Consumer Confidence: What It is & How It Works
Every time I visit my favorite coffee shop, the barista gives me a smile, nods, and brings my go-to order in a few minutes. It’s a relationship built on trust and loyalty. Imagine if all your customers felt the same about your brand.
In crowded markets where buyers are spoilt for choice, gaining consumer confidence can help you become a trusted name. This confidence will ultimately influence buying decisions and drive business growth.
In this article, I’ll explain consumer confidence and provide actionable tips for increasing this index for your business.
We’ll cover:
What is consumer confidence?
How is consumer confidence measured?
Why is consumer confidence important?
How to Increase Consumer Confidence in Your Business
What is consumer confidence?
Consumer confidence measures the degree of optimism customers feel about spending money on purchases. It predicts economic conditions for upcoming months based on consumers’ financial situation and willingness to spend or save money.
If people are optimistic about their finances, they’ll likely spend more and drive economic growth. But if they feel pessimistic, they’ll minimize spending, leading to a slowdown.
Here are three pillars for businesses to build consumer confidence and gain customer loyalty:
Honesty. When brands choose authenticity over popularity and keep their messaging transparent, they set the right expectations for potential buyers. This creates a more truthful buying experience where consumers aren’t worried about being scammed or getting low-quality products/services.
Trust. Trust is an extension of the honesty pillar. For consumers to trust your business, you have to make realistic promises and deliver on all promises — right from deals and discounts to timely delivery and customer support. This ultimately leads to greater satisfaction and healthy relationships, translating into customer loyalty.
Consistency. To retain consumer confidence, you need to consistently deliver premium-quality products/services. This is a big part of building your reputation as a trusted, high-quality brand, which allows people to make more confident buying decisions.
Now that we’ve cleared the basics, let’s understand how consumer confidence is measured and why it matters to your business.
How is consumer confidence measured?
The Consumer Confidence Index (CCI) is an economic indicator where the Conference Board measures people’s financial behaviors and willingness to spend.
The board surveys around 5,000 households in the U.S. to assess their attitudes toward spending or saving. Then, they release a monthly report providing insights about the economic conditions and predictions for the coming months.
Here’s how the CCI is measured in different phases:
Survey creation. The CCI survey includes five questions about people’s present situation and future expectations. Respondents can choose from three options to answer a question: positive, negative, or neutral.
Relative value calculation. After all the data is collected, the positive responses for each question are divided by the sum of all positive + negative responses. This gives the relative value for every question, which is compared against the relative values from 1985 (the original benchmark for CCI).
Interpretation. The average of the relative value of all five questions becomes the Consumer Confidence Index. The index value of >100 indicates a high confidence level and economic growth. On the other hand, an index value below 100 signals a slowdown with a low willingness to spend.
With this detailed breakdown of the Consumer Confidence Index, it’s time to address the big question: Does CCI even matter for businesses?
Why is consumer confidence important?
Consumer confidence can directly impact business growth. A high confidence index means people are willing to spend more and increase consumption. This can improve sales, increase revenue, create employment, and create a sustainable growth loop.
If you’re wondering about CCI’s impact on your business, here are four ways a high confidence index can benefit businesses:
Higher sales and revenue. When people feel financially secure, they’re more eager to spend money. This can unlock new revenue streams for businesses and drive more conversions.
Business expansion. A consistently positive buying sentiment means businesses will have enough cash flow to expand their operations. You can hire more employees, open a new branch, enter new markets, or add more product lines/services.
Greater customer loyalty. High CCI also promises customer retention because customers can continue to shop from brands they trust. You have the opportunity to create long-term relationships with repeat buyers.
Stable workforce. Another big benefit for companies operating in a high-confidence climate is the ability to stabilize their workforce. You don’t have to hire rapidly or lay people off, and instead focus on mutual growth.
Put simply, the CCI can have a domino effect on the economy and your business. A positive index can create opportunities for hypergrowth, but a negative index can push you into a slump.
So, what can you do to increase people’s confidence in your brand? Let’s find out.
How to Increase Consumer Confidence in Your Business
I spent days researching what businesses need to build and maximize consumer confidence. Here are four best practices for increasing people’s confidence in your brand.
