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If brand + trust = value, how are you solving the equation?Exploring how brands’ actions impact consumer trust and buying decisions.

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Is there a link between customers’ trust in a brand and their willingness to spend money on it? We conducted primary consumer research to find out.

Our research shows trust is priceless

The message is clear: customers buy brands because they trust them and will turn their backs on any brand they feel breaches that trust. So, to protect value and tomorrow’s margin, organisations must first understand the values that drive customers to trust and buy their brands and then demonstrate, to all stakeholders, that they are behaving and delivering outcomes to support those values.

In this paper, we draw on original research findings to examine how retail and consumer products companies can better align their behaviour with their brands, thereby gaining a competitive edge by sustaining and growing customer trust.

About the surveyEY commissioned independent research in which a nationally (UK) representative sample of more than 2,500 consumers were asked about the effect that brands’ actions have on their shopping habits, and if there was ever a point at which values overtook value when shopping for everyday products. The survey was conducted via an anonymous online poll.

of consumers agree that the behaviour of a company is as important as the products that it sells.

81%

of consumers would boycott a brand that they no longer trust.

74%

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The context: what’s changed?

Companies used to think they could protect the value of their business and brand by focusing on that which is measured in financial and operational KPIs. No longer. Today, any management team that relies on financial performance alone to underpin the value of its business is actually endangering it.

Why? Because brand equity exists not only on a company’s balance sheet but also in the minds of its customers, employees, suppliers and other stakeholders. And their influence is growing. Following a 35-year upward trend,1 what The Economist terms “untouchable intangibles”2 are now estimated to make up more than half of the value of the average business.3 In other words, the shape of value has changed.

The value of any brand is now largely determined by stakeholders — primarily, but not solely, customers — who are focused on aspects of a business’ performance that are not enshrined in accounting standards. To earn the trust of customers and protect the value of their brands, management must communicate in ways that are meaningful to customers and reflect their specific interests. This imperative is underlined by our research: 80% of consumers have questioned whether to keep purchasing from a brand that has acted improperly, such as treating staff poorly.Put simply, trust is a buying trigger.

1. Integrated reporting: elevating value, EYGM Limited, 2014.2. ‘Untouchable Intangibles’, The Economist, The Economist Newspaper Limited, 2017 (accessed via www.economist.com, 10 November 2017). 3. Global Intangible Finance Tracker 2017: An annual review of the world’s intangible value, Brand Finance Institute, June 2017 (accessed via www.brandfinance.com, 30 October 2017).

Values that matterThe corporate values that have the biggest impact on consumers’ shopping habits are as follows. Interestingly, when making a purchasing decision, fair treatment of employees is a significant consumer consideration, outweighing even companies’ loyalty programmes/incentives (66%).

86%

Brand’s clear

purpose

82%

Good treatment

of staff

78%

Impact on shopping habits

Customer experience

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The cost of betrayal

For consumers to place their trust in a brand, they must first have something to trust in. With a clear set of brand values, it is possible to grow both customer loyalty and advocacy — driving differentiation and competitiveness in today’s crowded marketplace. Our study shows that almost two-thirds of UK consumers will act as advocates for brands whose values they support, a tendency that is strongest (79%) among 16- to 24-year-olds.

The values that build trust in a brand are not necessarily ethical per se: there is nothing unethical about favouring automated manufacturing over handcraftsmanship, for example. But what matters is that brands must exemplify the values and principles they advocate. Betraying these principles has severe consequences once customers become aware — which these days, in the era of social media, they almost certainly will.

The cost of betrayal holds true across all demographics: 87% of women and 74% of men say a company’s behaviour influences their buying choices. However, our study shows younger consumers under 35 are more sensitive to inconsistent brand values.

of consumers agree that if a brand acts improperly, it would affect their decision to continue purchasing it.

80%

of UK consumers will act as advocates for brands whose values they support.

62%

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The rising power of social media … Our survey findings indicate that we are at a defining moment in brands’ strategies for building consumer trust — one where management teams have a shrinking window of opportunity to act. This is because today’s explosion of technology and data has driven a dramatic increase in an organisation’s transparency.

The combination of this transparency with the rise of social media, means that customers now have the ability to instantly share information and opinions on a company’s activities. In doing so, they can reshape people’s perceptions of a brand — making it more or less valuable in an instant.

The impact is strongest among the young. Almost a third (28%) of consumers aged 16 to 24 cite social media as “very important” when making buying choices, compared to only 12% across all age groups.

… is still eclipsed by word-of-mouthWhile social media is a growing influence on consumers’ perceptions of, and trust in, brands, it has yet to supplant word-of-mouth, online reviews or even traditional media. Since a brand’s equity primarily exists in the minds of its customers, it is logical that word-of-mouth from friends and family still has by far the greatest influence on consumer choices.

Even the 16 to 24 age group are more influenced by word-of-mouth from peers (39%) than by social media (28%). And for the slightly older 25- to 34-year-old demographic, social media (60%) is actually less relevant than traditional media channels (64%) when it comes to purchase decisions.

This underlines that real reputational damage starts once a brand’s contradictory actions are reported by the mainstream media. Two-thirds (67%) of UK consumers would stop purchasing a brand if it suffered negative publicity, a reaction that is remarkably consistent across all ages and genders.

