Trust in business steady in India: Edelman Trust Barometer

Trust in business is holding steady in India and China, according to Edelman Trust Barometer study conducted by Edelman, the world’s biggest independent PR consultancy, in 23 countries across the world.

Richard Edelman, President & Chief Executive Officer of Edelman, writes in his blog, “The lead of the story must be that trust is transformed. In the wake of the financial market meltdown at the end of 2008, we have gone through a series of corporate crises during 2010 -- from oil spills to product recalls affecting the leading enterprises in five sectors to the near-bankruptcy of five nations in the EU. The result is an even more profound shift in the expectation of companies to operate with increased transparency and in a manner that delivers profit while improving society, captured by my client Indra Nooyi, CEO of Pepsico, in her phrase, ‘Performance with Purpose’.

“We also found unprecedented skepticism, a need to hear, see or watch news as many as 10 times before achieving belief, plus an increased reliance on those with credentials and expertise.”

The key findings of Edelman Trust Barometer study are:

State of trust

Trust in business — There are now three clear country groupings – the Trusters, the Neutrals and the Distrusters. The Trusters, notably Brazil, China, and India, withstood the financial crisis and had positive economic performance this year. There is evidence of rising trust in business over the past two years even in flat-lined economies such as France, the Netherlands and Italy. The key change in 2011 is the switch of Germany and the USA, with the former now in the Neutrals with Japan, while the USA moves to the Distrusters along with Russia and the UK. Business is as or more trusted than government in 19 of the 23 nations we surveyed this year.

Trust in government — There are fewer countries in the Truster category for government, including Brazil, China, Singapore and the UAE. The largest drops in trust in government were in Germany and the USA. Note that in general, trust in business and government is now in sync, a change in the past two years. Though there are exceptions, such as Germany, where rising trust in business is observed despite less confidence in government.

Trust in media — We note that trust in media continues to rise in the developing world and to slide in the developed economies. The most depressing findings for media were in the US and UK, respectively 27% and 22%, which we attribute to increased politicization, aggressive tone and scandals.

Trust in industries — Technology continues to wear the halo as the number one industry in both developed and developing economies (98% trusted in China). Banking and financial Services are now the least trusted industries of the 16 we review annually. The reputation of banks continues to plummet, especially in the US, UK and Ireland, down nearly 50 points in the US in the past three years to a new low of 25%. Automotive has made an amazing recovery, to rank as the #2 trusted industry in the world, attributable to the GM IPO, the launch of electric cars and the association with modernity in the developing world.

Trust in nationality — The companies headquartered in Canada, Germany and Sweden continue to enjoy a trust advantage, while the UK and Switzerland are closing the gap. American companies are much better regarded in the past two years, especially in Germany and Russia, while preserving a strong reputation in such key future markets as Brazil and China. The companies based in the BRIC nations saw rising trust scores in developing nations, but a decline in markets such as the USA.

Earning trust

What drives corporate reputation — The top four factors are: high quality products and services; Company I can trust; transparent business practices; treats employees well. The bottom two are: highly rated leadership and delivers consistent financial returns. This is the second year in a row that we see a reversal of constituent elements of reputation, suggesting a rebalancing of priorities for business.

Shareholder versus stakeholder — We asked specifically about Milton Friedman’s contention that the social responsibility of business is to generate profit; about 50% of respondents agreed. But, we also probed whether companies need to create shareholder value in a way that benefits society even if that causes a reduction in shareholder value; about 80% agreed with that point of view, from developed to developing economies. This indicates a desire for profit and purpose, a stakeholder approach to shared value.

Credible spokespeople — Given the uncertainty in the economy and plethora of sources of information, respondents said that they believe spokespeople with proven expertise, in order academics, technical experts from a company (for first time), financial analysts and chief executive officers. The recovery of the CEO in reputational terms is remarkable; this is the highest score we have seen in nine years, though in the UK and US that means only about one third believe a CEO is credible. We also found that in a crisis, the number one trusted source is the CEO, followed by an outside expert, followed by a technical expert from the company.

Information sources — More people go initially to search engines, then to online sources for information about a company. The brands most noted are the familiar mainstream media stalwarts such as the Financial Times, Wall Street Journal, BBC, Globo and CCTV. Blogs and social networks substantially lag the mainstream brands.

Benefits of trust — If you go into a crisis as a distrusted company, it takes only 1-2 negative stories for a person to believe negative news. If you go in as a trusted company, it takes only 1-2 positive stories for you to achieve belief. Trust is a protective agent, a facilitator of action. We find further evidence of desire to buy products, recommend products/services and buy shares in a trusted enterprise.

