trust, risk and performance

This page considers trust, risk and performance.

It covers -

• introduction
• trust
• comparison shopping
• buying online

     introduction

Online and offline, consumers seek clues to assess whether a retailer, government agency or individual is credible. They also judge on the basis of performance. 

That is not new, as evident from from accounts in Paco Underhill's entertaining Why We Buy (London: Orion 1999), Perceived Quality: How Consumers View Stores & Merchandise (Lexington: Lexington Books 1985) edited by Jacob Jacoby & Jerry Olsonn and Trust and Crime in the Information Society (Northampton: Edward Elgar 2005) edited by Robin Mansell & Brian Collins. As noted in the reputation page of the marketing guide elsewhere on this site, many are using the web to express their opinion of that performance.

This page highlights some of the studies of how consumers assess sites and online services. It is an introduction to questions explored more fully in separate guides on privacy, security, marketing and the new economy.

Despite claims by some pundits, consumer behaviour online is not monolithic. Although the web is becoming mainstream, it's not surprising that different groups have different expectations and seek different cues. That's a challenge if you're offering goods and services online, as the market segments you want to capture may be among the more savvy. 

They're also likely to comparison shop, judging your services or information against overseas benchmarks that are just a mouse-click away. Such benchmarking is becoming an issue as Australian markets ask why local retailers, for example, do not match the privacy and feedback policies of overseas competitors.

We have been underwhelmed by the lack of response to queries addressed to webmasters on several major Commonwealth government sites: there seems little point of including an email link if the mail is not checked. Claims by particular agencies that their sites do not feature cookies are regrettably untrue.

     trust

Starting points for considering the nature of trust in cyberspace are

• the detailed 1999 report from the US National Academy of Sciences on Trust In Cyberspace
• the Informed Consent Online project (ICO) at Washington University
• the 2001 Stanford Persuasive Technology Laboratory report (PDF) on factors that affect credibility
• its 2002 report (PDF) on credibility
• Rufus Pichler's 2000 thesis Trust and Reliance-Enforcement and Compliance: Enhancing Consumer Confidence in the Electronic Marketplace (PDF).

Among literature discussed elsewhere on this site we have pointed to Trust & Risk In Internet Commerce (Cambridge: MIT Press 2000) and The Economics of Information Security (New York: Springer 2004) by L Jean Camp, Jason Rutter's From the Sociology of Trust towards a Sociology of E-Trust (PDF) and Bruce Schneier's excellent Secrets & Lies: Digital Security In A Networked World (New York: Wiley 2000).  Schneier is more nuanced than Gail Grant's Understanding Digital Signatures: Establishing Trust over the Internet & Other Networks (New York: McGraw-Hill 1999).

There is a more technical approach in Joseph Reagle's 1996 thesis on Trust in a Cryptographic Economy & Digital Security Deposits: Protocols and Policies. It is of particular interest given Reagle's subsequent work with Cranor and others on consumer responses to privacy policies and H Jeff Smith's Managing Privacy: Information Technology & Corporate America (Chapel Hill: Uni of North Carolina Press 1995), for which as yet there is no equivalent. A popular philosophy treatment is provided in Trust: From Socrates to Spin (London: Icon 2004) by Kieron O'Hara, author of Plato & the Internet (London: Icon 2004).

For those seeking a mathematical approach we recommend Sandeep Krishnamurthy's 2001 paper An Empirical Study of the Causal Antecedents of Customer Confidence in E-Tailers and From Surfing to Buying: The Role of Online Customer Experience in Acquiring and Converting Web Traffic (PDF) by Shivaram Rajgopal, Suresh Kotha & Mohan Venkatachalam.

Our discussion of trustmarks is here; a more detailed discussion of privacy web seals and offline trustmarks is provided here in our detailed Privacy guide. The Design guide features suggestions about online indicators of credibility

     comparison shopping

In the late 1990s some advocates hailed the development of shop bots as a tool for getting the best price by searching across numerous sites.

Typically bots spider prices identified on B2C and B2B sites, collate the results and display a listing that allows an end-user to quickly compare prices for a particular item or for similar items. Rather than laboriously having to find etail sites and then identify prices on those sites one by one, the information is automatically gathered and presented.

We were somewhat more reserved, since great pricing is one thing, actual delivery (and if appropriate return) quite another.

Other advocates promoted rating systems, of varying complexity, so that consumers could advise each other independent of a vendor's advertising or a self-awarded seal.

In practice the performance of such schemes has proved to be quite problematical. There have been claims that particular retailers cook the books in a digital version of payola. Some have used software or litigation to prevent bots trawling their site. Others, such as Amazon, rely increasingly on dynamic pricing - potentially a different figure for every visitor.

Chris Dellarocas' 2000 paper (PDF) Immunizing online reputation reporting systems against unfair ratings and discriminatory behavior and the paper by Erik Brynjolfsson on The Great Equalizer? Consumer Choice at Internet Shopbots are thus of particular interest. 

Jakob Nielsen's 1998 Alertbox on Reputation Management is an excellent introduction to issues raised by the growing number of 'opinion' sites, such as the US Epinions and UK DooYoo - web databases of complaints about hundreds of products and services with authors receiving a royalty each time a published complaint is accessed. 

Complaints portal Ecomplaints perhaps unsurprisingly has had limited success as a venue for consumers to publicly swap messages with corporate targets. Planetfeedback, a site identifying the executives of all major US corporations, appears to enjoy greater popularity.

     buying online

The Information Economy guide elsewhere on this site points to studies of what people buy on the web and who is buying. Interpreting that information is a challenge, as there is a significant regional variation within markets such as the US and between markets such as the UK and Australia.

One example is the report by the London Business School on Business to Consumer eCommerce: an Investigation of Factors Related to Consumer Adoption of the Internet as a Purchase Channel.



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