Creating a business model based on radical trust

Human beings naturally crave relationships of trust. However lately big brands have not done such a great job of showing they're to be trusted. I want to share with you my experience building a startup business based entirely on trust and, in the process, proving people are more honest than you might think.

Let me tell you briefly about Matchboard, which I founded in 2012. We’re an online business, which you can think of as the B2B equivalent of an online dating site. In other words, we help companies find their perfect match suppliers. Instead of putting in filters like blue eyes, brown hair and big muscles, you put in filters like budget, timeline, industry experience. And you get connected with a shortlist of suppliers who meet your exact criteria.

Examples: you want to engage a digital marketing agency, or a customer experience consultant, or an offshore call centre – just take 60 seconds to pop your needs in and, presto, get matched. We have thousands of buy-side customers, from one-man businesses to household brands, and we have hundreds of suppliers, all of whom are carefully pre-screened.

Here’s the catch: when we match a buyer with a supplier, or suppliers, and a deal happens, the buyer and supplier deal with each other directly. They don’t invoice through our platform – after all, some of the deals are in the millions, and neither side wants a middleman platform such as Matchboard to be – well – in the middle. They want to deal directly with each other.

In the traditional 2-sided marketplace model, whether it’s AirBnB, Uber or Freelancer.com, payment for services occurs through the platform. But in Matchboard’s world, where transactions are sometimes large, this just isn’t practical.

This led me to two choices for monetising the business: either, Matchboard passes leads to suppliers and charges per lead, OR we rely on the honesty of our suppliers to tell us when they’ve closed a deal and we take a success fee on what the supplier invoices.

The per lead fee was the “safe” option. It was the model adopted by other B2B platforms in the US and the UK. We’d get paid upfront for leads, cash in the bank - regardless of the outcome. “Regardless of the outcome” – those words echoed hollow and didn’t sit well with me. I always believe in backing myself, and don’t like taking money from someone who has received no benefit.

The other option was potentially much more lucrative – taking a cut on every successful match that we make. But that meant we’d have to trust our suppliers to report their successes in converting our leads.

The seasoned executives I consulted said I was stark raving mad to think that suppliers could be trusted.

My gut feeling told me otherwise, and I wanted to prove them wrong. I realised that instead of consulting “seasoned executives”, how much better to consult the sort of people who would be the potential customers of the platform. So I spoke to many companies on both the buy and supply side. The buyers all wanted a free-to-use service, a smarter alternative to Google search. And the suppliers overwhelmingly told me they’d prefer to pay on success. 

Behavioural economics learning number 1 – people love certainty.

Suppliers are happy to pay a large referral fee once they’ve banked a deal, but they will only pay a tiny fraction of that fee if it’s just a lead, i.e. where there’s no certainty.  The success fee model was somewhere in the realm of 20 times more profitable than the pay for a lead model.

I launched the company with both models – the per lead and the success fee model based on trust. This was the only way to really know for sure. And guess what, the per lead fee was retired within months. Conclusion: the “experts” are not always right.

Our customers weren’t the only ones to love our trust-based pricing model. The media lapped it up too – here was an example of a company whose very existence depended on people’s honesty. Now that’s a story.

Inspirations for trust model

There were three main factors which gave me confidence that the trust model would work. The first one I touched on already – it was the model the market wanted. I believe it’s hard to go wrong if you listen to your customers and build your business around their feedback.

But it wasn’t just customer-centricity that inspired me. I’d spent 15 years working for a Japanese company and my knowledge of Japanese culture and language was intimate.  10 of those 15 years were spent in the US, where I was in charge of sourcing clients who wanted to expand to the Japanese market. The difference in approach was stark: while the American companies were driven by NDAs and RFPs and quick turnaround, the Japanese approach was based on patiently building relationships of trust over the long-term. It was an insult to the Japanese company to send an NDA without even making the effort for a face-to-face meeting.

It was my experience doing business with the Japanese, that strengthened my resolve that this trust model can - and does - work.

What sealed the deal, though, was when my husband, who has a PhD in Behavioural Economics, told me about a famous academic experiment called The Trust Game.

The Trust Game

In this game, there are 2 players who don’t know each other and who never actually meet. There’s an experimenter, and he gives the first player some money. He tells this player that he can send some of it to the second player – whatever amount he chooses, even zero. He’s told whatever he sends will be tripled by the experimenter, so it’s the tripled amount that will be sent to the second player. 

The second player receives the tripled amount and is told what player 1 has done. The experimenter now gives player 2 an opportunity to repay player 1 and send him some money. This could be any amount including zero. 

In the original experiment, 30 out of 32 trials gave a surprising result: player 1s sent money that averaged slightly over 50% of what they received from the experimenter. Less than 10% of people gave nothing. It was a similar story with the player 2s.

The Trust Game shows that trusting people (even strangers) is part of our nature, and that people will appreciate and repay you for your trust.

The proof is in the pudding for Matchboard. In our 7 years in business, only 3 suppliers out of hundreds have proven untrustworthy – knowingly not reporting, or misreporting, their wins from Matchboard leads. Those suppliers have been blacklisted and removed from our platform.

Making it work

It’s one thing to create a business model built on trust, but how do you sustain it and make it work?

1. Firstly, research shows that people’s trust increases if there is long term benefit. This is very apparent with Matchboard, as our suppliers want new business leads for many years to come. They see the benefit long term so they have a vested interest in being continuously honest and trustworthy.
2. Secondly, even though Matchboard is an online business, we meet our suppliers as much as possible face to face. There’s no doubt that body language and physical cues help build trust. By eyeballing a CEO and shaking their hand, I’m building trust with Matchboard’s supplier. People are more likely to do the wrong thing by you if you’re faceless and just communicating online.
3. Thirdly, give customers incentives to be trustworthy. The ultimate incentive in our case is rewarding the supplier with more business, and being part of an ecosystem that opens doors to new marketing opportunities.
4. Put mechanisms in place to unobtrusively monitor compliance. With Matchboard, we run customer satisfaction surveys. We check in with buyers to find out what they thought of the suppliers we introduced and whether it was a perfect match. Another B2B platform runs an annual ethics quiz for all suppliers, where you need to get a score of 100% to participate. 
5. Try the model on a small scale and experiment first – it may not suit your customer-base. It works with a high-touch B2B model like Matchboard. There are many other examples of marketplaces and platforms which in some way rely on trust – from AirBnB hosts who rent out their home to complete strangers, to customers on ebay who trust the seller on the other side of the world to actually deliver the item ordered. I’d argue Matchboard’s model is more radical, taking trust in business to new heights.

I hope you feel inspired to put more trust into your business – whether that’s with your customers, suppliers, partners or employees. I challenge you to think about how you can embed trust more deeply and use it as a differentiator with your competitors. In the trust economy, I can assure you, the good guy really does win.

[This is an excerpt from a presentation delivered at the Building Customer Trust & Brand Engagement conference in Sydney on Jul.31, 2019.]