Trust is no longer a commodity that is acquired but rather a benefit that is bestowed, earned through action, reinforced by transparency and engagement. Business has the opportunity to build an enduring foundation of trust if its leaders commit to a strategy that brings value to both investors and society -- the What and the Why. However, today it must further explain as to how it makes money, a new level of transparency on business practices -- for instance, ingredients in products. Finally, it must build relationships across the entire stakeholder universe, the Where, by engaging audiences across the four leaf clover of media (Mainstream, New, Social, Owned) and joining the continuing conversation by adding value and learning from the critics.

Forbes expects global firms to redefine PR in India

Rohin Dharmakumar writes in Forbes India. His report:

A wave of international firms is sweeping over India’s shores. They see the potential to take the business of public relations to a more professional, systematic and pro-active level. They are trying to shake up a smug Indian industry used to treating PR as a minor cost centre focussed on managing a few journalists; and help it prepare for a more assertive and connected consumer base. In the process, PR is becoming a more strategic but expensive affair for companies…

Indian PR firms are at the middle of this change. Before time runs out, they must shape up to fight the onslaught or sell out to foreign brands. Many have indeed sold out — Genesis to Burson-Marstellar, IPAN to Hill & Knowlton, Hanmer & Partners and 20:20 Media to MS&L and Roger Pereira & Associates to Edelman. A few foreign agencies have started from scratch — Text100, Fleishman-Hillard, Waggener-Edstrom and APCO.

But a few Indian firms are holding out. “I don’t need someone to tell me how to compete,” says Madan Bahal, CEO of Adfactors, one of the leading PR firms in the country.

The public relations business in India is fairly young; most firms trace their origin to the years following economic reforms. Using just sheer doggedness in chasing down journalists, a growing bunch of entrepreneurs fueled a mini-boom. For them, public relations meant little more than media relations. “Everybody who spent a few years doing PR opened up their own mom-and-pop shops, selling media execution. They worried about which hotels to hold press conferences in or what gifts to give journalists,” recalls Rishi Seth, founder-CEO of Six Degrees PR who earlier headed multinational PR firm Text100 in India.

The business was soon commoditised. Most worked on wafer-thin retainers and even slighter profits. To control costs, they began hiring inexperienced and cheaper employees. For many, the profession degraded to ‘planting’ nice stories about their clients or blocking negative stories. Journalists they managed to befriend co-operated…

All that changed with the Internet and mobile phone. There are more than 500 million mobile users and about 80 million Internet users in India today. Nearly 70 percent of Web users are on some social network. Their trust in newspapers, TV news and yes, business magazines, is down sharply: 35-40 percent lesser than two years ago, according to a 2010 survey conducted by Edelman. But they’re connected, eager for information and willing to speak their mind.

“This is the age of radical transparency. If you’re a company behaving in an unethical way, then you will be found out and castigated very quickly. And you cannot hope that your relationships with journalists — however good they may be — will protect your reputation then,” says Arun Sudhaman, managing editor of The Holmes Report, a London-based PR trade publication.

The entire market for agency PR in India is estimated to be just around $100 million annually, says Sudhaman. That’s about 35 percent of just Edelman’s 2009 global revenue. Average monthly retainers still hover around the Rs. 100,000-150,000 figure, a pittance compared against companies’ marketing or advertising budgets. “In New York I wouldn’t consider retainers less than $20,000 a month,” says Robert Holdheim, Edelman’s India head…

International agencies bring a whole new way of doing PR in India. Unlike the local firms which follow ad-hoc methods, they work with data, templates and processes. They try to understand the business problems of the clients rather than just look at the marketing problems…

International firms have become ubiquitous on the PR scene in India. The only three exceptions are Vaishnavi Communications, Perfect Relations and Adfactors. Even they are under constant wooing by foreign firms looking for a toehold in India. Dilip Cherian, founder of Perfect Relations, says, “We are constantly courted and are consistently one of the first ports of call for an acquirer. And though we have always believed that any deal that enhances all-round shareholder value is good, we are not in a hurry to sell.”

Bahal of Adfactors, is categorical that he will not sell out to an international agency. He sees Indian agencies selling out as a sign of weakness and a lack of vision or ambition among entrepreneurs to take their firms to a higher level. Worse, most entrepreneurs have sold out for ‘peanuts’, he says. Bahal is open to partnerships ‘by the hundreds’ though.

The fact remains that the top Indian PR companies like Vaishnavi and Adfactors are still the revenue leaders; they are no weak competitors.

At the end of the day, the nationality of the PR agency doesn’t matter, but the quality and ethics behind their work do. As Hill & Knowlton India’s head Radhika Shapoorji says, “Consumers are getting more empowered. They know their rights and will not stand for nonsense. And in sectors like aviation, telecom and hospitality, due to the sheer number of customers and customer touch points, you can almost expect a crisis a day. Therefore companies must treat each complaint as an issue, before it becomes a crisis.”

(With additional reporting by Samar Srivastava)