Digital startups are winning the consumer trust battle
Established companies have a 6% “legacy tax” on trust. Approximately 47% of consumers surveyed plan to switch to a digital startup due to perceived trust concerns over how their personal data is being used, compared with 41% who said they would rely more heavily on established, pre-digital enterprises. For instance, Alipay, China’s third-party online payment company, has become the largest online payment processor in the world in less than a decade.
Full article By Manish Bahl, Senior Director, Center for the Future of Work, Cognizant
One of the biggest threats to companies today comes not from the competition, but from the imperative to win and keep consumer trust. In an age when personal data is the key to honing a competitive edge, data ethics has become the new battleground for digital success. Companies that view trust as not just a privacy, security or technology issue, but also a brand-building opportunity and place consumers before near-term profits and self-interest will be best equipped to sail through trust-driven business disruption. These are some of the key findings from Cognizant’s latest study “The Business Value of Trust”, which shines the spotlight on the factors that determine how consumers think about trust and the economic value associated with it, while revealing what happens when the trust is breached.
Data is the foundation of trust
The technologies that pervade our existence are transforming how we as consumers live, work and play. It’s no wonder, then, that almost half of consumers surveyed consider themselves “always connected”, and 77% view social media platforms as critical to maintaining social relationships.
Companies are now increasingly reliant on decisions driven by algorithms and machine learning to find the next business opportunity with consumers. Nevertheless, the aggressive data monetization approach adopted by companies comes fraught with challenges. Data is at once an asset and a liability. According to Gartner, by 2018, half of business ethics violations will occur through improper use of big data analytics. As Nobel Prize winning economist Ronald Coase has said, “If you torture data long enough, it will confess to anything you’d like.” Concern continues to grow — and is perhaps approaching a tipping point — as 65% of consumers surveyed express high levels of concern about how and where their personal data is stored.
“Return on Trust” is the digital economy imperative
Trust has been elevated to a C-suite issue because consumer trust converts into bottom-line benefits. In the study, 50% of consumers say they are willing to pay a premium for products and services from companies they trust. On the flipside, the misuse or mismanagement of personal information has potentially irreversible downsides. It is evident that consumers may forgive companies for their mistakes, but not for dishonesty. Roughly 57% said they will stop doing business with a company that has broken their trust.
No industry that the survey covered is perceived as highly trustworthy. On average, only 43% of consumers surveyed have a high level of trust in institutions across industries. Worse, nearly 40% plan to switch to the competition or digital startup due to trust issues. Automotive companies and retailers are at the highest risk of losing brand value. Of all industries, automotive companies (36%) and retailers (37%) rank the lowest in trust, and 41% of consumers surveyed would switch retailers if there were a breach in trust. Telecom operators are next in line. While 42% of consumers surveyed trust their telecom operators, an equal percentage say they would switch to a new provider.
Digital startups are winning the consumer trust battle
Established companies have a 6% “legacy tax” on trust. Approximately 47% of consumers surveyed plan to switch to a digital startup due to perceived trust concerns over how their personal data is being used, compared with 41% who said they would rely more heavily on established, pre-digital enterprises. For instance, Alipay, China’s third-party online payment company, has become the largest online payment processor in the world in less than a decade.
Increasingly, consumers trust businesses not on the basis of their physical assets or the products and services they offer, but rather on the value and experience they deliver in the virtual and physical worlds. The center of gravity is shifting to agile businesses that can quickly innovate and embrace the power of digital platforms. These digital disruptors are creating new customer expectations every day, and in the process, they are redefining consumer trust.
Trust is gained by walking the talk
Many companies believe that they have done their job by publishing data privacy and security policies. But more than half of consumers surveyed for the study say that making sense of these policies is nearly impossible. Communication is a two-way street, so merely stating your organization’s policy and then hiding behind the law will not create a sustainable level of trust.
The study indicates that transparency is the top factor (67%) upsetting a company’s trustworthiness. In fact, 45% of consumers surveyed are willing to share their personal data if a company asks upfront and clearly states how the data will be used. When companies share responsibility for and show an interest in minimizing risk, consumers are more willing to trust.
