In a competitive environment where overseas rivals are putting pressure on local retailers, businesses need to invest in building their brand purpose for their customers and their people.
Trust is a fundamental building block of customer loyalty. Yet it’s increasingly in short supply as brands across the spectrum are taken to task for mishandling personal data. Even if you’re not one of the financial institutions or social networks in the eye of the storm, your business is at risk of becoming collateral in this dogfight over data, trust and who gets to be taken seriously.
Trust is eroding quickly and it’s a serious problem here in Australia. From a list of 28 nations in the 2018 Edelman Trust Barometer, only six countries had suffered a steeper loss of trust during the past year.
Another study by the Havas Group found brand trust in Australia was the lowest in the world at just 25%, compared to a global average of 57%. The situation may take a further hit with the implementation of new data breach regulations forcing companies to quickly reveal when customer data gets hacked.
The power of purpose
All of this comes at a time when retailers are feeling the pinch in-store and online from slick overseas rivals. Brand purpose is a great way for retailers to build consumer connections and stand out from the crowd – but only if it’s done right.
Edelman’s Earned Brand 2017 found 65% of consumers buy on the basis of their beliefs, with 57% buying from or boycotting brands based on social or political issues. Purpose initiatives help demonstrate beliefs and commitments to customers who are increasingly looking to put their money where their trust and values lie.
Consumers want to see brands follow through on marketing messages with concrete actions in their communities and their workforce. Australia has long struggled with low employee engagement rates – with just 24% telling Gallup researchers that they feel connected to their work.
Demonstrating purpose through corporate social responsibility (CSR) activities creates a virtuous cycle. Engaged employees who feel like they can be their authentic selves at work tend to stick around and be more productive. They also provide better customer experiences – a key differentiator for retailers.
Purpose also goes beyond CSR efforts to include initiatives that Human Resources (HR) spearheads within the workplace. It’s about ensuring values are reflected in how they treat staff. Such efforts are no substitute for traditional marketing but it’s a powerful extension. And it makes for compelling storytelling opportunities.
Yet retailers must bear in mind that consumers are more conscious than ever of inauthentic claims. Purpose must be a sustained part of your business, not just a publicity tactic. Exactly how you follow through on your stated values will be heavily scrutinised and consumers have more platforms than ever before to make their feelings heard. As Oxford University trust expert, Rachel Botsman says, “Trust doesn’t sit in one place and it isn’t a project. Trust is embedded in the DNA of an organisation.”
The limits of purpose
Despite its undoubted value, brand purpose also has a limit in this age of mistrust. In an academic study involving 1,375 customer responses about 93 brands across 18 industries, CSR activities had a positive impact on customer attitudes and retention rates. This was particularly true of brands suffering from a weaker position in the market and those hamstrung by small advertising budgets.
Yet these purpose-based initiatives can’t make up for resting your laurels and failing to innovate. It’s those who do good deeds and engage in innovation who do the best. For many Australian retailers, there’s a lot of ground to make up.
For those who can secure the trust of their customers in an unsettling age, the pay offs are significant. In the UK, trust is now the second most important factor for consumers behind price when deciding where to shop, according to PwC.
Having a great product is no longer enough. Consumers want to understand your values and see how you live them. The most powerful brands will combine purpose with innovation to keep customers loyal.
Aaron Green is the head of SAP SuccessFactors ANZ. SAP SuccessFactors is a global provider of cloud-based human resource software and fully integrated human capital management (HCM) systems. It helps companies of all sizes improve employee engagement, productivity and team performance by connecting your people with your purpose. Learn more at successfactors.com