The Economic Value of Customer Trust

Written by Mike Marks on Thursday, 11 January 2018. Posted in Business Strategy, Distribution

According to research we conducted for HARDI, 9 percent of a customer's annual business is switched to a competitor due to a supplier failure, compared with only 2 percent caused by disruptive selling. (Read the results of that study in this book on Amazon.) The No. 1 priority for distributor sales reps (aside from helping to prevent these service failures from happening in the first place) must be to build customer loyalty. Loyal customers will give reps the opportunity to fix problems when they do arise before moving business, and they'll trust you to help them out when one of their other suppliers screws up.

You may have heard me say that if you want loyalty, you should get a dog. Internal rep turnover, disintermediation and pricing transparency are all sabotaging customer loyalty, but – that said – the more your customers trust you, the more loyal they'll be. Trust today looks a bit different than it used to, but it still has economic value. Consider the ways that today's sales reps build customer loyalty, and you'll notice that not one of them works without trust:

Serving as a customer advocate. If a sales rep has built trust with a customer, that customer will be willing to shift responsibility for solving a problem off of their own shoulders and onto that of their sales rep, because they have faith that their rep will take care of it (even if the solution goes against the distributor's policies).

Being responsive. Trustworthy sales reps are timely. When a customer calls them, they won't try to get back to them within 24 hours, but within 24 minutes. Opportunities to resolve issues caused by your own company – or to swoop in and respond to an issue caused by a competitor’s failure – come and go quickly. To be the recipients of these kinds of calls, reps must be trusted to respond quickly.

Proactively adding value. Loyal customers trust that their sales reps will work on projects that benefit them, such as solving technical problems or introducing profit-enhancing improvements.

Clerical and administrative tasks may shift away from field sales reps in the future, but trustworthy reps will continue to serve as the foundation for customer relationships.

About the Author

Mike Marks

Mike Marks

Mike Marks co-founded IRCG in April 1987. He began his consulting practice after working in distribution management for more than 20 years. Over the years, his narrow focus in B2B channel-driven markets has created an extensive number of deep executive relationships within virtually every business vertical in construction, industrial, OEM, agricultural, and healthcare.

Mike has led project teams that improve market access by aligning resources to growth opportunities serving manufacturers, dealers, and distributors. Clients have ranged from small privately owned firms to many of the industry’s market share leaders. Ownership structures have included owner-operators, private equity, ESOPs, and publically traded firms. Mike is proud of the teams work and the confidence clients have shown with additional project work.

He has written extensively, and is frequently quoted on many industry issues. He has substantial board experience on both public and private distribution firms. His contributions to the field include serving multiple terms as a Research Fellow with the National Association of Wholesaler-Distributors, permanent faculty at Purdue University’s University of Industrial Distribution, eight years as Graduate Adjunct Faculty in the Industrial Distribution Program at Texas A & M University, and rendering several precedent-setting expert opinions in contract disputes between manufacturers and distributors.

Prior to forming IRCG, Mike held the position of Executive Vice President at Lex Electronics, an $800 million vertically integrated electronics distributor in Stamford, CT. Mike’s path to management in his early career was through increasing responsibilities in sales and sales management. He also completed a tour of duty as a manufacturer’s representative.