The “Give-to-Get” ratio – Show the value of trust
As consumers become more educated about how a company is using their data, they want a personal, tangible and immediate benefit in return. In fact, 46% of consumers surveyed believe the risk of sharing personal information is worth the personalized products, services and offers they’ll get in return. About 66% view their personal information as valuable, and 50% are willing to share it in exchange for personalized engagement, cash rewards, better customer service, special promotions, relevant experiences and friendly interactions. We call this the “give-to-get” ratio and managing this trade-off transparently is essential for trust to grow and for the companies to succeed.
To date, market-leading consumer-facing businesses (Google, Netflix, Amazon, etc.) are thriving in large part because the give-to-get ratios in their business models weigh so significantly in their customers’ favor. Consumers give very little, and get a lot in return.
Tear down the wall between IT and business with a “chief trust officer”
Trust is not an issue of compliance, privacy, security or technology (as many companies presume it to be) but a brand-level risk/opportunity that belongs in the C-suite. The role of the chief trust officer would be to ensure that the monetization of data assets conforms to ethical guidelines. In particular, the role will have a dual responsibility to execute the following:
A discussion on the importance of consumer trust would be incomplete without considering the legal implications and regulatory frameworks that impact digital business. More than 50% of consumers surveyed feel that digital regulations will help increase trust. In reality, however, regulations are always behind the curve compared with technological advancements. While digital regulations will evolve at their own pace across geographies, they should not be considered as the only resort for protecting consumer data. Businesses need to focus on self-regulation based on openness and accountability, with an obsession for maintaining consumer trust.
The increasing value and quality of the data that companies gather has changed not only the way products and services are delivered, but also the way consumers make decisions. As the digital revolution unfolds, trust will become even more important because consumers will not just expect but assume businesses have put their interests before everything else. Consumers are a business’s brand ambassadors, and losing their trust will directly impact the brand and the future of the business. Data ethics has become the new purpose for businesses. Trust will increasingly be seen not as the end objective, but as a necessity for business success.
Established companies have a 6% “legacy tax” on trust. Approximately 47% of consumers surveyed plan to switch to a digital startup due to perceived trust concerns over how their personal data is being used, compared with 41% who said they would rely more heavily on established, pre-digital enterprises. For instance, Alipay, China’s third-party online payment company, has become the largest online payment processor in the world in less than a decade.
Full article By Manish Bahl, Senior Director, Center for the Future of Work, Cognizant
One of the biggest threats to companies today comes not from the competition, but from the imperative to win and keep consumer trust. In an age when personal data is the key to honing a competitive edge, data ethics has become the new battleground for digital success. Companies that view trust as not just a privacy, security or technology issue, but also a brand-building opportunity and place consumers before near-term profits and self-interest will be best equipped to sail through trust-driven business disruption. These are some of the key findings from Cognizant’s latest study “The Business Value of Trust”, which shines the spotlight on the factors that determine how consumers think about trust and the economic value associated with it, while revealing what happens when the trust is breached.
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| Manish Bahl, Senior Director, Cognizant |
Data is the foundation of trust
The technologies that pervade our existence are transforming how we as consumers live, work and play. It’s no wonder, then, that almost half of consumers surveyed consider themselves “always connected”, and 77% view social media platforms as critical to maintaining social relationships.
Companies are now increasingly reliant on decisions driven by algorithms and machine learning to find the next business opportunity with consumers. Nevertheless, the aggressive data monetization approach adopted by companies comes fraught with challenges. Data is at once an asset and a liability. According to Gartner, by 2018, half of business ethics violations will occur through improper use of big data analytics. As Nobel Prize winning economist Ronald Coase has said, “If you torture data long enough, it will confess to anything you’d like.” Concern continues to grow — and is perhaps approaching a tipping point — as 65% of consumers surveyed express high levels of concern about how and where their personal data is stored.
“Return on Trust” is the digital economy imperative
Trust has been elevated to a C-suite issue because consumer trust converts into bottom-line benefits. In the study, 50% of consumers say they are willing to pay a premium for products and services from companies they trust. On the flipside, the misuse or mismanagement of personal information has potentially irreversible downsides. It is evident that consumers may forgive companies for their mistakes, but not for dishonesty. Roughly 57% said they will stop doing business with a company that has broken their trust.
