Before jumping into Part 3 of our Strategic Foresight series there are a few housekeeping items to cover.
For starters, if you are new to our series, I recommend reading the intro article which provides concept details and overall context. You can find that article here.
I also want to reiterate a key principle of Strategic Foresight: We are not predicting the future. Rather, we are taking a structured approach to exploring possible future-world scenarios based on the information available today. This enables brands to make strategic planning decisions today with an eye on tomorrow.
Over the next few weeks, I will continue sharing the 5 key topics that arose from our Strategic Foresight exercise.
Part 1 – Life From Home (Read Here)
Part 2 – Global Social Responsibility (Read Here)
Part 3 – Reputation Currency
Part 4 – New Rules of Engagement (Read Here)
Part 5 – Hyper-Personalization (Read Here)
Here, I will be covering a topic that is related to last week’s Global Social Responsibility but takes on a life of its own the deeper we dig: Reputation Currency.
The technical definition of currency is, “A medium of exchange for goods and services” – which can be virtually anything, but the most common understanding of currency is money. By acting as a standardized valuation mechanism, money has shifted the transaction process from bartering to decision making. So, rather than two parties negotiating trade terms on a case-by-case basis, the modern consumer market sees sellers establish a monetary price for goods or services and buyers decide which offers to accept.
While economics and business finance are not my areas of expertise, these are not groundbreaking or overly complicated concepts. That said, I feel it is important to establish a baseline understanding of the term currency to ensure we are on the same page moving forward.
The Rise of Reputation Currency: Instability Breeds Fear & Discomfort
The Great Depression of the 1930’s and the Great Recession of the 2000’s illustrates the volatility and vulnerability of financial institutions. While those are drastic examples, even between those major events our domestic economy experienced sudden ups-and-downs which had global economic impact. In such times of financial flux, both consumers and businesses realize they have little-to-no control over market variables that ultimately determine the value of dollars and cents. This lack of control is an uncomfortable and scary proposition, but one that is an unavoidable reality.
Looking beyond physical dollars and cents, we have consumer credit which has exploded over the past 50 years. In 1971, 51% of households had a credit card whereas today that number is 83% and rising (Source: WalletHub, 2021). Since 2013, U.S. consumer debt has increased 31% reaching $14.9T in 2020 (Source: Experian, 2021). This intangible currency is managed by risk assessment and contractual obligation, both of which are gambles presenting additional layers of fiscal uncertainty.
All of this is to say, the future of monetary currency is unpredictable. But, in our modern world, what forms of currency are?
Cryptocurrency is claiming to be an answer to that question by establishing a transparent, user-controlled ledger to maintain overall balance. However, still in its infancy, this blockchain solution to institutional concerns has its own list of questions and concerns. So, while it may have a promising future, cryptocurrency is not the answer today.
Referring back to the technical definition of currency, focus on the “medium of exchange” part. Yes, money and currency are synonymous, but they are not mutually exclusive. Literally anything can take the form of currency if two parties agree upon its value. Under the right circumstances, a rare baseball card could be exchanged for the deed to a house. Or a prized racehorse could be traded for a trip to outer space. Throughout human history, currency has taken many forms. So, it stands to reason that the same can be said about the future. Especially when standardized or traditional forms of currency are deemed unstable or lose their value.
The Effect of Reputation Currency: Trust-Based Purchase Decisions
Pausing a moment to recap – the fear and uncertainty associated with financial institutions and traditional currency (i.e., money) are driving forces behind alternative forms of currency, such as Bitcoin and Ethereum. It appears the future of currency will be about restoring an individual’s sense of control to alleviate their concerns and strengthen their confidence. So, that is a good area to focus.
Having removed boundaries around what can be used as currency, we can explore alternatives to money; even looking beyond tangible goods and redeemable services. Since our goal is to identify the future of “exchange mediums” that offer individual control and confidence while still holding market value, then let’s examine the world as it exists today in search of what might be shaping the world of tomorrow.
There is one factor consistently present throughout most, if not all, trade deals and transactions: Trust.
A buyer trusts the seller is delivering what was advertised. A seller trusts the buyer is not using counterfeit money. A collectables dealer is trusting the item is authentic. A bank trusts a consumer will pay back their loan. A business trusts the bank will safeguard their account holdings. As the list goes on, we see that trust is what keeps the system afloat. Ultimately, our ability and willingness to trust another party is the defining element of transaction agreements.
In some instances, we have no choice but to trust the other party. In other instances, we make the wrong decision in where we place our trust. We cannot control the trustworthiness of another, but we can control our own. By consistently upholding agreements and fulfilling promises, we are validating the trust others place in us. On the flip side, consistent failure to deliver will erode that trust. Either way, through our own actions we are establishing a reputation that influences how we are viewed by others.
In this sense, our reputation becomes a form of currency that carries weight in the existing consumer market. From credit scores to online reviews, the levels of trust others place in us can be determining factors in whether a transaction is completed. Reputation has become “a medium of exchange” and it is something we all have direct control over.
The Future of Reputation Currency: Two-Way Ratings & Reviews
We are experiencing a paradigm shift when it comes to customer-brand relationships. No longer is trust and reputation a one-way street leading straight to a company’s doorstep. Brands are now becoming empowered to have their own voice by reviewing individual consumers and assigning reputation scores based on past interactions. This shared responsibility to be trustworthy is a big step toward a more open and honest market where company AND consumer actions have consequences.
