Baruch College, The City University of New York, USA
While the number of Web users continues to grow very quickly worldwide, only a small percentage of them buy products or services online. The main reason for that is their lack of trust in the online companies and the Web in general as a safe place to make purchases. This chapter reviews and summarizes current research in the area of online customer trust. It discusses how customer perceptions about the company, its Web site, and the Web in general as well as individual customer characteristics affect how they develop trust in the online companies. In conclusion, a number of guidelines for companies are provided to help them increase their customers’ trust in them.
Business-to-consumer (B2C) electronic commerce is by now a well-established part of the retail market, both in the US as well as abroad. However, our understanding of the factors that affect transactions between online companies and customers is still limited. For example, the number of Web users is still growing and has so far surpassed the 500 million mark (NUA Surveys, 2002). However, only about 15% of those users make purchases online (Taylor Nelson Sofres, 2002). There are many reasons why such a large percentage of Web users choose not to make online purchases but the primary reason concerns trust. More specifically, most Web users simply do not trust specific online companies, or the Web in general, enough to make purchases online (Hoffman et al., 1999). It has been documented that trust in the Web-based vendor is one of the critical factors of success in online commerce (Torkzadeh & Dhillon, 2002). Therefore, online companies face the daunting task of inspiring trust in customers who may only experience them through the Web.
The virtual nature of the Web medium presents new challenges to online companies. Customers no longer interact with salespeople or have a direct physical experience with the store and its products. Instead, their experience is mediated through the Web, a twodimensional graphical display without any face-to-face interaction with human representatives of the company and without physical interaction with the company’s products and stores. Off-line research shows that the development of trust most often depends on direct physical experiences with the company’s store and its salespeople (Doney & Cannon, 1997). It is less clear how online customers develop feelings of trust towards the Web-based companies they visit. However, current research in online consumer behavior and specifically on the development of online customer trust provides some guidelines in this area.
Trust has been the topic of research in various fields including psychology and marketing. There have been multiple attempts to define the concept of trust by researchers from various disciplines and backgrounds resulting in multiple overlapping definitions of trust (Luhmann, 1979; Kumar et al., 1995; Mayer et al., 1995; Fung & Lee, 1999; Menon et al., 1999; Stewart, 1999; Gefen, 2002; Koufaris & Hampton-Sosa, 2003a). A review of the vast literature on trust indicates a group of core concepts around which the definition of trust is built. One such concept is uncertainty. The trusting party must experience uncertainty about a potential or existing relationship. That relationship can be personal, social, business, or of any other type. This uncertainty causes the trusting party to experience a perception of risk (Doney & Canon, 1997; Kee & Knox, 1970; Mayer et al., 1995). In turn, this perception of risk is usually based upon the trusting party’s beliefs regarding the ability, integrity, and benevolence of the trustee (Mayer et al., 1995):
Depending on how the trusting party perceives these three characteristics, he or she will display a certain willingness to depend or rely upon the trustee in the expectation of a certain beneficial outcome, or will believe that the trustee will not act opportunistically (Jarvenpaa et al., 2000). It is that willingness to depend or rely on a third party based on beliefs about that party that is the central core of most definitions of trust (Jarvenpaa et al., 2000; Gefen, 2002; Gefen et al., 2003; Koufaris & Hampton-Sosa, 2003a).
Customer trust online presents the same challenge as all aspects of online consumer behavior: the dual nature of the online consumer. Customers of Web-based companies are simultaneously both customers and Web users. In order to understand how they feel, think, and act, one must consider them both as traditional customers as well as end-users of a system (Koufaris et al., 2002). Therefore, when we consider how online customers develop trust in Web-based companies, we must look beyond the traditional marketing/ psychology models of customer trust and combine them with models of end-user behavior.
Overall, customer trust online depends on the following sets of factors:
Perhaps the two most important perceptions about a company that can influence customer trust are its perceived size and perceived reputation. Perceived size indicates the perception by customers of the company’s size (such as number of stores, employees, products and services offered, etc.) but not necessarily the actual size of the company. Research both online and off-line has shown that a large perceived size may increase trust in the company (Doney & Cannon, 1997; Jarvenpaa et al., 2000). This may be because customers assume that a large company has the capabilities necessary to provide them with the services and support they want (Chow & Holden, 1997). A large perceived size may also indicate to customers that the company will be able to compensate them in the case of product failure (Jarvenpaa et al., 2000). Online, there is some evidence that perceived size is also important in the development of trust, but its effect may depend on the type of company (Jarvepaa et al., 2000; Pavlou, 2003).
