In E-commerce, Trust is More Crucial than Price
Facebook’s tribulations demonstrate what can happen when a firm loses its users’ trust. New research finds key ingredients to creating trust among online customers — and keeping it.
Based on the research of Robert A. Peterson
When Facebook CEO Mark Zuckerberg was grilled by Congressional committees in April about a massive data breach, a particular word was heard over and over. The word was “trust.” Looking at transcripts, it appears more than 50 times.
The emphasis on trust makes sense to Robert Peterson, the John T. Stuart III Centennial Chair in Business Administration at the McCombs School of Business. “Trust is the foundation of e-commerce, more than price, assortment, or availability,” he says.
What it takes to build and preserve trust is the subject of a new study by Peterson and Yeolib Kim, a School of Information Ph.D. who teaches at South Korea’s Ulsan National Institute of Science and Technology.
Trust is the crucial element, they say, that makes the rest of e-commerce possible. That’s because it takes the place of face-to-face contact. On the internet, sellers and buyers are unable to personally interact, making purchasing inherently more risky than in brick-and-mortar stores.
“In the online environment, there is always some element of risk involved,” Kim says. “You can’t physically handle the product. Trust is a substitute for the physical experience. Once you have that trust, you are willing to buy something.”
He adds, “Facebook’s example shows that it takes multiple transactions or processes to build trust, but it can evaporate easily with one mishap.”
Building Blocks of Trust
What must a retailer do to earn a shopper’s trust online? The question has been studied from many different angles, the researchers found. The problem was that many of the studies couldn’t be compared with one another. They examined different components of trust and measured them in different ways.
“Nobody had thought about how it all fit together,” says Peterson. “You had to find a common metric.”
To make sense of it all, he and Kim synthesized 150 separate studies spanning 1999 to 2015. They identified 16 variables and reanalyzed the underlying data to see which ones related most closely to higher levels of trust. Across all the studies, they found that four of the variables stood out above the rest.
Two were practical ones: the quality of customer service and the usefulness of a website in getting a transaction done.
Kim points to Amazon.com as a seller that has mastered both areas. It recommends items a shopper might like, responds quickly to negative reviews, and makes the final purchase quick and easy. “Amazon’s one-click is a very useful option,” he says. “On some other sites, it depends how many buttons you have to click. The more you have to do, the less useful you perceive a site.”
Protecting Personal Information
Another key variable was privacy. Security breaches have damaged sellers like Target, which lost sales after credit card data of 41 million customers got hacked. The same issue tripped up Facebook after 87 million users unwittingly had personal details siphoned off by political data firm Cambridge Analytica.
“Facebook’s security features, which are constantly tweaked, lacked the tools to protect customer privacy,” Kim says. “It failed in maintaining trust. Maintaining trust is just as important as building trust.”
A final variable was reputation: how well a site cares about its patrons and keeps its promises, in the opinions of its customers.
A strong reputation can compensate for weaknesses elsewhere, the researchers found. In a separate study Peterson and Kim exposed consumers to two websites offering similar products. One was Amazon and the other a mock site created for the study. They discovered that consumers were more likely to come back to Amazon when they ran into obstacles like an item being out of stock.
Trust Relationships: It’s Complicated
Although the researchers identify several qualities that foster trust, they caution that the cause-and-effect connections aren’t simple. A website like Craigslist might appear low on trust because its format offers anonymity to scam artists. But it might rate high on usefulness, accounting for its popularity.
A company can also have good policies internally, but get tripped up by external factors like culture. Take privacy, says Kim. “It’s more important in Western cultures than in Eastern cultures. In Western culture, you could manipulate a privacy statement at the bottom of the page to increase trust. In Korea and Japan, that might not help.”
Demographics can play another confounding role. Studies have shown men to be more trusting overall than women, and students more trusting of e-commerce than non-students.
Further research may uncover more about how all these factors work together. Peterson and Kim have conducted an online experiment on how language can influence trust. In their experiment they tested ways to frame a seller’s communication when it is out of stock for a particular product.
“In the experiment, the website communicated that a particular product was ‘sold out,’ ‘out of stock’ or ‘unavailable,’” says Peterson. “They all mean the same thing, but people think of them with different connotations. If you are told a product is ‘out of stock,’ maybe you will think the company has an inventory problem, but if a product is ‘sold out,’ you might think it is very popular.”
In the meantime, the pair hopes that online vendors can learn from their experiment. In an age of fake news and fake social media accounts, shoppers are more wary than ever about who’s really at the other end of the line. Their caution is best illustrated, Peterson says, by the internet meme of a dog sitting at a keyboard as it remarks: “On the internet, nobody knows you’re a dog.”
“The takeaway for companies is that you don’t necessarily win consumers by having the lowest prices,” he says. “You have to focus on building trust.”
“A Meta-analysis of Online Trust Relationships in E-commerce” was published in the Journal of Interactive Marketing.
Story by Steve Brooks
