One undeniable truth of branding is that when people trust a company, it will have a positive effect on that company’s results.
One of the factors that has the biggest impact on trust is transparency, and that can be applied to all aspects of the business process. Consumer research has shown that 94 per cent of consumers intend to remain faithful to brands that offer complete transparency. In fact, 73 per cent even say they are prepared to pay more to shop with a transparent company.
The reality is that transparency goes beyond sharing fairly superficial information and attractive photos that showcase what you do. A study published in the Journal of Business Ethics in 2013 revealed that companies that are transparent about their production processes and working conditions also enjoy a higher degree of trust from consumers, and this, in turn, has been demonstrated to lead to positive word-of-mouth marketing and ultimately, better financial results.
Unfortunately, trust has become something of a scarce commodity. Over recent years people have become unsure about who or what to trust. The world is now so awash in fake news, social media campaigns and potentially misleading communication that finding the truth is no longer easy. The only way for a company to build up a relationship of trust is to play the long game, and be consistently transparent about matters such as the company results, internal processes, purchasing philosophy, pricing, values, employee relations, etc.
And crucially, even when things go wrong, truly transparent companies will not attempt to hide the truth. On the contrary, they will be the first to communicate it.
Of course I am not saying that being transparent has to mean sharing absolutely everything about your company with the entire world. I am a Disney fan, so I am naturally curious about how Disney treats its employees and what things are really like behind the scenes, but I don’t want to know who is actually inside the Mickey suit! That is no longer transparency; that is taking away the magic.
The curious case of Veja
Veja is a footwear company that was founded in 2004 by Sébastien Kopp and François-Ghislain Morillion, with headquarters in Paris, France. In 2018 alone, the brand sold 550 000 pairs of shoes, turning over of €21 million, with success largely build upon Veja’s reputation for being one of the most ethical and transparent brands in the fashion industry.
In 2003, the company’s two founders visited a Chinese factory, as part of an audit for another French fashion brand. At first glance, the working conditions in the factory seemed to be okay, but when they saw how the workers lived, they were appalled. At that moment, they decided to develop a fashion brand that could be both successful and have a socially responsible method of production.
The pair already had valuable market knowledge, understanding that 70 per cent of the cost price for well-known brand sneakers goes on advertising and communication, while the materials and the production cost just 30 per cent. With this in mind, they planned to turn this business model on its head: minimising advertising and investing much more in production, with the hope that they would be able to sell their shoes at the same price as the famous brands.
When they signed their first cotton contract in 2004, they paid double the market price. The local producers couldn’t understand what was going on. Kopp and Morillion soon became known as ‘Los Frenceses Locos‘, the crazy Frenchmen. They insisted that all of their contracts were concluded in accordance with fair-trade principles: paid in advance for a previously agreed price. This way, the farmer knows exactly how much money he will receive at the moment he is sowing his seeds. As a result, he is protected from unexpected price fluctuations in the market and has a greater degree of financial flexibility. And in order to ensure complete transparency, Veja publishes all its contracts on its website, right down to the smallest detail. Everyone – competitors and consumers – can see exactly how the deal was done.
As this suggests, Veja’s transparency policy is far-reaching. It not only publishes its supplier contracts, but also issues a certificate for all the products it uses, so customers know exactly where the materials come from and they can be confident of their quality.
Veja also wants to produce as sustainably as possible, and via the information on their website, customers can follow the progress they are making towards the realisation of this goal.
In this same spirit of openness, the company is not afraid to highlight its own imperfections. One of Veja’s objectives is not to work with companies that are registered in a tax haven. In this context, Veja makes use of the list of companies and their financial constructions published each year by La Nef. However, on its site the company also makes clear that its e-commerce activities in many countries mean that today it has little option in some situations other than to co-operate with partners who do make use of tax havens. In other words, at the present time Veja is not in a position to make good all its promises, but it is doing what it can to move in the right direction. This kind of transparency results in huge customer trust and the kind of appreciation for the company that many brands should envy.