Saul Klein is the dean of the Peter B. Gustavson School of Business at the University of Victoria.
Tim Hortons Inc. is reported to be reconsidering the use of third-party advertising on screens in its stores. A controversy first erupted earlier this year, when Tims placed Enbridge Inc. commercials in front of its customers, then pulled the messages in the face of public objection.
Unfortunately for Tims, pulling the ads aroused objection, too, and the company found itself in a no-win situation, caught between environmental activists and oil-industry supporters. What probably looked like an easy way to tap into another revenue stream had backfired badly.
Why do these "easy wins" occasionally turn out so wrong? It has to do with the trust consumers have in their brands. Trust drives loyalty, but it can easily erode if the brand is seen as inconsistent with its customers' values. When trust is present, it is easier to respond to unforeseen events.
An example would be the spate of bomb threats against WestJet Airlines Ltd. in June. Because of the high degree of trust the airline has with customers, it was able to weather the storm and even benefit from a sense of sympathy; it came across as caring and sincere. It's no accident that WestJet recently reported its 41st consecutive quarter of profitability, a remarkable achievement in the highly volatile airline industry.
When trust is absent, a company has scant reservoirs of consumer goodwill to draw upon, and it can suffer greatly when something adverse happens. Consider the reaction to United Airlines when one of its planes was forced to make an emergency landing in Newfoundland in June. Some passengers became irate at being housed at CFB Goose Bay while the crew stayed at a local hotel, and the story went viral.
Negative consumer reaction tends to follow perceived violations of trust. A few years ago, a disgruntled passenger posted a song (United Breaks Guitars) on YouTube that garnered more than 15 million views after the airline mishandled the passenger's luggage and failed to take responsibility. The incident is a typical example of a betrayal of customer trust. It should be no surprise that United's parent company has lost money in four of the past 10 years.
Consumer trust is a key company asset to be safeguarded. Actions that erode or build that trust must be carefully managed.
Putting oneself in the middle of a contentious public issue, as Tim Hortons did, is a sure way to lose trust from those who have strong feelings about it. It is fine for a niche player that appeals to a narrow audience to choose sides, but not for a brand that courts a broad base of appeal.
The issue is particularly timely for Tims, given the company's recent acquisition by 3G Capital – which also owns Burger King – and the strength of their consumer franchise in Canada. As the Gustavson School of Business revealed in June, Tim Hortons is the most trusted brand in Canada. This trust is built upon functional performance, delivering reliable and consistent value to consumers, as well as on an emotional attachment that customers have to the brand. Tims has done a great job of earning Canadians' trust through its community engagement and workplace practices.
In this context, the acquisition of Tims raises serious questions. We have already seen announcements of cost cutting and the shrinking of the employee base (at least at the head office). Such restructuring is logical in terms of looking for synergies in the merged entity, but it carries risks in how it comes across to consumers.
So far, Tims has avoided layoffs and is looking at voluntary attrition, but, as in most other areas of consumer relations, perceptions matter more than reality and Tims needs to safeguard its image as a responsible employer.
3G Capital has a reputation for tightly controlling costs, and we will be watching closely to see whether this translates into an erosion of trust in Tim Hortons, through, for example, reduced community involvement. Cost cutting is already having a positive impact on the coffee company's bottom line, as it reported last month, but this can be a double-edged sword. Will a short-term benefit destroy value in the long-term by undermining consumer trust?
A comparison with Burger King may be instructive here. While Tim Hortons is the most trusted brand in Canada, Burger King ranks 147th out of 249 brands studied, ranking 90th in terms of community engagement, 206th in terms of work force indexes and 148th as a corporate citizen in Canada. Burger King has also reported strong performance under 3G Capital, but our data suggest that this resurgence may be short-lived.
Given the strong relationship between trust and consumer recommendations, Tims has much to lose if new circumstances lead to a convergence of consumer attitudes with those that characterize Burger King. Consumer word of mouth drives purchase behaviour – and companies undermine consumers' trust at their peril.