Let’s Be Honest: Inspiring Customer Loyalty with Transparency and Trust
Like most people, I shop with intention (most of the time). I look for the “organic” label on produce, research the ingredients in my skin products, and opt for sustainable clothing. In recent years, I’ve started to care more about my relationship with what I eat, wear, and apply - and so have the majority of the population. In a survey of over 10,000 customers from around the world, 70% said they devote time looking into the companies that they buy from. We want to get to know our products, and this is why transparency matters.
New Customers vs. Existing Customers
This makes intuitive sense if you zoom out and think of your own purchasing experiences. Repeat customers are happy customers, because if you weren't happy with the company behind a product, you wouldn't be making this purchase to begin with. Discounts, promotions, and competitor one-upmanship can only go so far, but none of these tactics build customer retention. For that, brand engagement has to run deeper.
Does Social Media Build Loyal Customers?
The increasing demand and expectation for brand transparency has been influenced by the pervasion of social media and constant connectivity. Customers can access product information right at their fingertips and make buying decisions based on a product’s ingredients and manufacturing journey, among other attributes. During this process, customers are forming alliances with brands that have transparency, and at the heart of their decisions is trust. Simply put, the ability to share a positive customer experience means that customer satisfaction itself is a powerful marketing tool.
The food industry, for one, has seen increased consumer demand for transparency. In fact, 81% of both online and in-store shoppers prioritize transparency according to “Transparency Trends: Omnichannel Grocery Shopping from the Consumer Perspective,” a report from FMI and Label Insights. This means brands will benefit from offering a complete list and description of ingredients, certifications, in-depth nutritional information, and details about sourcing. Changing consumer eating habits has translated into changing purchasing habits: 64% of consumers followed a health-related eating program in 2020. A growing concern over the environmental impact and ethical values of food consumption has also contributed to transparency needs. With consumers expecting manufacturers to provide credible answers, companies that can meet these expectations are building customer loyalty and customer lifetime value.
This is why customer loyalty programs are so popular in today's marketing climate. Rewards on birthdays, perks for referrals, gifts following great customer service interactions - all of these are shortcuts to inspire different types of loyalty. However, if these tactics aren't backed by actual transparency and trustworthiness, this can make customers feel betrayed, and that's when brands see their customer loyalty index plummet.
The Trust Gap: When Empty Promises Backfire
In spite of this shift in consumer behavior, the food industry is still facing the challenge of decreased customer trust. According to a survey conducted by Label Insights, 75% of consumers said that they did not trust the accuracy of food labels. These sentiments are rightfully warranted - Label Insight's Empty Aisles report revealed that 30 major retailers’ websites failed to identify attributes such as “low-sugar” or “cruelty-free” for products that qualified for these labels.
With the shift to grocery e-commerce, it has become especially important that consumers have access to complete product information. Online grocery shopping has also lowered barriers for customers to try another brand, so if customers do not trust a brand to be transparent, they will, at best, move on. At worst, they will become active detractors of your brand and transform into a nightmare for your customer service team. At this point, you can forget about repeat business - you'll be lucky if your new customers don't dwindle drastically based on negative social media chatter.
Aligning Incentives Beyond Just Price
Another industry that has experienced changing consumer behavior and a movement towards transparency is fashion. With pressure to reduce carbon emissions and waste from customers who want more environmental accountability, fashion brands are moving towards circular fashion. Defined as a “regenerative system” where materials are reused over and over again, circular fashion aims to eradicate any environmental harm within the product lifecycle. According to Vogue Business, the fashion circular economy is valued at $5 trillion, and this is just the beginning of tapping into sustainability as well as product reuse and recycling. Top brands like Stella McCartney, Adidas, Puma, and H&M have taken steps toward circularity. Stella McCartney, for example, vowed in 2020 that all leftover material would be regenerated, and Adidas has produced 11 million pairs of shoes using recycled ocean plastic since 2019. The work is happening, but how can brands know if their efforts towards transparency are paying off in hard numbers?
