Moments of Truth
A “moment of truth” occurs each time a stakeholder—customer, investor, employee, regulator, or other—comes into contact with an organization, at any touch point. The experience the stakeholder has determines his or her own perceptions and the reputation of the company. And in today’s world where consumers are constantly connected, these views are often shared via social media, in turn shaping the perceptions and expectations of others.
Every consumer has likely experienced the following scenarios: One calls the customer service phone number and deals with an unresponsive, unhelpful representative more intent on explaining company protocol than solving problems; on the flip side, one returns an item ordered online to the store and is greeted by a personable employee who deals with the return pleasantly and with ease.
Opposite experiences, yes, but each of these situations is a “moment of truth” that affects the organization’s reputation, which is built, enhanced, or destroyed every minute of every day.
Stakeholder expectations determine reputation vis-à-vis peers and competitors, and each stakeholder has very different expectations of what he or she expects from the company. These expectations are based on the stakeholder’s own experiences, whether personal or based on information heard from others he or she deems trustworthy. An investor has different expectations from a customer. However, it is the ability of the company to meet or exceed those different expectations that determines reputation. Companies with the best reputations have exceeded the expectations of their stakeholders better than their competitors have, and they are rewarded for their efforts as a result. The Intangible Asset Finance Society has found that the most reputable companies in each market segment are more successful than their competitors on all financial measures, including cost of capital, cost of sales, market share, and market capitalization.
Effective organizations recognize that the foundation of reputation is the values and culture of the company. That is, the company makes a commitment to truly care about its relationship with its various stakeholders and manages to exceed stakeholder expectations. It does not delegate reputation to public relations or marketing but engrains it into the strategy of the company and makes it everyone’s responsibility.
The most reputable companies build a “reputation culture.” They do not view a statement of values as a description of how they want to be perceived but rather as a prescription for the expected behaviors of every employee—from the CEO to the lowest level—in every situation. The most reputable companies make certain that employees clearly understand what is expected of them and that they are properly incentivized and rewarded to do the right things at each “moment of truth.” Companies with poor reputations tell employees to enhance customer relationships but have in place incentives and rewards that actually undermine doing things well.
For example, Comcast, the largest cable company in the United States, has had customer experience rankings that have consistently been among the poorest in its industry. When the company began investigating why this was the case, it found that executive incentives and rewards were based on profitability. Executives were cutting customer service to increase profits. By changing its incentive and reward system and installing new training programs, Comcast has been able to slowly increase its customer satisfaction ratings, although they are still low. In fact, Comcast continues to be among the lowest-rated companies in customer service.
The Frequency of Online Truth
In contrast, Zappos, the online retailer, has built its reputation on its values and culture, which customers experience with each interaction. The company took great care to define its core values, culture, and brand as they relate to its business strategies. Amazon bought Zappos in 2009, and Amazon CEO Jeff Bezos (2009) noted that Zappos’s “unique culture is a very significant asset” that made it an attractive acquisition candidate. Both Amazon and Zappos are consistently ranked as the “best companies to work for,” and both have high reputation and customer satisfaction ratings.
Some may argue that the Internet and, more important, social media have made it more difficult for companies to deal with their various stakeholders. Because of the Internet, “moments of truth” happen more frequently and reach more people than ever before. The Internet gave stakeholders greater market intelligence, and social media have forced companies to be more transparent. Social media have given anyone who wishes to share his or her opinion a so-called authority, with the ability to go “viral” at any moment, and the markets of companies are in constant conversation because of this. Some of those corporate conversations are interesting, some are informative, and others provoke negative reactions with stakeholders. Companies are bombarded with discussions occurring online, some of which may take hold and “metastasize.” However, companies have the ability to directly interact with, or simply listen to, customers to better understand how they are being perceived.
Because of social media, companies are able to make more informed decisions that can positively affect their reputation. Those that listen to social media channels and engage with them have an upper hand over those that avoid social media.
Marketers and public relations professionals could learn a great deal from Amazon and Zappos. These companies use the Internet primarily to listen and to build relationships. Social media give companies invaluable information about the needs and interests of stakeholders, as well as the opportunity to build communities of common interest.
Three observations take a company a long way in building reputation and preparing itself for its moment of truth. First, values form the foundation of reputation. The behaviors of a company are interpreted by stakeholders as a demonstration of its values. Second, companies should clearly and unambiguously define their values and hold everyone (especially the CEO) responsible for adherence to them. Finally, companies should align their values with the expectations of their stakeholders and then should meet or exceed those expectations in every interaction and touch point.
Bart, C., & Schreiber, E. (2014). Achieving the execution edge. Hamilton, Canada: Worthy Shorts.
Bezos, J. (2009). Transcript of video from Jeff Bezos about Amazon and Zappos. Retrieved January 25, 2016, from http://www.sec.gov/Archives/edgar/data/1018724/000119312509153130/dex992.htm
Schreiber, E. (2014). A holistic approach to stakeholder relations to build reputation and mitigate reputation risk. London: QFinance.