The Foundation of Trust Premium
Trust is more than just a social nicety; it's a crucial economic driver. The trust premium is based on the idea that people are not only more inclined to buy from someone they trust, but they are also willing to pay a higher price for that trust. This concept challenges the traditional belief that consumers are solely driven by price. While price is a significant factor, it is not the only one. Trust plays a pivotal role in purchasing decisions, often leading customers to choose a more expensive option from a trusted source over a cheaper one from an unknown entity.
Trust is built on several long-standing beliefs, often instilled in us by our parents or personal experiences. These beliefs, which are rarely questioned or researched, form the bedrock of the trust premium. To understand this better, three key statements were examined: "You get what you paid for," "There is no such thing as a free lunch," and "If something is too good to be true, it probably is."
Over the past several months, I’ve put those beliefs to the test through a study that included 426 participants. Here are the results.
You Get What You Paid For
The adage "You get what you paid for" suggests a direct correlation between price and value. When people are unsure of the value of a product or service, they often rely on price as an indicator of quality. This belief is deeply ingrained and supported by the survey results, where a significant majority agreed with the statement. The implication is that paying more generally equates to receiving more value. This belief supports the idea that consumers are willing to pay a premium for products and services from trusted sources because they associate higher prices with higher quality and reliability. In my study, 67% of the participants indicated they agreed with the statement, “You get what you paid for,” and only 16% disagreed.
There is No Such Thing as a Free Lunch
The statement "There is no such thing as a free lunch" encapsulates the skepticism that people have towards offers that seem too good to be true. The survey revealed that a majority of people agree with this sentiment, believing that free offers often come with hidden costs or obligations. This belief reinforces the idea that people are cautious about offers that appear overly generous without a clear catch, and they prefer to engage in transactions where the terms are transparent and fair, even if it means paying a higher price. In my study, I found that 64% of the participants indicated they agreed with the statement, “There is no such thing as a free lunch,” and only 21% disagreed.
If Something is Too Good to Be True, It Probably Is
The cautionary principle "If something is too good to be true, it probably is" highlights the natural skepticism people have towards deals that seem overly favorable. This belief is the most strongly held among the three, with the highest level of agreement in the survey. It underscores the importance of trust in transactions. People are wary of offers that deviate significantly from their expectations of value and are more likely to trust and engage with businesses that offer realistic and believable propositions. In my study, 73% of the participants agreed with the statement, “If something is too good to be true, it probably is,” and only 11% disagreed.
Gender and Age Differences
The survey also explored the impact of gender and age on these beliefs. Interestingly, men were found to hold these beliefs more strongly than women. This trend was consistent across all three beliefs, indicating that men may be more inclined to associate price with value and to be skeptical of free offers and deals that seem too good to be true. In my study, 219 participants were women, and 206 were men. I found that 72% of men agreed with the statement, “You get what you paid for,” compared to 63% of women, 69% of men agreed with the statement “There is no such thing as a free lunch,” compared to 58% of women, and 79% of men agreed with the statement “If something is too good to be true, it probably is,” compared to 68% of women.
Age also played a role in how these beliefs were held. Older respondents were more likely to agree with the statements "There is no such thing as a free lunch" (15.6% more for people 65 years of age compared to 18-year-olds) and "If something is too good to be true, it probably is." (20.4% more). This suggests that with age and experience, people become more skeptical and discerning in their purchasing decisions. They are more likely to value trust and reliability, which supports the Trust Premium concept.
Summary
The Trust Premium is a powerful concept that highlights the economic value of trust in consumer behavior. People are not solely driven by price; they are willing to pay a premium for trust. This willingness is rooted in long-standing beliefs that associate price with value, skepticism towards free offers, and caution towards deals that seem too favorable. Gender and age differences further illustrate that men and older individuals are more likely to hold these beliefs strongly.
Understanding the trust premium is crucial for businesses. It emphasizes the importance of building and maintaining trust with customers. Businesses that can establish themselves as trustworthy can command higher prices and foster stronger customer loyalty. This requires transparent practices, consistent quality, and reliable service. By focusing on trust, businesses can differentiate themselves in a competitive market and achieve long-term success.
Want to hear more? Listen to the podcast episode at: https://podcasts.apple.com/us/podcast/s13e8-you-get-what-you-paid-for/id1569249060?i=1000656257945
Dr. Yoram Solomon is an expert in trust, employee engagement, teamwork, organizational culture, and leadership. He is the author of The Book of Trust, host of The Trust Show podcast, a three-time TEDx speaker, and facilitator of the Trust Habits workshop and masterclass that explains what trust is and how to build trust in organizations. He is a frequent speaker at SHRM events and a contributor to HR.com magazine.
The Book of Trust®, The Innovation Culture Institute®, and Trust Habits® are registered trademarks of Yoram Solomon. Trust Premium™, the Relative Trust Inventory™, and The Trust Show™ are trademarks of Yoram Solomon.
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