In Zeiten globaler Spannungen, fragmentierter Märkte und wachsender Zurückhaltung institutioneller Investor:innen rückt ein traditionell unterschätzter Faktor in den Fokus: Vertrauen.
In the previous discussion on startup challenges, we explored how entrepreneurial ventures often fail to become established firms. Many startups falter as they navigate the “valley of death,” struggling to scale operations and grow their customer base. Successfully overcoming these challenges is crucial for new ventures to reduce the risk of failure and ensure long-term survival. One essential strategy for navigating this transition is trust-building, which helps startups gain internal and external legitimacy and overcome the liability of newness.
New organizations frequently face the liability of newness, as identified by Stinchcombe (2000). Founders encounter higher perceived risks because their ventures are often unknown and unproven. This challenge aligns with findings by Rao and Costigan (Costigan et al., 1998; Rao et al., 2008) that emphasize the importance of building trust among customers to ensure the survival of entrepreneurial ventures. Trust-building is crucial for overcoming this liability and establishing legitimacy (Spremann, 1988; Stinchcombe, 2000; Welter, 2012).
Trust can be built through strategies such as branding activities, maintaining a consistent online presence, participating in events, and engaging in transparent communication. These efforts help ventures establish both collective and personal trust. Collective trust is where individuals trust the organization, and personal trust is where the founder’s personal brand bolsters the venture’s credibility (Welter, 2012). By reducing perceived risk through trust-building, startups can increase customers’ willingness to commit, confirming the Commitment-Trust Theory (Morgan & Hunt, 1994). This approach aligns with Aldrich’s (2005) view on the importance of trust for entrepreneurs introducing new products to the market.
Branding emerged as a critical strategy. Personal branding is especially important in a startup’s early stages, as it fosters perceptions of seriousness, competence, and credibility. As ventures mature, corporate branding becomes increasingly important (Sichtmann, 2007). Founders can enhance their personal brand by demonstrating expertise, networking, speaking at events, and leveraging past experiences and relationships (Aldrich & Fiol, 1994; Stinchcombe, 2000; Picken, 2017). Social proof, such as positive feedback and public endorsements, significantly impacts perceived risk and credibility.
Consistent and transparent communication further strengthens customer trust (Wiesenberg et al., 2020b). Honest and professional communication aligned with the company’s values builds trust over time. Two-way communication, such as customer feedback and reviews, enhances customer satisfaction and trust, particularly in B2B contexts. However, excessive communication can breach trust, highlighting the need for balance (Petkova, 2012).
Strong relationships are vital for business success. Personal ties and high-quality customer service are crucial for growing and retaining a customer base, especially in B2B ventures (Berry, 1995; Geyskens et al., 1998; T. V. Nguyen & Rose, 2009). While referral marketing may not be essential initially, it becomes more relevant as the venture matures. Conversely, word-of-mouth (WOM) is a primary goal for many startups, as it is a cost-efficient and effective method for generating customer loyalty and acquisition (Buttle, 1998; Harisalo et al., 2005; Ngoma & Ntale, 2019).
Revisiting the theorized model confirmed the importance of branding, communication, and relationship-building. However, the importance of referral marketing was downplayed in the early stages of the entrepreneurial lifecycle. This comprehensive approach to trust-building provides a robust foundation for new ventures to overcome the liability of newness and achieve sustained growth.
Customer feedback, such as reviews and co-creation, was introduced to the model as its relevance for customer base growth emerged from the analysis. A key finding was the importance of showcasing the venture’s track record. Showcasing past successes leverages historic trust to build future trust. This practice helps retain customers by sharing success stories and attracting new customers drawn to the venture’s proven track record. WOM was discovered to be an overarching driver of customer base growth, enabled by the trust-building strategies and practices mentioned above.
To facilitate the managerial implementation of these findings, five actionable steps have been developed:
1. Prioritize Trust-Building Strategies
Trust is essential to overcoming the liability of newness and ensuring customers commit to your venture.
