Trust is changing. Where do brands fit into online reputation systems and blockchain?
You may be asking:
One of the classic reasons to mind your business’ brand was to gain and maintain trust. No one will transact with you if they don’t trust that you are going to give them value or if they think you’re going to rob them. A strong brand is an antidote.
The brands of yesterdays companies took advantage of a lot of brand associations that were unearned. There was unmerited trust given to a business that had a storefront on Main Street or an office on Madison Avenue.
One of the classic slides on every pitch deck is the client list, which also garnered unmerited trust because the potential client had no idea if they were good or bad for those clients on the slides.
“Well if these guys are in this nice area with these clients, then they can’t be scam artists,” says potential customers of the past.
But the internet has disrupted trust. There are all sorts of sites (Yelp, Capterra, even Google) where potential customers can look up reviews of branded businesses. Customers use their social media to affect brands by sharing their best and worst customer service stories. Remember when we talked to Jay Baer about social media customer service?
The internet has also allowed us to transact with random people. The idea of eBay was crazy when it came around: “you mean I am going to win this auction and just trust that this person is going to send my prize?”
But a significant innovation of eBay was the reputation system; both buyer and seller would be rated, and there was now an incentive to do what you committed to so that you could maintain the rating so one could continue transacting. It is even proven that sellers with higher reputation scores sold their goods at higher prices!
Once the online reputation system entered the public consciousness, the door was open to Web 2.0 businesses that were previously impossible: Craigslist, Amazon Marketplace, Airbnb, Uber, Lyft, etc. These are called consumer to consumer (C2C) businesses or two-sided marketplaces.
Trust is about to be disrupted again with blockchain technology. One part of the technology behind BitCoin, the blockchain, is a distributed public ledger that can be audited by anyone. While I believe BitCoin will fail to become the world’s currency, Satoshi Nakamoto real legacy is the blockchain technology and how it is allowing two businesses with no reason to trust each other be in a supply chain together.
The Psychology of Trust
Trust is a feeling that human beings have developed because we need to rely on others from time to time. We need people to take care of our kids, guard our shelter, feed us when we are sick, etc. The people who could do these things for us or with us were part of our community.
Trust and community are inseparable. Many think of trust as their sixth sense for detecting bad people. Trust feels this way but does not work that way. Trust is derived from how much a part of the community we perceive someone. Knowing someone is from your community allows you to assume some things about the motives, beliefs, and actions, as well know what they have to loose if they defy the community.
Simon Sinek in his TEDx Talk illustrates this with an example. Fellow parents know that our kids are the most precious thing to us we can imagine. Who would you trust your kids with for a night: a sixteen-year-old daughter of a neighbor, or a thirty-year-old teacher who just moved to town? Most people say the sixteen-year-old, giving up the experience of the outsider for the trust we have in a community member.
Keep in mind that trust will always be a feeling. The online reputation systems and blockchain technology are only tools to inspire a feeling of trust.
Removing all the reasons not to trust will not inspire trust. The only thing that inspires trust is a shared community.
According to Professor Dan Ariely (his YouTube video on trust), the only ways to increase trust in a marketplace of people are:
- Make relationships long term. If people come in and out freely, trust will be unstable.
- Make participants reputation known. Have a public display of someone reputation.
- Have a known justice system. Let everyone known offenses to the community will be punished.
Brands work with trust both inside out and outside in. Brands are a participant in a community, and brands are trustworthy because their intention to stay in good standing with the community is clear. They don’t want to get a bad name. Also, brands represent communities of people, and people in the community will work to remain trustworthy so they can stay close to the brand. We are going to talk about this in the next section.
Online Reputation Systems Require A Strong Brand
An online reputation system (alternatively called interactive reputation systems or social web) is a rating scale for how trustworthy a participant has been. Trustworthiness comes from continually making mutually beneficial transactions with the other people in the community.
For example, Ebay’s reputation system is points based for both buyers and sellers. After a transaction is completed, both sides are asked to rate the other. A positive rating will give a point, a negative rating will deduct a point, and no rating at all will not affect the score. There are tiers raging from 10-49 points to 1,000,000+ points, and each one has a star badge that appears with the participant’s name.