No industry that the survey covered is perceived as highly trustworthy. On average, only 43% of consumers surveyed have a high level of trust in institutions across industries. Worse, nearly 40% plan to switch to the competition or digital startup due to trust issues. Automotive companies and retailers are at the highest risk of losing brand value. Of all industries, automotive companies (36%) and retailers (37%) rank the lowest in trust, and 41% of consumers surveyed would switch retailers if there were a breach in trust. Telecom operators are next in line. While 42% of consumers surveyed trust their telecom operators, an equal percentage say they would switch to a new provider.
Digital startups are winning the consumer trust battle
Established companies have a 6% “legacy tax” on trust. Approximately 47% of consumers surveyed plan to switch to a digital startup due to perceived trust concerns over how their personal data is being used, compared with 41% who said they would rely more heavily on established, pre-digital enterprises. For instance, Alipay, China’s third-party online payment company, has become the largest online payment processor in the world in less than a decade.
Increasingly, consumers trust businesses not on the basis of their physical assets or the products and services they offer, but rather on the value and experience they deliver in the virtual and physical worlds. The center of gravity is shifting to agile businesses that can quickly innovate and embrace the power of digital platforms. These digital disruptors are creating new customer expectations every day, and in the process, they are redefining consumer trust.
Trust is gained by walking the talk
Many companies believe that they have done their job by publishing data privacy and security policies. But more than half of consumers surveyed for the study say that making sense of these policies is nearly impossible. Communication is a two-way street, so merely stating your organization’s policy and then hiding behind the law will not create a sustainable level of trust.
The study indicates that transparency is the top factor (67%) upsetting a company’s trustworthiness. In fact, 45% of consumers surveyed are willing to share their personal data if a company asks upfront and clearly states how the data will be used. When companies share responsibility for and show an interest in minimizing risk, consumers are more willing to trust.
The “Give-to-Get” ratio – Show the value of trust
As consumers become more educated about how a company is using their data, they want a personal, tangible and immediate benefit in return. In fact, 46% of consumers surveyed believe the risk of sharing personal information is worth the personalized products, services and offers they’ll get in return. About 66% view their personal information as valuable, and 50% are willing to share it in exchange for personalized engagement, cash rewards, better customer service, special promotions, relevant experiences and friendly interactions. We call this the “give-to-get” ratio and managing this trade-off transparently is essential for trust to grow and for the companies to succeed.
To date, market-leading consumer-facing businesses (Google, Netflix, Amazon, etc.) are thriving in large part because the give-to-get ratios in their business models weigh so significantly in their customers’ favor. Consumers give very little, and get a lot in return.
Tear down the wall between IT and business with a “chief trust officer”
Trust is not an issue of compliance, privacy, security or technology (as many companies presume it to be) but a brand-level risk/opportunity that belongs in the C-suite. The role of the chief trust officer would be to ensure that the monetization of data assets conforms to ethical guidelines. In particular, the role will have a dual responsibility to execute the following:
- Add human intelligence to existing analytics capabilities. The future of analytics will lie in its intelligent ability to differentiate between appropriate and inappropriate use of data. The chief trust officer would work with relevant teams to develop an ethics framework (depending on the industry, data usage capabilities, etc.) and add it as a tool to the company’s current analytics solutions.
- Make data ethics a key performance indicator. Ethics must become a key performance indicator for every employee who has a direct or indirect connection with customer data. The starting point should be establishing onboard training for all new employees, and then initiating a company-wide program to help people understand the legal and business consequences of unethical data practices.
A discussion on the importance of consumer trust would be incomplete without considering the legal implications and regulatory frameworks that impact digital business. More than 50% of consumers surveyed feel that digital regulations will help increase trust. In reality, however, regulations are always behind the curve compared with technological advancements. While digital regulations will evolve at their own pace across geographies, they should not be considered as the only resort for protecting consumer data. Businesses need to focus on self-regulation based on openness and accountability, with an obsession for maintaining consumer trust.
The increasing value and quality of the data that companies gather has changed not only the way products and services are delivered, but also the way consumers make decisions. As the digital revolution unfolds, trust will become even more important because consumers will not just expect but assume businesses have put their interests before everything else. Consumers are a business’s brand ambassadors, and losing their trust will directly impact the brand and the future of the business. Data ethics has become the new purpose for businesses. Trust will increasingly be seen not as the end objective, but as a necessity for business success.
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