals.

Referrals are also useful beyond the realm of products. Services and service-based companies of one (from consultants to freelancers to client-focused agencies) can greatly benefit from word of mouth. In fact, a survey done by Drip (an email service provider like MailChimp) found that 50 percent of new customers for service-based companies came from word of mouth. That survey result is definitely worth keeping in mind.

Where a service-based business can really capitalize on making word of mouth happen is by simply following up. Talking to clients a few weeks after a project is finished can yield two massive benefits. The first is being able to collect a testimonial or success story based on the real results the client is seeing. If you ask for a testimonial as soon as a project is finished, the client has rarely had enough time to collect any results-based data. By following up a few weeks or a few months later (depending on how long it will take to measure results), you can garner far better stories from clients to use in your marketing efforts. Second, by creating a schedule for following up with clients, you can then ask them (assuming the project went well) if they know of other businesses that could benefit from your services the way they have—or if they’re interested in arranging another project with you. By creating a schedule for following up with contented clients, you can turn referrals into a real strategy instead of simply refreshing your inbox and hoping each day that one will come in.

Word of mouth can also be incentivized through the scalable system of segmented automation (as we saw in the previous chapter). For example, a week after a customer buys your product, you can generate an email asking them how much they’re enjoying what they purchased from you on a scale of 1 to 10. Then a second email, which you would send only to people who rated their enjoyment above a 7, could pitch an incentive program, with a double-sided incentive and prewritten text to share on customers’ social media feeds or in their own newsletters. For companies of one, focusing on existing and loyal customers as brand advocates—instead of trying to build an affiliate program of anyone who wants to make a quick buck referring you—creates a much greater trust, because those promoting your product already have a direct relationship with it. These are the customers who can tell the story of how they benefited from purchasing your product or service.

SEGMENTING TRUST

Unfortunately, a lot of people, especially creative people, look upon marketing in a negative way.

The truth is, they really shouldn’t. Marketing is simply building a sense of trust and empathy with a specific group of people by consistently communicating with them. Trust has to be developed before anyone will buy anything. This is why ad-mail and cold-calling have such a tiny success rate and rely on massive volume—and conversely, why highly targeted cross-sell emails have a high success rate at a much smaller scale. For someone to want to buy your product, they have to feel that you understand their needs and have a solution for them. This isn’t done through selling aimed at all people, but through consistent dialogue with a small and specific group of people. No company or product is too good to not have to consider and utilize marketing. No matter how great your product is, if you aren’t reaching the right audience, you won’t sustain your business.

Marketing is also no longer a silo job function within a larger organization—it’s embedded in every role and aspect of a business, from customer support to product design. It’s also not a single event—focused on a launch, for example. It’s the sum total of everything your company does that a potential or actual customer sees or interacts with, from emails to casual conversations to tweets.

Where companies of one can use their focus on betterment over growth in marketing is by focusing on a specific niche instead of a massive market. Trust is more easily established within a smaller customer base because it’s easier to stand out as an expert or to gather referrals that hold weight from other industry experts in that niche.

In recent years, large corporate business has focused its marketing and promotion efforts on collecting “vanity metrics”—like social media followers, subscribers, or clicks. But those metrics don’t always correlate with sales, profit, or reputation. That is, they don’t measure engagement or trust—they simply show how many people took some form of marketing bait. By considering “collecting” over “connecting” (with customers), these companies are becoming too caught up in collecting page likers and followers and have forgotten to build relationships with those individual customers who are already listening, following, or buying. Having 100 passionate fans of your business who are eager to buy anything you release is exponentially more effective than having 100,000 followers who simply follow your business to win something like a free iPad.

Making money is often easier than earning trust, because money can be lost and won back without judgment, whereas trust is hard to regain once it’s lost. Your word and your company’s word have to be a contract with your customers. This is how many companies of one stand out in competitive industries: by simply doing the work they say they’ll do and then honoring social contracts with their customers. Even a big company like Amazon has services built on trust. First it was the promise to deliver in less than seven days. Then they went to two-day delivery. Now, in some places (not in the woods, or on an island), Amazon delivers on the same day. We buy from Amazon because we trust that our order will be delivered quickly, and that, if we aren’t happy, it will be easy to return. So trust happens first. Only then does the commerce follow.

In trust marketing, a group of people trusts you enough to invest their personal attention, email address, or dollars with your company. This kind of marketing requires that you always keep the promises you make and engage in a consistent dialogue with them.

While it may seem counterintuitive to focus your marketing and trust-building efforts on a small and specific group of people, there are benefits to doing so. The more specific you are with who your products or services are for, the more you can build trust with that particular audience. The paradox of focusing on a niche is that the more specific you are, the easier it is to sell to that group and the more likely it is that you can charge a premium for being that focused. With that kind of focus in mind, you can get to know the specifics of your niche better, learn how to serve customers more effectively, and build a reputation for yourself in that smaller niche.

