Is Good Karma Good for Business?

Last Updated Oct 16, 2007 7:17 PM EDT

782995862_f0f9ffbdde_m.jpgUnisys recently released a new European study that reveals exactly what business practices erode customer trust. There aren't too many surprises, but the study did show that many activities you might think of as "trust-building" are in fact simply expected by customers. Businesses built scant loyalty through ethical business practices, customer satisfaction, and innovative products or services. These were a minimum standard that earned no brownie points.

For example, customers expressed a willingness to bolt to another bank for heightened security but did not consider added security an "added-value" that justified higher fees. The study did find, however, that consumer trust was,


"severely eroded when these baseline requirements are not met, with potentially dramatic consequences for business. For example, a massive 63% of European consumers would be concerned about buying a product or service if a company was unethical; 56% would lose trust with bad customer service, and 59% would react negatively to outdated products and services."
Perhaps the results will underline the need for companies to focus on customers and other stakeholders, not just on the demands of Wall Street and quarterly financial goals. It's not a new argument. Last year, Business Week proclaimed that Sun Tzu's The Art of War was out of fashion as the most esoteric business read, and the ancient Indian epic, the Bhagavad Gita, was in. The idea of "karma capitalism" was hot. Need a brush up on your Bhagavad Gita? Applied to business it offers:
"the belief that companies should take a more holistic approach to business--one that takes into account the needs of shareholders, employees, customers, society, and the environment. Some can even foresee the development of a management theory that replaces the shareholder-driven agenda with a more stakeholder-focused approach."
It might sound hippy-dippy, but the argument that companies should pay it forward does have some quantitative support. Consumerist dug up a study published in the very mainstream Journal of Marketing, which,
found that companies at the top 20% of the the American Customer Satisfaction Index (ACSI) greatly outperformed the the stock market, generating a 40% return. From 1996-2003, the portfolio outperformed the Dow Jones Industrial Average by 93%, the S&P 500 by 201%, and NASDAQ by 335%.
It's the karmic solution to beating the market.

(Image of karmic barrier by dmax3270, CC 2.0)

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    Jessica lives in London where she works as a freelance writer with interests in green business and tech, management, and marketing.