1. Maintain an authentic brand image.
The higher the degree of trust people have in your brand, the more likely they will buy from you. You can cultivate this trust in a few ways. Let’s break them down.
Transparency
Give people an unfiltered, unedited view of how you build your products or deliver your services. For example, if you’re a B2B SaaS company, you can talk about the behind-the-scenes process of building, and if you’re an ecommerce brand, you can talk about how your products are made.
In this post, Cosmix highlights how its product is different from most on the market because it’s made with real vanilla. This video gives you a glimpse of its manufacturing process.
Brand Values
Of consumers, 84% buy from brands whose values align with theirs. People will resonate more with your brand when they know you’re committed to making an impact in society. So, spotlight your values at different touchpoints in the buyer journey so buyers can trust your brand.
Take a page from H&M‘s book with their message about sustainability and mission to build a circular economy.
Social Proof
Building social proof is another great way to establish consumer trust. That’s because people trust brands when they hear a friend or acquaintance endorsing them. You can work on word-of-mouth marketing or strategically use social proof to win consumers’ confidence.
Creating a trustworthy brand image is a good place to start your efforts to increase consumer confidence. Once the foundations are set, you can implement these best practices to double down on this progress.
2. Simplify the buying experience.
With so many options available to your target buyers, you can’t afford to make any mistakes in the buying experience. The slightest friction in this journey can send people away, looking for alternatives.
That’s why you have to make the buying process as simple and seamless as possible.
Here’s a handy checklist I created after observing some of the most effective buying journeys from discovery to purchase:
Website navigation. Make your website so easy to navigate that people can shop even while asleep. Instead of frustratingly searching, it should give customers what they need in a few clicks.
Clear pricing details. Be transparent and share your pricing information upfront to help people make an informed buying decision. You should also avoid complex price points to avoid confusion.
On-demand support. Offer round-the-clock support or create a self-serve support model for people to find relevant answers whenever they need.
Convenient checkout. Make checkout a breeze without asking people to jump through hoops. You can also add a guest checkout option for quick orders.
Multiple payment options. Given that at least 15% of consumers expect high payment diversification, you should add various payment options to maximize conversions. Here’s an example of Cleartrip offering various payment methods:
3. Embrace consultative selling.
The rule of thumb for modern businesses: People don’t like being sold to. Gone are the days when pushy sales tactics could close deals and drive sales. Today, customers expect a more meaningful relationship with brands.
You have to focus on solving actual pain points instead of blatantly promoting your product/service. That’s called consultative selling, a needs-based selling approach in which you act as a helpful advisor, trying to provide tailored solutions and build a relationship.
Here are a few ways to leverage consultative selling to increase consumer confidence:
Listen intently to your audience and understand their pain points.
Share user-generated content to contextualize your solution for their use cases.
Ask questions and encourage people to open up about their challenges + expectations.
Share helpful resources tailored to specific challenges to educate and guide customers.
Proactively support customers after purchase to solve queries and ask for feedback.
This post by Fable&Mane presents a great example of an existing customer showing how she uses one of their products and how it’s benefitted her.
4. Deliver empathetic support.
Customer support is a critical link in building consumer confidence. If you want people to continue buying from your business, you have to focus equally on their post-purchase experience.
You can start by training your support team to listen carefully, validate people’s feelings, and respond with empathy. As part of the training program, you can host roleplay sessions, create support materials, and run mock sessions to help the team inculcate this message.
Besides direct support, communities are among the best channels to deliver support and delight customers. Our Consumer Trends Report suggests that 19% of respondents joined an online community, and at that same time, 24% actively participated in one. A thriving community can become a channel for support and turn into a growth lever.
You can also leverage social channels to deliver proactive support and address grievances.
Chewy’s support team presents an excellent example of how it’s done. They engage with people mentioning them on social channels and go the extra mile to help customers.
Maximize Consumer Confidence in Your Brand
Gaining consumer confidence isn’t just a nice-to-have anymore. You need to strengthen your brand reputation and consistently deliver value to your buyers to win their trust.
I’ve outlined different ways in which a positive Consumer Confidence Index can help businesses. You can also strategize to get started with these best practices to increase confidence in your brand and delight customers through consultative selling, seamless checkout journeys, and round-the-clock support.