Online reputation systems do not have to be based on points or even rely on users. I sell things I no longer need on Kijiji, and they publish “responds to emails within 2 hours” beside my username on my ads. This requires no user inputs, just data from their messaging system.
What is important to realize that reputation systems are only as valuable as the community they moderate. Participants will only take a reputation system seriously if losing standing with the community is considered a loss. Ebay’s reputation system is useful because buyers and sellers will not be able to transact if they are not in good standing. Remember, trust and community are inseparable.
Brand plays a role in online reputation systems. Firstly, a meaningful community will have a meaningful brand by definition, our definition of brand states: a brand is the aggregate of perceptions people have towards an organization based on prior experience. If you have a positive community, then you have a group of people who feel positively towards it; therefore you have a positive brand. Brand building tactics will consequently increase the power of a reputation system.
Secondly, the reputation system stakes itself on the trustworthiness of the brand itself. When eBay gives a star rating to a seller, it has meaning because the trusted brand of eBay asserts it. If a throwaway brand declares a participants reputation, does it mean anything? About as much as a tree falling in the woods.
Engineers may design the perfect reputation system, but it is going to be up to marketers and community managers to make it meaningful.
Blockchain, Crypto, and “Trust-less” Commerce
If you haven’t heard of the blockchain, then you may have heard of it’s first and most famous use case: BitCoin.
BitCoin is decentralized online currency brilliantly designed to replace dollars. The problem with using bits instead of coins and bills for money is that anyone can create new bits for free. So what is keeping people from just making more BitCoin? The blockchain (as well as cryptography and proof of work).
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value,” says Don & Alex Tapscott, authors Blockchain Revolution (Amazon).
For any transaction in a block chain, there is a record agreed upon by all participants. It is impossible to forge the ledger because of cryptographically signed and is hosted in multiple locations.
While I am doubtful on the future of BitCoin, it’s creator (Satoshi Nakamoto) true legacy will be the blockchain. Having un-corrupt-able public ledgers will revolutionize manufacturing, contract law, shipping, escrow, transportation, money lending, and many other industries.
For example, say I wanted to send trees to a mill, have them cut into boards, have the boards sent to a treatment facility, have them chemically treated and then sent to my customer. I could verify all these steps myself at great cost, or set up block chain for it with a token representing the lumber. As suppliers take possession of the lumber, they would take possession of the token and add their contribution to the ledger.
Theoretically, I don’t care who does the work as long as the lumber and the token move through the process. If the lumber is stolen or damaged along the way, then the ledger can be audited and will point me right to the person responsible for the damage or theft. My suppliers and I know that I can trust the ledger. As the shrewd lumber mogul I am (in this example, not in real life), I can even have restitution built into the blockchain; I can be sent money from the responsible party’s bank account if the lumber doesn’t check in within a precise timeline, say thirty days.
This supposedly allows client and supplier to transact while not trusting each other because they both can trust the ledger. This is trust-less commerce, where businesses no longer need service agreements and handshakes to work together.
While this makes sense from a computer science point of view, it doesn’t make complete sense from a human point of view, and trust is a human emotion. We are not rational actors.
Block chain will work to the extent that there are incentives to stay in good standing with a community in the long term. If participants don’t feel a part of a community, then they will have no problem taking even if a public ledger rats them out. And the fact that the block chain abstracts out the human interaction out will take even more trust out of the system.
For example, say a computer scientist uses block-chain to distribute package delivery by allowing travelers to pick up a package at their starting point and deliver it close to their destination. This takes deliveries out of the hands of delivery people, and into the hands of the people.
Democratized deliveries! Out for the tyrannical thumbs of FedEx, DHL and USPS (joking!). What can be better?
Well, it is better only to the extent that people will want to stay delivering packages. When a FedEx employee comes across a shipment of diamond rings, he delivers it because he want’s to keep his job, not let down his dispatcher, and maintain his reputation with his fellow workers. A scrupulous traveler working as a freelance courier will steal the first valuable shipment he or she finds if he or she does not care about staying in good standing with the community even if the ledger rats on them.
Therefore a block chain without a vibrant community and valuable brand is just a bunch of cryptographically scrambled bits. So you block chain engineers, make sure you partner with smart marketers and community builders.
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