Perceived reputation is the degree to which people believe in both the company’s honesty and concern towards its customers. A positive perceived reputation of the company may increase customer trust in it (Doney & Cannon, 1997; Jarvenpaa et al., 2000; Koufaris & Hampton-Sosa, 2003a). In the highly competitive world of online commerce, building a positive reputation can be very difficult and expensive. Establishing a continuous and positive relationship with its customers can help a company build a solid reputation in the market, hence the popularity of Customer Relationship Management (CRM). At the same time, a positive reputation can be easily destroyed by a few missteps by the firm, in which it is perceived to be acting in an unfair, dishonest, or otherwise disreputable manner.
One of the impacts of the use of the Web for commerce has been in the area of customization (Roth, 1998). Technologies such as recommender systems and personalized home pages enable companies to provide customized content to their Web users.
The trend, however, has moved beyond customized information into the realm of mass customization of physical products. Companies like Dell, Nike (with NikeID.com), and Reflect.com allow customers to customize their products (computers, shoes, and cosmetics respectively) through the companies’ Web sites. Using the latest Internet-integrated manufacturing and distribution technologies companies can manufacture and deliver those customized products with minimal cost increases (Zipkin, 2001).
Perceived willingness to customize is the customer’s perception regarding the readiness of the company to provide customized products or services to its customers. Research has shown that perceived willingness to customize can be a positive antecedent to customer trust in the company both online and off-line (Doney & Cannon, 1997; Koufaris & Hampton-Sosa, 2003a). This is partly because customers see a company that can customize its products and services as one with enhanced capabilities (e.g., manufacturing, logistical, distribution), a key antecedent of customer trust. Also, in order for mass customization to work, customers are asked to communicate with the company and provide it with specific information as to how they want their product customized. The result is that customers feel that they are being “heard” by the company and their needs are being addressed on a personal level. This can increase the customers’ trust in the company.
The importance of the salesperson in establishing a trusting relationship between the customer and the company has been documented in the marketing literature. Interacting with a salesperson with expertise and one who is likeable and helpful can lead a customer to trust the company itself (Doney & Cannon, 1997). Online, however, customers are unable to interact with a salesperson. Instead, they interact with the Web site. In many ways, the Web site can act as a proxy for the salesperson. The experience of the customer with the Web site may also influence the level of trust by the customer towards the company. Perceiving the Web site as appealing, likeable and helpful can have a similar impact on trust beliefs as when those perceptions are about a salesperson.
One explanation for this proposition is that a well-designed Web site that is useful, user friendly, and pleasant to use is also an indicator of the company’s capabilities. Customer trust in a company can increase when the customer believes that the company has the capabilities and resources to fulfill its promises (Chow & Holden, 1997). In addition, we know that customer trust in an online company is partly determined by trust in its control mechanisms, the main one of which is its Web site, i.e., the tool it uses to enable and secure transactions with its customers (Tan & Thoen, 2000-2001).
More specifically, the usability of a Web site can increase customer trust in the company. The definition of usability of a Web site is centered around the design elements of a Web site and how they affect the use of the site by users (Palmer, 2002). A Web site with high usability will feature easy navigation, appropriate search mechanisms, relevant content, and a consistent interface (Radosevich, 1997; Spool, 1997; Palmer, 2002; Agarwal & Venkatesh, 2002). In general, Web users who perceive a Web site as easy to use and feel in control of their actions while they use it will rate the usability of the Web site as high. In turn, a Web site with high usability will also encourage online customers to trust the company itself (Koufaris & Hampton-Sosa, 2003b).
Especially important is the customer’s perception regarding the security control of the Web site (Koufaris & Hampton-Sosa, 2003a). Online customers are usually concerned about the security of their transactions on the Web site and they expect that an online company’s Web site will secure the exchange of financial information with them (Ranganathan & Ganapathy, 2002). However, these expectations are not always met and fears over stolen credit card numbers, misused private information, and privacy invasions have been a leading reason for many Web users deciding not to buy online (Hoffman et al., 1999). There are various methods for Web sites to indicate that transactions on their Web site are secure, such as seals from trusted third parties (Palmer et al., 2000; Van Den Berg & Van Lieshout, 2001) and online reputation systems (Resnick et al., 2000).
The general appeal of the Web site can also contribute to a climate of trust between the online customer and the company. In general, the experience of the customer after interacting with the site can have an impact on trust. If customers enjoy their visit and they find the Web site useful, they are more likely to find the site appealing. An appealing Web site is one that is fun and interesting to use but at the same time enhances the online customer’s shopping productivity. Online customers who find a Web site appealing are more likely to trust the company itself, similar to the way off-line customers trust a company when they find its salesperson likeable (Koufaris & Hampton-Sosa, 2003b).
Many online users have general perceptions about the Web that can determine their behavior toward all online companies. A critical perception involves the risk involved in buying online. Perceived risk, an essential element in the literature on trust (Mayer et al., 1995; Doney & Cannon, 1997; Pavlou, 2003), has two dimensions: behavioral and environmental. Behavioral risks are related to the actions of specific online companies. Environmental risks are related to the infrastructure of the Web itself. Perceived environmental risk can have a sweeping effect on Web user intention to buy online. Empirical studies have shown that trust in the security of the Web in general can increase trust in a specific company (McKnight et al., 2002b). The magnitude of that effect, however, can be smaller compared to the impact of company-specific perceptions, such as its reputation and size.