42%

of consumers would post critical comments about retailers on social media.

of 25- to 34-year-olds would air their grievances on social media.

61%

Consumers influenced by word-of-mouth from peers

Traditional media

Online reviews

Social media

35%47%84% vs. vs. vs.

73%

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No brand is immune from the need for trustAs research makes clear, no company can afford to ignore the implications of its own behaviour, for the sake of its brand trust and value. The impacts apply across multiple areas and activities. Here are some of the most significant from across the study:

Four-fifths of consumers (80%) agree that if a brand in any industry acts improperly, it will affect their decision to continue purchasing it. This feeling is strongest among younger consumers, with 83% of 16- to 24-year-olds and 85% of 25- to 34-year-olds saying their buying decisions are influenced by behaviour they disapprove of.

Improper behaviour

Customer loyalty

While 83% of all consumers say that favouring a company encourages them to purchase other products from it, trust is most influential for younger consumers — affecting the buying choices of 91% of 16- to 24-year-olds versus only 78% of those over 55.

Boycotting

of consumers would boycott a retailer that they do not trust. Interestingly, this sentiment increases with age. Four-fifths (80%) of those aged over 55 would avoid an untrustworthy retailer, compared to just two-thirds (64%) of 16- to 24-year-olds — perhaps because more limited spending power restricts the latter’s buying options.

74%

Treatment of customers and employees

86%

78%

of consumers would alter their buying decisions based on whether a brand treats its customers well.

feel the same about a brand’s treatment of its employees.

Advocacy

of all UK consumers will act as advocates for brands whose values they support. This tendency is strongest amongst younger consumers, with 79% of 16- to 24-year-olds and 76% of 25- to 34-year-olds saying they would do this.

62%

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Supply chains

The nature of a brand’s supply chain seemingly influences the buying habits of three-quarters (76%) of UK consumers. Yet, 74% say making supply chains more transparent would not encourage them to pay more for a brand’s products. More than half of consumers (53%) are prepared to pay a premium price based on how products are sourced, with 39% willing to pay more for locally produced goods.

of consumers would stop buying a brand if it were bought by a company that had suffered negative publicity. This sentiment is shared across all ages and genders, although 25 — 34-year olds (73%) are more likely to boycott brands following their acquisition by a negatively perceived company. So both parties in a corporate takeover need to carefully consider the potential impact of the acquisition on brand equity.

Corporate acquisitions

67%

A four-step programme to sustain and grow brand value7

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Understand the key stakeholders

It is vital to identify clearly the stakeholders that have the greatest influence on the value of the brand. Customers will usually be at the top of the list but others, ranging from suppliers to employees and lobby groups, may also be significant. Armed with this information, management can go on to define the outcomes that these stakeholders care about, helping to sustain and build trust and value in the brand.

Deliver and protect the outcomes that matter

Having identified the key stakeholders and the outcomes that matter to them, for example fair treatment of staff, management can then ensure appropriate focus on these outcomes by developing and embedding processes and behaviours that will deliver and protect them, across the end-to-end business processes. This means driving new insight out of data to enable earlier and better decisions that enable management’s promises and messages of intent to be honoured.

Communicate the outcomes

Having focused on these outcomes, the business must then communicate them clearly in ways that engage and resonate with those target stakeholders. Importantly, the outcomes being communicated will usually lie outside the scope of today’s financial reporting. While this might initially appear to be a challenge, it is a great opportunity for businesses to be creative, innovative and more targeted in their communications — including engaging with different stakeholder and demographic groups via non-traditional means such as influencer programmes.

Establish an assurance framework to safeguard and grow brand value

To ensure businesses continue to deliver on the outcomes that matter, management should create a framework that protects and monitors them in the widest sense, whether on the balance sheet or not. With an ‘Outcome Based Assurance Framework’, those who are accountable can be more confident about delivering on the promises that they have made for value creation.

To earn and inspire the trust that protects and builds brand value, management need to take a new approach: one that starts not with risk but with the outcomes that matter, acknowledging the new world of diverse stakeholders with their own agendas, and access to data to monitor against these.

Such an approach includes four key steps:

1 3

2 4

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No time to lose

EY believes management teams have a shrinking window of opportunity in which to act to protect their brands against the loss of customer trust. The upside opportunity to gain competitive advantage is also clear — by behaving in ways that are closely aligned with customers’ values.

As our research demonstrates, a sizeable proportion of the value of any brand is now shaped by outcomes that lie outside current financial accounting standards. So, companies should ensure they understand these outcomes and the stakeholders who demand them, and then take steps to deliver on expected outcomes visibly and demonstrably.

Companies that do this can elevate their brand loyalty and value to a whole new level. And in an increasingly transparent and connected world, the biggest winners will be those that seize the opportunity first. There’s no time to lose.

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Contacts

Julie Carlyle Partner and Head of Retail, EY, UK and Ireland Ernst & Young LLP jcarlyle@uk.ey.com

Ross Jackson Associate Partner, Financial Accounting Advisory Services, EY, UK and Ireland Ernst & Young LLP ross.jackson@uk.ey.com

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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

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