Leading With Transparency Promotes Customer Loyalty
Typically, consumers who have never heard of your company have a healthy dose of skepticism, even distrust. They don’t know if you can deliver on your promises of a quality product and stellar customer service, among other things. Some of this skepticism persists even once consumers are familiar with your company since they often see businesses in an adversarial role, trying to get the most money from the customer while spending the least in order to make the most profit.
We know that building trust is key to making more sales, creating loyal customers and having consumers spread the word about your company as brand ambassadors. But how can you address and transform this existing distrust? The answer lies in transparency.
What is transparency in business?
Transparency is defined as “a “lack of hidden agendas or conditions, accompanied by the availability of full information required of collaboration, cooperation and collective decision-making.” Companies that embrace transparency as a core business value find that this practice leads to trust, which leads to customer loyalty, which leads to business success.
How to be transparent in your business
Being transparent in your pricing
Being honest and transparent about pricing and products is foundational to business transparency. Pricing is one area where consumers of all types expect complete transparency. Companies that don’t provide accurate and complete pricing information foster mistrust and lose an opportunity to build customer loyalty. Customers appreciate businesses that are forthright about services provided, fees and contract terms. Pricing transparency emphasizes value, not prices.
This can be a simple practice for someone like a restaurant owner, in which pricing is easily outlined on a menu and customers know exactly what to expect. However, it can become difficult for trade-based professions like plumbers, electricians and similar tradespeople, who provide services that fluctuate in cost. If you have to raise your prices because of inflation, be upfront about it and explain the reason.
In these situations, one option is to share the average cost range for your core services, regularly assess what you’re charging in comparison to industry standards and update your prices accordingly. Additionally, be sure to communicate that customers will need an estimate to understand the actual cost and that this information is clearly listed on the website, not in fine print or hidden. This way, customers have an idea of what the average spend is, but they understand that their unique situation will affect the price of the associated service(s). When you do provide this quote, because you’ve provided an average, they are less likely to be disappointed when they get the actual bill.
Being transparent in your communications
This entails updating your websites and social media platforms with the most current and accurate information about things like product availability, inventory, pricing and policies. Since small business owners are wearing many hats, updating these channels regularly can fall by the wayside. With this in mind, owners should designate someone to maintain the social channels and website to ensure these updates are made. If resources don’t allow for this, setting monthly reminders to update these channels yourself would be beneficial to start including this in ongoing business practices. Companies can use social platforms to boost their transparency through direct communication with customers and stakeholders.
Brands that prioritize transparency in their social approach realize gains in consumer trust, increased sales and a bolstered brand reputation. Social media platforms play a key role in successful brand-consumer relationships and are some of the best places to be real with customers since it is considered to be more personal than other marketing channels. This is especially true with millennial and Gen Z consumers, with 79 percent and 74 percent, respectively, saying that company transparency is important, according to a 2022 study by NielsenIQ. In fact, 22 percent of Gen Z respondents report that a lack of brand transparency reduces their interest in a company’s products, according to CM Group research.
Being transparent by admitting mistakes
In a digital world where consumers have easy access to company information and reviews, customers expect and demand transparency from businesses. The NielsenIQ report revealed that 72 percent of consumers say that transparency is important or extremely important. In fact, 79 percent of customers want brands to go above and beyond what they are required to reveal and give more information, with two-thirds of them saying they would switch brands for more in-depth data.
As today’s digital world puts businesses under a microscope, acknowledging mistakes when they happen and being open about how the company is handling them are vital. This includes addressing negative reviews of the company’s products or services, using them as an opportunity to be transparent about issues and how they’re being resolved. People actually trust companies that have a few bad reviews, because it shows that they are transparent and not just allowing glowing reviews to be posted. Positive reviews, though, are also important since about half of consumers would travel farther and pay more to visit establishments with complimentary postings, according to Podium.
Being transparent by sharing your company’s ongoing efforts
Treating transparency as a core company value that guides all aspects of a company’s operations is key to long-term success. Transparency is not a one-and-done initiative. Businesses should put transparency into practice on a continuous basis to build and maintain trust with customers. This can include regular updates to the website with pricing or product information as well as business practices. It can even be as simple as sharing what vendors your business chooses to work with, which can demonstrate a commitment to other core values like sustainability or equality. If this is done early and often, being transparent will become second nature and be mirrored by your entire organization, rather than an afterthought.
Furthermore, businesses should regularly benchmark whether they are delivering on their core values, and if not, determine the best course of action and be open to customers about what they’re doing to remedy the situation.
A lack of transparency, which significantly contributes to loss of customer trust and loyalty, leads to the loss of long-term customers and a missed opportunity to reap the bottom-line impact of customer loyalty.
Studies have documented that customer loyalty can pay huge dividends. One of these dividends is that companies spend fewer resources in keeping loyal customers. Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.
Profits are another area bolstered by customer loyalty. Bain & Company, working with Earl Sasser of Harvard Business School, found that increasing the customer retention rate by 5 percent increases profits by 25 percent to 95 percent. The study also noted that loyal customers tend to purchase more and frequently refer new customers to a supplier, offering another profit source.
There are three concrete fiscal realities of loyalty and engagement:
- Loyal customers spend 67 percent more on products and services than new customers.
- Almost half (46 percent) of loyal customers are likely to keep buying from a brand after a negative experience, according to KPMG.
- New prospects who are referred to you by existing customers convert more than non-referred prospects.
Business transparency is a game changer that can lead to business success. Companies that practice transparency build strong, positive relationships that increase long-term customer loyalty. Additionally, businesses that strive to be open and honest with customers set themselves apart and generate ROI in the form of profits and long-term sustainability.