September 24, 2015
Nothing can kill a business faster than a loss of trust amongst your customers. As business owners, we make promises to our customers every day about the quality of our products and the experience they’ll have shopping from us. If we are lucky enough to build trust with these customers they reward that by buying from us again and again.
“Trust” – also known as Goodwill which includes things like a company’s reputation and brand – is notoriously difficult to quantify. How do you measure how much consumers’ trust your company? Though Wall Street has their various equations for sussing out a company’s Goodwill, a very obvious answer to this question came to light earlier this week seeming to suggest that ‘trust’ can make up billions of a company’s worth.
As you’ve no doubt heard, earlier this week it was reported that German car manufacturer Volkswagen has essentially rigged their cars to falsely pass emission tests. The company has promised consumers that 11 million of their cars were ‘green’ when in fact those automobiles were releasing 4x the allowable amount of pollutants into the air.
When news of this hit, Volkswagen’s stock took a massive nosedive. It lost 23% of its value in one day – to the tune of $15B US (approximately 14B Euros) off it’s market capitalization. While the stock has come back slightly since then, this loss doesn’t account for future sales losses from consumers who choose to purchase a vehicle from a different manufacturer.
The loss of consumer trust, whether your business has $14 in sales or $14T in sales, is something that is incredibly hard to come back from. In the coming months, I won’t be surprised is we start seeing ‘sorry’ and ‘we’ve changed’ commercials from Volkswagen as they spend millions to try to regain consumers’ trust.
Turns out that a lesson you learned in elementary school holds true for global CEO’s (and, also for small business entrepreneurs!) – don’t break your promises.