Unfortunately, there are many misconceptions among the general Web user population about the security of the Web and the Internet in general. For example, many online users are still concerned that their information can be intercepted and stolen while in transit from their computer to the company servers. There is little general education about the strength of the Secure Sockets Layer (SSL) protocol used widely on the Web and many Web sites do not adequately assure their customers that they use SSL sessions to secure their transactions. There is also a general fear about providing personal and financial information to a company which exists only in a virtual environment and with which the customer has had no physical experience at all. Customers seem more inclined to trust giving their credit card numbers to a gas attendant or a waiter because they are physically present, even though the security of their transaction in that case is not greater (and may actually be lower) than when they provide it to a Web site that uses an SSL secure session.
Online customers have certain individual characteristics that can make them more or less likely to trust an online company even when all the other factors that can increase trust are present. One such characteristic is individual trust propensity. Also known as “disposition to trust,” trust propensity is an individual trait defined as a “general willingness based on extended socialization to depend on others” (McKnight & Chervany, 2001-2002; Ridings et al., 2002). Empirical studies have shown that trust propensity can have either a direct or a moderating effect on the formation of trust (Mayer et al., 1995) and that this effect applies to online shopping as well (Cheung & Lee, 2001; Lee & Turban, 2001).
Another important individual characteristic deals with the level of Web skills of the online consumer. Individual Web skills, i.e., how knowledgeable and capable a user is when using the Web, have been shown to have a significant impact on Web user experience, attitudes, and intentions (Ghani & Deshpande, 1994; Hoffman & Novak, 1996; Novak et al., 2000; Koufaris, 2002). They are similar to the measure of computer self-efficacy which is defined as “an individual judgment of one’s capability to use a computer” (Compeau & Higgins, 1995) and by extension, a Web site. Web users who are not very comfortable with using the Web are less likely to have a positive experience when using a Web site and are therefore less likely to develop trust in an online company. Companies need to address that fact by designing Web sites that cater to the lowest common denominator, the inexperienced Web user, while still providing the advanced functionality that an experienced Web user would enjoy and expect.
Based on the current research on the development of trust in the company by online customers, the following guidelines emerge to help Web-based companies increase their customers’ trust in them:
Earning the online customer’s trust is a crucial factor for the success of all online companies. As the recent statistics show, most online companies have not yet achieved high enough levels of trust in the general Web user population. Hence, the vast majority of Web users do not buy online. This chapter has provided a discussion on the factors that can increase online customer trust and has presented a set of guidelines for companies that can enable them to achieve that goal. It is one step in creating a trusting environment for customers on the Web, which is essential for maintaining the growth of online commerce.
Agarwal, R., & Venkatesh, V. (2002). Assessing a firm’s Web presence: A heuristic evaluation procedure for the measurement of usability. Information Systems Research, 13(2), 168-186.
Chen, L.-D., Gillenson, M. L., & Sherrell, D. L. (2002). Enticing online consumers: An extended technology acceptance perspective. Information & Management, 39(8), 705-719.
Chow, S., & Holden, R. (1997). Toward an understanding of loyalty: The moderating role of trust. Journal of Managerial Issues, 9(3), 275-298.
Compeau, D. R., & Higgins, C. A. (1995). Computer self-efficacy: Development of a measure and initial test. MIS Quarterly, 19(2), 189-211.
Doney, P. M., & Cannon, J. P. (1997, April). An examination of the nature of trust in buyer-seller relationships. Journal of Marketing, 61, 35-51.
Fung, R. K. K., & Lee, M. K. O. (1999). EC-trust (trust in electronic commerce): Exploring the antecedent factors. Paper presented at the Fifth Americas Conference on Information Systems, Milwaukee.
Gefen, D. (2002). Customer loyalty in e-commerce. Journal of the Association for Information Systems, 3(1), 27-51.
Gefen, D., Karahanna, E., & Straub, D. W. (2003). Trust and TAM in online shopping: An integrated model. MIS Quarterly, 27(1), 51-90.
Ghani, J. A., & Deshpande, S. P. (1994). Task characteristics and the experience of optimal flow in human-computer interaction. The Journal of Psychology, 128(4), 381-391.
Hoffman, D. L., & Novak, T. P. (1996). Marketing in hypermedia computer-mediated environments: Conceptual foundations. Journal of Marketing, 60(3), 50-117.
Hoffman, D. L., Novak, T. P., & Peralta, M. (1999). Building consumer trust online. Communications of the ACM, 42(4), 80-85.
