Companies behaving badly pay a price

May 3, 2018 - An aerospace company which receives government subsidies proposes large compensation increases to senior executives and sparks protests on the street. An airline physically removes a passenger from a plane and ignites a social media firestorm. A car maker achieves a market valuation of more than its competitors who sell 25 times as many vehicles. What we learn from the experiences of Bombardier, United Airlines and Tesla, respectively, is that trust matters. Losing it has harsh negative consequences, while gaining it pays off handsomely.

Trust in business, in media, in government and even in non-profits has declined around the world (according to the Edelman Trust Barometer). The annual Gustavson Brand Trust Index helps us understand what is going on, and why.

The results are fascinating. Each year we collect data from over 6,000 consumers in Canada on the extent to which they trust about 300 different brands. We measure beliefs that the brands deliver on basic promises of reliability, quality and good value, that they communicate with us fairly and treat us well as customers, and that they play a positive role in society. On this last factor, which highlights a broader set of expectations than are typically considered, three-quarters of Canadians see business as able to make profits while also improving social and economic conditions. These three components explain brand trust, which in turn drives recommendations.

We find that while trust builds slowly, it can erode rapidly. Last year’s poster child for bad behaviour was Volkswagen, which fell to last place in our survey, from the middle of the pack the year before, in the aftermath of their emissions cheating scandal. This year, VW stays mired in last place, although we see some small improvements in their scores. Samsung’s trust ranking plummeted this year, from 14th place last year to 220nd place today, following its combustible phone scandal. More positively, the biggest gainer this past year was Chapters/Indigo, which moved into 6th place, from 67th the year before. In the absence of good news or major scandals, most brands held steady and the top brands stayed the same in 15 of 26 categories, with some others slipping only because new brands were included for the first time.

Some categories have chronically low brand trust: gas stations, telcos and soft drinks remain at the bottom of the heap. On the other hand, hotels and retailers still rank high in trust. For the second year in a row, Mountain Equipment Co-op comes in as the most trusted brand in Canada. President’s Choice, tied for first place last year, remains close to the top along with CAA (a newly included brand), Costco, Fairmont Hotels, and Ikea.

Bragging rights aside, trust is a serious matter for business. Businesses need our support to survive and flourish, and nothing says longevity as much as trust. Building and sustaining our trust, however, is not easy. Businesses must put our welfare front and centre and recognise that if we do well, they do well. We will be more loyal, less price sensitive, and more willing to forgive if something beyond their control goes wrong. Without trust, we switch brands constantly, if we have a choice, hoping for something better, shop on price, and blame the brand for any mishaps. Without trust we seek increasing regulation to safeguard ourselves against the actions of others.

Building and maintaining trust is an issue of values. Forsaking quarterly profits for long term performance requires discipline and will not happen without senior executive and board level commitment. A culture that examines all decisions through the lens of trust is one that is better equipped to avoid the potholes that inevitably come one’s way.

More broadly, trust has profound implications for how our society functions. We all – businesses, customers and citizens –  have a vested interest in ensuring it continues.

Saul Klein, PhD
Dean & Lansdowne Professor of International Business