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Feb 26, 2010 -

The current predicament facing the Toyota organization with its massive global product recall has me thinking about the personal side of business lately. Specifically, I’m thinking about trust—about how intangible it is, and how easy it is to either miss the truth of, or simply forget about, what customers are really buying. Sometimes we’re so focused on the tangible exchange—the deliverable, the economic transaction, the business—that we neglect what the customer really values. And what the customer really values most is often of an intangible nature: trust, security, peace of mind.

The idea of perceptual, emotional or otherwise intangible value in business can be traced back to the Great Depression, when Cadillac effectively stopped selling automotive transportation. In the 1930s, Nicholas Dreystadt took over as the company was about to fail and announced that Cadillac did not compete with other automakers, but that “Cadillac competes with diamonds and mink coats. The Cadillac customer does not buy transportation, but status.” That simple perceptual innovation translated to a price premium and saved the company. Within two years Cadillac had become a major growth business despite the dismal economy.

Status is perceptual, emotional, and absolutely intangible. You can’t really measure it or hold it in your hand. It’s soft and fuzzy, but yet it’s real value in the mind of the customer. And that’s where it counts, because the old cliché is true: perception is reality.

Intangible value gets to the heart of what motivates customer behavior. If you can positively answer the tougher questions of what tangibles like quality, cost, and speed actually do for the consumer—how speed improves life or what quality really buys in the mind of the customer—you transcend the mere economic transaction, because the emotional bonds that result are much stronger than the dollar exchange.

What is happening to Toyota right now is that the emotional bonds of trust, built painstakingly over decades, is being eroded by the dramatic scope and scale and suddenness of their product quality issues. Many people, loyal customers, are feeling betrayed.

Now, there’s nothing new in the understanding that to build a profitable, long-term, close-knit relationship with the customer, you need to constantly connect on two levels, rational and emotional. One is tangible, the other is intangible. Rational is bang for the buck. Emotional is more about trust, caring, loyalty, respect...all the things we look for in any good partner.

The emotional connection is difficult to wrangle because it is so intangible. You can’t necessarily analyze it. Customers actually aren’t that much help to you in defining it. They can’t always tell you why they love what they love, at least in terms that are useful. Sometimes they just don’t know. Sometimes they know, but can’t articulate it. And sometimes they don’t want to tell you, because it’s personal. But what they do know is when it’s missing, and they will definitely tell you and about a million other people.

The need to trust is borne only out of our belief that we are somehow vulnerable. Trust goes hand in hand with, and is dependent on, a perceived risk. Without risk, there’s simply no need to talk about trust. People buy solutions to problems, and the one problem everyone shares is the problem of security, or insecurity, depending upon how you frame it. In fact, it’s all about risk!

Consumer behaviorist Ernest Dichter determined in the 1950s that most people perceive at least five dimensions of downside risk every time they engage in a purchase experience:

1. Economic — Will this waste my money?

2. Functional — Will this work reliably well?

3. Social — What will others think less of me?

4. Physical — Will this somehow be painful?

5. Mental — Will I think poorly of myself?

This insight makes the whole issue of delivering intangible value a little more accessible. Understanding that people are always buying some form of security makes framing the problem a bit easier. We can see why quality and consistency count, because they make us feel safe. We can see why price counts, because it makes us feel smart. We can see why design counts, because it makes us look good.

When we tap into the security zone, we begin to build the kind of collaborative and trustful partnership we seek with our customers. If Toyota is to survive their crucible of consumer trust, they will need to positively address all five dimensions of downside risk to recreate that sense of security. One thing is for sure, if it does come at all, it won’t come easily or quickly.

Trust never does.

Matthew E. May is an innovation consultant and the author of In Pursuit of Elegance: Why the Best Ideas Have Something Missing. He blogs here. You can follow him on Twitter here.