Trust... Explained

What is trust?

The hallmark of business success stems from the extent of ‘fit’ enjoyed by two transaction parties. The shift towards relationship marketing, as opposed to one-off transactions, has seen organisations focusing on establishing and building enduring relationships (Morgan and Hunt 1994). Trust, at both an Interpersonal and organizational level, has been identified by numerous researchers as one of the key drivers of success in any relationship.

The invention and expansion of the internet has succeeded in altering business dynamics, essentially as a result of the higher level of risk involved in online relationships (e.g. financial losses and privacy intrusion). As such, trust, an element that easily conferred a competitive advantage became a basic requirement in attracting customers. Trust in online relationships has been widely discussed and studied in literature, however, the extreme majority of the scholars focused on online commerce (Buttner and Goritz 2008 and Hanai and Oguchi 2009). While very few discussed the importance of trust and trustworthiness in other forms of online relationships that may not necessarily involve a monetary risk (e.g. purchase) but might present other forms of risks, such as privacy intrusion in online social communities, for instance.

Despite the considerable effort made by researchers to understand the context of trust in interpersonal and organizational business relationships, some basic dimensions of trust are still subjects of academic debates, including the definition of trust itself and its influence on the performance of the relationship and the parties involved. In one of the most cited papers on trust, Mayer, Davis, and Schoorman identified trust as "the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party" (1995:712). Despite being considered as a masterpiece in trust literature, one argument that can be made against the definition is whether vulnerability is motivated by a willingness or a need, as a prerequisite in interpersonal relationships as suggested by Rosseau et al (1998:395) in their definition of trust being "a psychological state comprising the intention to accept vulnerability based on positive expectations of the intentions or behaviour of another".

Does it matter?

To understand the importance of trust, think of the decision of whether or not to initiate a relationship (e.g. purchasing a product or registering at a social networking portal) as being a weighting of two discrete elements: perceived gains and perceived risks (Donald and Stuart 1964, Kaushik, Michelle and Louis 1999 and Salam, Rao and Pegels 2003). This simplified model of decision making is extremely useful in illustrating the importance of trust, which has a direct influence on decision making by reducing the perceived risk or/and increasing the perceived gain. Furthermore, many scholars suggested a positive impact of trust on a relationship, most notably the loyalty of both parties to the relationship (Alhabeeb 2005, Harris and Mark 2004 and Sirdeshmukh and Barry 2002). For these reasons, trust was heavily studied in marketing, not only to understand the benefit of building trust with consumers and business partners, but also on how to build such trust through positioning a business as being trustworthy.

How to gain trust?

Mayer, Davis, and Schoorman 1995, describe trustworthiness as the building block of trust. According to them, it results in the development of a positive perception about an organisation’s capability and message, this view was further reinforced by Benbasat, Gefen and Pavlou (2008). Early literatures on Trustworthiness identify such elements as consistency, responsibility, benevolence, honesty, fairness, problem solving, competence and being helpful as important positive perception builders about an organisation (Altman and Taylor 1973, Dwyer and LaGace 1986, Rotter 1971 and Morgan and Hunt 1994). These elements were subsumed in the three elements of ability, integrity and benevolence, identified by Mayer, Davis, and Schoorman 1995.

Bolton, Loebbecke, and Ockenfels 2008:4 identify ‘reputation’ as a key fundamental in conveying reliability and building trustworthiness, one that tasks the capacity of an organisation to deliver to stakeholders in accordance with their expectation. This view is buttressed by Ennew and Sekhon 2007 who posit that good reputation is the conscious outcome of habitual ‘internal policy’ and ‘external communications’; a view that is consistent with that put forward by Alhabeeb 2008; Doney and Cannon 1997, who opined that for trustworthiness to be effectual, it must be integrated into the core value of an organisation and translate into the day-to-day operations with consumers. Organisations can achieve this by exploring the experiences of users of their product through product reviews and using this as a basis to convey trustworthiness. Bolton, Loebecke, and Ockenfels 2008 show that buyers place more value on reputation over price.