Action: Implement personal and corporate branding activities, build a consistent online and offline presence, and engage in transparent communication.
2. Leverage the Founder’s Personal Brand
Showcasing credibility and expertise can help you be perceived as a domain expert. Leveraging the founder’s network helps gain from historical trust.
Action: Engage in public speaking, networking events, and utilize past experiences to enhance perception as a domain expert.
3. Focus on Relationship Building
Relationships are key to successfully growing the customer base, as they enable both customer acquisition and retention.
Action: Invest in relationship marketing and curate personal relationships offline. Implement personalized customer service and a CRM system. Regularly check in with clients, especially in the B2B realm.
4. Showcase Your Track Record
Ensure people know about your historic successes. Communicate your track record in your marketing and sales strategies to leverage past trust.
Action: Ask past and current clients for recommendations and statements on your work. Highlight your venture’s successes in your communication strategy.
5. Capitalize on WOM
Positive WOM is a powerful, cost-effective, and long-lasting marketing tool for customer acquisition and retention.
Action: Engage in the above-mentioned strategies, ensure high customer satisfaction, encourage two-way communication by introducing reviews and customer feedback (e.g., NPS scores), and share customer success stories.
Applying these five actionable points can contribute to the survival of the transition phase and customer base growth of scaling entrepreneurial ventures. By focusing on trust-building, branding, communication, and relationships, startups can successfully overcome the liability of newness and achieve sustained growth.
Author: Sylvie Steinegger, Msc
Entrepreneurial ventures aim to bring novel ideas to life. Despite their brilliance, 90% of these ventures fail to become established companies (Krishna et al., 2016). As they grow, startups face different challenges at each stage of their life cycle. Successfully becoming an established firm is crucial to reducing the risk of failure (Picken, 2017; Rayport, 2022). The most dangerous phase is the “valley of death,” or the transition phase. During this phase, startups must prepare to scale and grow rapidly, often with limited resources (Graham, 2006). Successfully crossing this chasm is essential for a startup to expand operations and grow its customer base.
Early-stage startups often start with a small user base—typically their lead users. To become an established company, ventures need to scale both the firm and the customer base. Scaling often presents a significant risk, leading many startups to fail. They must address market risks and position themselves correctly (Picken, 2017). Research into strategies to overcome these challenges and the role of trust in this process is ongoing (Welter, 2012). Moreover, understanding the link between trust, entrepreneurship, and marketing practices to expand the customer base remains a key area of study.
A qualitative study interviewed 32 experts in entrepreneurship, including founders, investors, professors, and growth leads. This study adds to the literature on the connection between entrepreneurship and trust. It focuses on how startups can acquire and retain customers by engaging in trust-building strategies. The research explores how these strategies can be used to scale the customer base. The study does not focus on any specific industry or geography.
The research explored the relationship between scaling a growing venture and achieving customer base growth through customer trust. The author theorized that building trust positively impacts customer base scaling during the transition phase. New ventures often face the liability of newness, where trust is crucial. Successful customer base growth is vital for reducing the risk of failure.
The study tested a two-staged model through expert interviews. In the first stage, new ventures build trust by adopting proven strategies from the literature. These strategies help organizations gain customer trust. In the second stage, ventures leverage this trust to grow their customer base through marketing practices. The author proposed strategies to enhance trust during both stages. This approach helps ventures scale by growing their customer base and successfully navigating the transition phase.
The interviews showed that trust is crucial for startup survival. Building relationships with customers before, during, and after purchases is important. The trustworthiness of the founding team also plays a significant role. Being recognized as a domain expert enhances trust in the customer base. Transparent, simple, and consistent communication further builds trust.
Consistent relationship-building, customer feedback, and focusing on satisfaction are key to leveraging trust. These practices lead to customer base growth and increased word-of-mouth (WOM) promotion. Building and leveraging customer trust positively impacts customer base growth. This approach enhances the survival chances during the transition phase for scaling ventures.
Author: Sylvie Steinegger, Msc
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