For brands looking to better understand and prepare for the growing relevance of Reputation Currency, here are a few trends and strategic initiatives to explore:
The Trust Economy has, is, and will continue to spark innovative solutions that disrupt legacy industries. Growing up I was taught to never accept a ride from strangers. Now, I do not think twice when I hop into an Uber – trusting that the sticker on their windshield is safeguard against those strangers I was warned about as a kid and trusting that the driver will take me where I want to go. Another example – In the past, I felt awkward staying at a friend’s house if they were not there with me. Now, I will travel to another state and sleep in someone else’s bed without even knowing their last name.
The success of brands like Uber and Airbnb are fully dependent on trust among the community of users. Trust is also the bedrock of the brand itself who relies on others to appropriately represent them as hosts and drivers. Due the revolutionary nature of these business models, regulations and consumer protection measures have been evolving along the way. Ultimately, the user community trusts that brands will do the right thing when confronted with unexpected breakdowns – even if “the right thing” is not clear until it happens.
Consumer ratings and social scores are indications that the world of online reviews is evolving, especially within the Trust Economy. While frequently visited platforms like Yelp allow brands to respond as customer post reviews, most review platforms have one-way scoring; customers rate the brands. Today, brands like Uber and Airbnb are empowering drivers and hosts to have a voice by rating the customer. This introduces a “social score” for the consumer that can impact their ability to get a ride or book a room. Much like how a credit score impacts a person’s ability to receive a bank loan, consumer and social scores are impacting a buyer’s reputation within the open market.
As is evident by the popularity of Yelp, consumer purchase decisions are largely based on what other users share about their experiences. According to a 2020 Local Consumer Review Survey by BrightLocal, the average consumer spends nearly 14 minutes reading reviews before making a decision. Looking forward as the voice-of-brand community continues to grow, the types of value-attributes that brands can assign to their customers will expand beyond sales and revenue. So, perhaps we are moving toward a future world where the customer is NOT always right.
Data privacy and security timelines have been accelerated because of the COVID pandemic. As covered in Part 1 of this Strategic Foresight series, Life From Home (LINK), many consumers have been forced online for traditionally in-person experiences (i.e., telemedicine) – going against their preferences or comfort zones. While this is not the result of anything within a company’s control, they are still faced with the reality that increased online activity leads to increased cybersecurity risk. An industry study conducted by PurpleSec, a cybersecurity firm, found that 2020 saw a 600% increase in cybercrime and it is the responsibility of the companies themselves to get up-to-speed.
This highlights a common obstacle for companies when faced with sudden, unexpected market shifts: Lack of preparedness. Not everyone is familiar with digital security standards or information privacy regulations, and not all brands have the resources necessary to combat the ever-growing list of online threats. However, consumers will not be patient or understanding if their personal information is exposed due to a brand’s lack of online security. That is especially true for those who were reluctant to transition online in the first place. Many consumers feel they have no choice but to trust companies with their sensitive information, so the cybersecurity stakes are higher than ever.
Final Thoughts & Action Items
As a friendly reminder: Strategic Foresight is NOT predicting the future. The objective is to explore possible future-world scenarios based on the information we have available today to identify emerging trends that are shaping and influencing your business, market, and consumers. From there, expand your time horizons and consider what your business, market, and consumers might look like if those trends continue.
In the case of Reputation Currency, we are seeing a trust-based world emerge. No longer are performance scores, ratings, and feedback flowing one-way. Brands are increasingly able to protect and defend themselves within the global user community, so a more transparent and honest market is taking shape. As a result, the value of reputation as a medium for exchange will continue to rise.
Moving forward, there are two key attributes for brands to prioritize as part of their development strategies: Awareness and perception. Fortunately, these are relatively simple and straight-forward topics to address; but they must be addressed in the right ways.
Awareness, for example, is more than a matter of recognition. Having heard of a brand is only one aspect of awareness, so actionable insights are found by digging deeper. Seek to understand how well customers know your brand, ask if they can identify your value propositions, and uncover their level of knowledge regarding your data security and privacy standards. These attributes contribute to your brand’s overall reputation, so exploring these areas will paint a clear picture of what they currently know about you today and will highlight the areas in which customers need more information.
Ultimately, brand reputation is directly linked with brand perception. Ongoing feedback collection on this topic is vital to strategic brand development because brand identity and image exist solely in the minds of consumers. As previously discussed, user community forums and review platforms play significant roles in the customer’s decision-making process. By maintaining a channel for customers to provide feedback directly to your brand, you have an opportunity to address pain points before they are brought to the public’s attention.
Both awareness and perception are key elements shaping your brand’s reputation. Actively listening to the customer’s perspective and making genuine efforts to apply their feedback are the trademarks of a trustworthy brand. Your reputation is one of the few aspects of business that is under your immediate control. Leveraging data-driven insights to guide decision making is how we take the drivers seat and steer toward the most promising future.
For over 35 years, we’ve been refining our approach to engaging and listening to customers in ways that produce actionable insights and tangible results. If you’re ready to launch into the world of Strategic Foresight, we’re ready to show you the way.