Trust Issues: Volume 1

Luke Smith

Partner + Investor

June 22, 2021

“Trust me”.

It’s a phrase that often generates impotent results. You can’t just ask for it, you have to earn it. Neatly, trust also earns for you. It is arguably the world’s most valuable currency. Just looking at one of Max Roser’s pieces of research below, there is a clear correlation between trust among a populace and prosperity (as measured by GDP). I’m not suggesting something so simple as trust = $$$ but it’s clearly a key factor which drives success in trade. Nowhere is this more the case than it is online and for tech businesses. Trust ultimately leads to repeat custom and net promoters. For where we are in the tech cycle that is diamond dust.

I’ll be looking at the various strategies and levers that businesses can use to build and earn trust in this series — so that they can avoid having to implore customers with a “trust me” and deliver authentic trust that they can feel in their bones.

In this first volume of Trust Issues, I’ll take a quick look at the current state of play in the online world and examine the concept of social proof. By the end of all this, I’m hoping to provide some intel to help you create your own ‘trust bucket’.

Where we are in the cycle

There has been lots of great analysis about the state of the internet being in a phase of optimisation rather than innovation. Ben Evans and Fred Wilsonare particularly strong on this topic. It’s not incredibly clear what, how or where the next big way to acquire customers will be. As a result we’re all operating in a somewhat static space where there is increasing competition for users’ attention, hearts, minds and wallets not only from digital-native businesses but from an increasing amount of the analogue world moving online.

This is being reflected in marketing costs. The cost of clicks, milles and conversions has always been an expensive game to play and it is becoming increasingly so; unsustainably so for some. In addition, we have a much-changed funding environment. Last year we managed to scare ourselves into a cooling off of valuations and into discounting growth-at-all-costs strategies. This was a healthy correction in my opinion and it has led to a focus on business economics that perhaps we’d lost for a little while.

Bottom-up trust…social proof

Once upon a time we had experts. It might be hard to believe in these days of Trump vs. Clinton and Brexit but expert opinions still count quite a bit. Through the demonstration of expertise in a field, non-experts are more likely to defer to that person. This is a form of top-down influencing. It’s powerful: Which?, Stuff and Wired are all forms of it. There’s clearly a sustainable business model to be built on it. Though I find it lacking in some ways. It’s not nearly as compelling as some of the newer items that we can put in an internet business’ trust bucket.

Amazon changed the world of ecommerce with user reviews. They proved that users would leave reviews with some very minor incentives. More importantly they proved that users would leave reviews en-masse, building a network effect and building trust which helped to pave the way to the world-consuming, $385bn Amazon that we know today.

That a stranger (only be linked to you by a degree of purchase intent for a particular book on a specific site) confirmed Amazon’s service promises and enabled millions to leap the first major ecommerce hurdles: is this company real? Will I get what I bought? Is the product any good?

Ultimately, we crave the opinions of others. It’s an incredibly important part of our make up. It’s this craving which represents such a great barrier and opportunity to building successful businesses. While expert reviews are great, they’re just not as resonant as the voice of the crowd; and that’s not to say anything of the voices of friends and family. This is the concept of Social Proof. It’s also one of the Cialdini’s six principles — like Authority (expertise, as covered above) — and the one that I find most instructive. The core tenet: people follow the lead of perceived similar others.

Roughly a decade following Amazon’s founding, online trust got a major upgrade: the social graph. Where we were once bound by the similarity in book taste and retailer-of-choice, all of a sudden we had/have a giant repository of similarity. Facebook, Twitter and LinkedIn passport us through the internet — and their own environments — enriching our experiences at every turn by letting us know who ate what, where, for how much and how they rank it in relation to everything else they’ve ever done.

We have community and commerce. That’s some next level stuff: more powerful than a catalogue of reviews from people who you don’t really know and more powerful than some experts. Compounding this superiority: the distinction between community and commerce is arbitrary and it won’t remain for long. This era of the internet age has allowed us to foster, maintain and grow networks of a size and quality that is far beyond anything that we can manage in an offline world. Those networks are enriched by incorporating the data of what we buy, what we value and how much we think things are worth. The relationship is symbiotic, the best operators know this and are taking advantage of it.

How to get the community <-> commerce loop going

There are plenty of examples out there of companies who’ve very effectively leveraged a community dynamic to realise compound growth. Waze and Slack immediately spring to mind as some companies have nailed it. They’re centred on increasingly strong, not-directly-commerce-related, use cases: avoiding traffic and messaging.

In commerce businesses, it can be tough to see where the community ‘fits in’.Live Better With is a great example (disclosure: it’s a portfolio company). LBW sells non-medical items that help people live better with chronic diseases, focused on cancer sufferers. There’s so much asymmetry of information in this market. Time with doctors and medical staff who might be able to suggest helpful products is hard to get and/or prohibitively expensive. Useful items are drowned out by the noise of Amazon. High-street drug stores, pharmacists and chemists aren’t nearly knowledgeable nor focused enough to add much value. But there’s a consumer group here (be it the sufferer or their friends & family) who desperately need and want a solution to the problem though as individuals it’s hard to know where to start.

Understanding this market dynamic led the team to create an eCommerce platform that aggregated these under-the-radar products but, crucially, they created a Facebook community and seeded it with content. This has incredible value in itself: where once there was little information and a good deal of vulnerability there’s now a place to go where people have shared problems and a common purpose. Community members may not fit into the classic conception of “Friends and Family” but this is a place that they can call home. It’s Maslow through and through. Beyond the social impact, there’s a strong business sense here too. The community keeps people coming back — repeating purchases, recommending products and giving hints and tips. This improves the experience for existing customers while attracting new ones. The more engagement there is in the community, the better the targeting of potential new customers and the more relevant content and product catalogue can become. In this scenario, LTV:CAC has the potential to and is being improved upon on multiple axes without a lack of focus.

More than ever before we have the ability to incorporate social proof into the foundations of our businesses. I think that there’s a huge opportunity to do this across healthcare and wellness, but in no way is it limited to that sector. The most successful businesses going forward will be those who make social proof integral to their business models — it engenders trust which means superior economics.

I hope you enjoyed this first volume of Trust Issues, I’m planning on writing a few more in the coming weeks to address how blockchain is changing our conception of trust and another post on cybersecurity. We’re going to build out the modern business’ trust bucket. If there’s a topic that you’d like me to cover, just let me know.

In the meantime, I’ve got a trust hack for you. Add a phone number to your website. You’d be amazed what a huge impact it can have.

This article was originally published on my blog on 29/09/2016

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Luke Smith

Partner + Investor

June 22, 2021

Luke joined Forward Partners from REV Venture Partners, a corporate VC, where he was responsible for deal origination, investment due diligence and portfolio reporting. He was previously a consultant with the strategy consultancy Oliver Wyman, where he worked across the retail, aviation, healthcare and FMCG sectors. Luke originally planned a career in science and he holds a PhD in biochemistry. His focus at Forward Partners is on sourcing and executing new investments.