Finding and Maximizing Your Trust Premium: A 3-Step Process

Understanding and leveraging the concept of trust premium is essential for any business aiming to thrive in a competitive landscape. Trust premium, the additional value customers place on trustworthy businesses, varies significantly across industries and customer types. While knowledge of trust premium is crucial, it's not enough on its own. As W. Edward Deming, the father of the quality movement, famously said, "If you can't describe what you are doing as a process, you don't know what you're doing." This article will guide you through a systematic process to identify, enhance, and capitalize on your industry's trust premium, helping you attract high-trust customers, retain your existing clientele, and build enduring trustworthiness, in three phases.

Phase 1: Survey Your Industry's Trust Premium

Understanding the trust premium within your industry is a crucial first step in optimizing your business strategy. Trust premium varies widely across different industries and even within different segments of the same industry. For instance, financial advisors can command a trust premium of nearly 40%, while insurance agents might only see a 5.5% premium. This discrepancy arises because financial advisors directly manage clients' investments, offering visible results, whereas insurance agents serve as intermediaries, whose value is only realized during claims processing.

To accurately gauge your industry's trust premium, conduct a comprehensive survey targeting potential customers. This involves identifying demographic characteristics relevant to your industry. For example, a wedding photographer should focus on younger, unmarried individuals. Utilize a panel survey to gather data from a sample size that provides a reasonable margin of error, typically between 200 and 500 respondents.

The survey should aim to uncover:

1. Trust Premium Levels: Determine the average trust premium within your industry.
2. Factors Affecting Trust Premium: Identify the qualities and behaviors that significantly impact trust premiums.
3. Transferable Trust Elements: Assess the strength of the four R's—reputation, references, recommendations, and reviews/ratings. These elements reflect how trust in one area can influence trust in another.

Segment your findings by demographics to understand which customer groups are more likely to pay a higher trust premium. This segmentation helps tailor your strategies to target the most lucrative customer segments effectively.

Phase 2: Current Customer Assessment

Once you have a clear understanding of the trust premium within your industry, the next step is to assess your current customer base. This assessment reveals how close you are to the optimal trust premium and highlights areas for improvement.

Start by measuring your current trust premium. If your industry’s average is 30% and your customers only provide a 12% premium, it indicates a significant gap in perceived trustworthiness. Conversely, if your premium is close to or exceeds the industry average, your current practices are effective, and you should aim to maintain them.

Key aspects to assess include:

1. Trust Premium of Existing Customers: Compare this with the industry average to identify discrepancies.
2. Competitor Threats: Evaluate the likelihood of losing customers to competitors offering discounts. A high trust premium reduces the risk of customers switching to competitors.
3. Outbound Transferable Trust: Assess the willingness of your customers to act as references, provide recommendations, and post reviews or ratings.

Additionally, identify specific behaviors that need modification to increase your trust premium. Focus on behaviors that have the most significant impact, following the 80/20 rule where 20% of the changes yield 80% of the benefits.

Phase 3: Form New Habits

With a clear understanding of your industry's trust premium and insights from your current customer assessment, the final phase involves forming new habits to enhance trustworthiness. This process requires a systematic approach to changing behaviors that build trust.

Implement the Trust Habits process, which involves seven steps:

1. Focus on the Segment: Concentrate on the customer segment identified as having the highest trust premium.
2. Identify Limiting Behaviors: Determine which behaviors are hindering trust and need change.
3. Form New Habits: Develop new habits to replace the limiting behaviors.
4. Make it S.M.A.R.T.: Ensure new habits are Specific, Measurable, Achievable, Relevant, and Time-bound.
5. Make it Stick: Use tools and techniques to reinforce new habits, making them part of your routine.
6. Accountability Partner: Engage someone to hold you accountable, significantly increasing the likelihood of success.
7. Repeat Until Habit is Formed: Consistently practice the new behavior until it becomes a habit.

Implement this process separately to acquire new customers and retain existing ones. Each segment may require different behaviors and strategies. For example, habits focused on gaining new customers might revolve around initial impressions and reputation, while those for retaining customers might emphasize consistent service and reliability.

In conclusion, systematically surveying your industry, assessing your current customers, and forming new trust-building habits can significantly enhance your business’s trust premium. By understanding and applying these phases, you can effectively increase trustworthiness, retain customers, and attract new ones, ultimately leading to greater success in your industry.

Want to hear more? Listen to season 14, episode 3 of The Trust Show podcast: https://podcasts.apple.com/us/podcast/s14e3-finding-and-maximizing-your-trust-premium/id1569249060?i=1000662397516