Kurt Elster, instead of spending his time building an audience for general ecommerce consulting services, focuses entirely on Shopify store owners. (More than 400,000 businesses use Shopify as an ecommerce platform.) By using this niche to build trust in a smaller and more specific audience, Kurt has grown his revenue eightfold and made a name for himself as an authority in Shopify consulting; he was even featured on Shopify’s website. His reputation for helping Shopify store owners has, in turn, brought him more leads, allowed him to set higher prices for his services, and helped him land speaking gigs around the world. If you had a Shopify store, whom would you trust with your business—a general ecommerce consultant or someone like Kurt who focuses only on Shopify?

TRUST DOESN’T REQUIRE A BIG BUDGET

By making customer happiness your top priority over new customer acquisition and then incentivizing customers to share the word about your business, less of your money needs to be spent on promotion. With a company of one, which can be profitable at any size, such slow but sustainable growth makes sense. You start with the idea of creating a trust-centric business, build products that customers love, make sure they’re educated and happy with what they’ve purchased from you, and then give them systematic ways to share their success with others.

This doesn’t require huge billboards, massive ad spends, or paid acquisitions. In treating trust as a primary factor in running your business, you’ll amass an army of loyal fans—and not just a huge customer base of people who bought from you and then forgot about you.

The truth is, you don’t need Super Bowl ads. Instead, as a company of one, you can be more effective by writing guest articles for websites and blogs, creating incentive programs for existing clients, or appearing in podcasts that cover your industry.

Alex Beauchamp, former head of content at Airbnb, said that she never wants any content she works on to “go viral.” She doesn’t want to ever be on the hook for making that happen. Moreover, going viral is often what happens with a business that, not understanding who its intended audience is, tries to appeal to pretty much everyone. If you want a piece of content for your business to generate a billion views, you probably don’t understand the purpose of that content or whom it was really created for. Engagement and connection with your niche are more important and far less costly to generate.

Alex, in her current role as director of content at Edmonds.com, knows that trust is more important than virality when it comes to content. As an objective third-party review website for cars, Edmonds.com can’t appear partial to any one car brand by taking ads or sponsored content. That would immediately ruin trust with its specific audience. So instead, Alex and her team create impartial reviews, based on the merits of each vehicle, that are intended for the specific audience of engaged car-buyers. She says that the best platform is the one you’ve already got—by catering to people who are already listening and focusing on them, you can draw in others as well.

As noted earlier, education is a better and cheaper way to build your customer base. When you teach customers about how products like yours can be used or can benefit their own businesses or lives, trust is the natural outcome. BoatUS, a company that provides insurance and tows for water vehicles, uses education for customers and noncustomers alike with its mobile phone app that features water hazard warnings and tide charts—for free. If your business becomes a source of information, you’re giving your customers what they need to make their own informed decision (even if they decide not to buy from your business). This type of education, like a free resource page on your website or a small but free mobile app, can be a cost-effective way to promote both your products and customers’ trust in them.

Jason Fried told me that Basecamp recently flirted with paid acquisition by spending around $1 million on social media ads. They quickly stopped because they found that these ads weren’t as effective as what they were doing already: creating and sharing educational content. For instance, in the absence of any acquisition or paid ads, over 4,400 people signed up for their software in one week alone. They decided to focus on a great product, amazing customer service, and incentivizing existing customers with referral bonuses. Jason said that he would rather give money to his happy customers to bring in more customers through incentives than buy ads from big businesses like Facebook or Google. It costs them a lot less money as well.

There’s no reason to compete with highly expensive ad spends to gain customers; moreover, such campaigns are especially difficult for a company of one, because of the scale that’s required and, of course, the cost. Let me give you a perfect example that is close to home for me.

The Pointe Restaurant in Tofino is an award-winning, high-end dining experience (and my favorite place to eat). They greet you with a glass of champagne, and the waitstaff then gets to know you a bit as they bring you five to seven immaculately prepared courses over several hours. The chef tends to make an appearance to see how the night is going. When the bill arrives, the maître d’ asks if you’d like your car brought around to the front. While the food obviously backs up the restaurant’s top-of-the-line status, the personal touches are what set it apart and make it a luxury brand that people talk about. The personal touches may not cost much more to implement (for example, hiring waitstaff who make the effort to get to know people), but surprising and delighting customers can go a long way toward building trust. And with service like this, they can charge a huge premium.

Trust in business is more than a matter of adopting an internal slogan or making up a mantra to apply to products and services when it suits a marketing campaign. Trust has to be totally baked into every aspect of not only what you sell, but how you sell and support it. For a company of one, even at a tiny scale, maintaining a business worthy of customer trust creates a market differentiator and helps you stand out. Such a business focuses on quality over speed, compassion over profit, and honesty over tricks. And since, as a customer, you certainly prefer to buy from trusted businesses, why change that when you’re the one doing the selling?

BEGIN TO THINK ABOUT:

· How you embed trust and honesty as a marketing strategy in your company of one

· The relationships you could foster with your customers to incentivize them to share word of your business with others

· How to ensure—whether through email, support, or social media—that you’re always honoring social contracts with your customers