Typically, in online environment, consumers consciously investigate the trustworthiness of an organisation before making a transactional commitment, especially with transactions that involve high risk. However, focusing on positive physical attributes of trustworthiness are not enough. The presence of the elements of ability, integrity, and benevolence does not insulate the consumer from manipulative behaviour. Each of the attributes can be feigned, argues Kramer 2009. In the offline business environment, regulatory authorities are able to institute checks that ensure that companies comply with acceptable practice. However, in the online environment, this is more challenging, and so the risk level for the consumer is higher. One such critical risk element is consumer data security. For instance, DoubleClick, an online advertising agency that keeps track of ‘people’s revealed preferences’ (Zadek 2007: 54) , in pretext, turned around to market this information to other companies, by ‘correlating people’s records of visit to websites with their names and addresses’ (Zadek 2007:54).

Although Buttner and Goritz 2008 argue that Trustworthiness can sometimes play a mediating role between perceived risk and actual purchase, the literature on how consumers can validate the claims of companies focus on third party product reviews, which are based on past experience and are insufficient in their usage to forecast future performance (Kramer 2009). Furthermore, the work of Bolton, Loebecke, and Ockenfels 2008 identify the tendency for organisations to pursue trustworthiness for profit gains alone. The effect is that, consumers, wary of this, usually respond to any change by discontinuing transaction with such organisation. The suggestion however, is that consumers would have to ignore previous losses, a notion which impacts on the consumers future dealing with other organisations by heightening his perception of risk.

Apparently, trust is a critical element in bolstering business relationships as it can result in the creation of loyal customers, highly conscious of the costs of switching from one brand to another. Organisations are the major beneficiaries from such a commitment and so need to work hard in ensuring that they do not leave the customer in doubt of their trustworthiness.

References:

Alhabeeb, M. (2005). Consumer trust and product loyalty. Proceedings of the Academy of Marketing Studies 10(1)

Altman, I. and Taylor, D. (1973) ‘Social Penetration’, New York: Holst, Rinehart, Winston

Benbasat, I., Gefen, D. and Pavlou, P. (2008) A Research Agenda for Trust in Online Environments. Journal of Management Information Systems 24(4), 275-286.

Bolton, G., Loebbecke, C. and Ockenfels, A. (2008) Does competition promote trust and trustworthiness in online trading? An experimental study. Journal of Management Information Systems 25(2), 145-169

Buttner, O. and Goritz, A. (2008). Perceived trustworthiness of online shops, Journal of Consumer Behaviour 7: 35-50

Donald, C. and Stuart, R. (1964) Perceived Risk and Consumer Decision-Making: The Case of Telephone Shopping. Journal of Marketing Research (1), 2-39

Doney, P. and Cannon, J. (1997). An Examination of the Nature of Trust in Buyer-Seller Relationships. Journal of Marketing 61, 35-51

Dwyer, F. and LaGace, R.(1986) On the Nature and Role of Buyer-Seller Trust. AMA Educators Conference Proceedings 52, 40-45

Ennew, C. and Sekhon, A.(2007) Measuring trust in financial services: the Trust Index. Consumer Policy Review 17(2), 62-68

Hanai, T. and Oguchi, T. (2009). How do consumers perceive the reliability of online shops?. Cyber-psychology: Journal of Psychosocial Research on Cyberspace, 3(2)

Harris, L. and Mark, G. (2004), “The Four Stages of Loyalty and the Pivotal Role of Trust: A Study of Online Service Dynamics,” Journal of Retailing 80 (2), 139–58

Kaushik M., Michelle, R. and Louis, R. (1999). An examination of perceived risk, information search and behavioural intentions in search, experience and credence services. Journal of Services Marketing 13(3), 208-228

Kramer, R. (2009) Rethinking Trust. Harvard Business Review 87(6), 68-77

Mayer, R., Davis, J. and Schoorman, F. (1995) An integration model of organizational trust. The Academy of Management Review 20(3). 709-734

Morgan, R. and Hunt, S. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing 58, 20-38

Rotter, J. (1971) Generalized expectancies for interpersonal trust. American Psychologist 26, 443-452

Rousseau, D., Sitkin, M., Burt, R., & Camerer, C. (1998). Not so different after all: A cross-discipline view of trust. Academy of Management Review, 23(3), 393-404

Salam, A., Rao, H. and Pegels, C. (2003) Consumer-Perceived Risk in E-Commerce Transactions. Communications of the ACM 46(12)

Sirdeshmukh, D. and Barry, S. (2002). Consumer Trust, Value, and Loyalty in Relational Exchange. Journal of Marketing 66 (1), 15–37

Zadek, S. (2007) The Civil Corporation: The New Economy of Corporate Citizenship. London: Earthscan