Jarvenpaa, S. L., Tractinsky, N., & Vitale, M. (2000). Consumer trust in an Internet store. Information Technology and Management, 1(1-2), 45-71.
Kee, H., & Knox, R. (1970). Conceptual and methodological considerations in the study of trust. Journal of Conflict Resolution, 14, 357-366.
Koufaris, M. (2002). Applying the technology acceptance model and flow theory to online consumer behavior. Information Systems Research, 13(2), 205-223.
Koufaris, M., & Hampton-Sosa, W. (2003a). The development of initial trust in an online company by new customers. Information & Management, 41(3), 377-397.
Koufaris, M., & Hampton-Sosa, W. (2003b). Replacing the salesperson: The effect of Web site perceptions on initial trust in the company. Working Paper Series: Zicklin School of Business, Baruch College, CUNY.
Kumar, N., Scheer, L. K., & Steenkamp, J.-B. E. M. (1995). The effects of perceived interdependence on dealer attitudes. Journal of Marketing Research, 32(3), 348-356.
Lee, M. K. O., & Turban, E. (2001). A trust model for consumer Internet shopping. International Journal of Electronic Commerce, 6(1), 75-91.
Luhmann, N. (1979). Trust and power. Chichester, UK: John Wiley and Sons.
Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An integrative model of organizational trust. Academy of Management Review, 20(3), 709-734.
McKnight, D. H., & Chervany, N. L. (2001-2002). What trust means in e-commerce customer relationships: An interdisciplinary conceptual typology. International Journal of Electronic Commerce, 6(2), 35-59.
McKnight, D. H., Choudhury, V., & Kacmar, C. (2002b). The impact of initial consumer trust on Intentions to transact with a Web site: a trust building model. Journal of Strategic Information Systems, 11(3-4), 297-323.
Menon, N. M., Konana, P., Browne, G. J., & Balasubramanian, S. (1999). Understanding trustworthiness beliefs in electronic brokerage usage. Paper presented at the International Conference on Information Systems, Charlotte, NC.
Novak, T. P., Hoffman, D. L., & Yung, Y.-F. (2000). Measuring the customer experience in online environments: A structural modeling approach. Marketing Science, 19(1), 22-42.
Palmer, J. W., Bailey, J. P., & Faraj, S. (2000). The role of intermediaries in the development of trust on the WWW: The use and prominence of trusted third parties and privacy statements. JCMC, 5(3).
Pavlou, P. A. (2003). Consumer acceptance of electronic commerce – Integrating trust and risk with the technology acceptance model. International Journal of Electronic Commerce, 7(3), 69-103.
Radosevich, L. (1997). Fixing Web-site usability. InfoWorld, 19(50), 81-82.
Ranganathan, C., & Ganapathy, S. (2002). Key dimensions of business-to-consumer Web sites. Information & Management, 39(6), 457.
Resnick, P., Zeckhauser, R., Friedman, E., & Kuwabara, K. (2000). Reputation systems. Communications of the ACM, 43(12), 45-48.
Ridings, C. M., Gefen, D., & Arinze, B. (2002). Some antecedents and effects of trust in virtual communities. Journal of Strategic Information Systems, 11(3-4), 271-295.
Roth, M. S. (1998). Differentiating your presence on the Web with the 4Cs. Marketing Management, 6(4), 24.
Spool, J. (1997). Web site usability: A designers guide. San Francisco, CA: User Interface Engineering (UIE).
Stewart, K. J. (1999). Transference as a means of building trust in World Wide Web sites. Paper presented at the International Conference on Information Systems, Charlotte, NC.
Surveys, N. (2002). How many online? NUA Internet Surveys. Retrieved September 26, 2002 from: http://www.nua.ie/surveys/how_many_online/index.html
Tan, Y. H., & Thoen, W. (2000-2001). Toward a generic model of trust for electronic commerce. International Journal of Electronic Commerce, 5(2), 61-74.
Taylor, N. S. (2002). Global e-commerce study reveals 50 per cent increase in online shoppers in past 12 months (Vol. 2002): Taylor Nelson Sofres Interactive.
Torkzadeh, G., & Dhillon, G. (2002). Measuring factors that influence the success of Internet commerce. Information Systems Resarch, 13(2), 187-204.
Van Den Berg, R. J., & Van Lieshout, J. M. (2001). Finding symbolons for cyberspace: addressing the issues of trust in electronic commerce. Production Planning & Control, 12(5), 514-524.
Zipkin, P. (2001, Spring). The limits of mass customization. MIT Sloan Management Review, 42, 81-87.
Section I - Consumer Behavior in Web-Based Commerce
Section II - Web Site Usability and Interface Design
Section III - Systems Design for Electronic Commerce
Section IV - Customer Trust and Loyalty Online
Section V - Social and Legal Influences on Web Marketing and Online Consumers