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Trust And Its Importance In E Commerce Marketing Essay

Abstract

E-commerce and online shopping is growing exponentially every day. Trust is a critical factor in the online purchasing decision of the consumer. The lack of trust is a fundamental reason why many users won’t purchase goods or services from e-commerce Web sites. Much research ahs been done on the area of trust and e-commerce. However, no single, comprehensive definition exist do to the complex notion of trust and the factors that go into a the development of trust in an e-vendor. This paper attempts to outline the need for a single yet comprehensive definition to be used in e-commerce research, the factors that go into creating trust, and the importance of trust in e-commerce.

Introduction

Trust plays a vital role in a variety of human interactions. These include everything from cooperation, network relations to crisis management. The concept of trust has been studied within many disciplines, including philosophy, sociology, economic, organization theory and technology (Al-Dwairi & Kamala, 2009). Over the years, researchers have continually tried to construct models for trust in electronic commerce that include a variety of factors that affect consumers’ trust and their decision to transact online.

Trust means different things to different people. This is due to it being based on such things as predispositions, personal experiences and personal goals. “In terms of the Internet, several factors make trust more difficult to build. Building trust into—and maintaining trust in—an e-commerce system is difficult because so many different elements, and their interactions, can impact user trust (Ofuonye, 2008).” Because trust is a subjective, user-centric, context dependent concept, it’s elusive, and it is unlikely there will ever realize a unique, universally acceptable definition (Ofuonye, 2008).

This a literature review aims to establish the background knowledge of trust and its relation to e-commerce by focusing on the following questions:

What is trust?

What factors affect trust?

What is the importance of trust in e-commerce?

It is important to understand the factors that might influence consumers’ intentions to of interacting with businesses. As discussed, one factor that is recognized as key for the continued growth of e-commerce is trust

What is trust?

According to Webster’s Dictionary, trust can be defined in a broad sense as the reliance on the integrity, strength, ability, surety, etc., of a person or thing; or the confident expectation of something. “Trust has long been regarded as a catalyst for buyer-seller transactions that can provide consumers with high expectations of satisfying exchange relationships (Pavalou, 2003).” As evidenced in past and current literature, many researchers maintain that trust is essential for understanding interpersonal behavior and economic exchanges. Trust is identified as a psychological state that people have the intention to accept vulnerability based on their beliefs that transactions with sellers will meet their confident transactions expectations due to the sellers’ competence, integrity, benevolence, and predictability (Pavlou et at, :McKnight et al,2001; Gefen et al, 2003) 5, 15, 27]. In e-commerce, the importance of trust is elevated due to the high degree of uncertainty and risk present in most on-line transactions. Jarvenpaa et al. empirically showed the favorable effect of trust on consumer purchase intentions (Jarvenpaa et al, 1999) and (Jarvenpaa et al, 1999a). Kim and Benbasat state that in regards to online shopping, consumers are vulnerable and likely to expose themselves to loss (Kim & Benbasat, 2003). They will also feel greater uncertainty and heightened risk (Ha & Stoel, 2003) and be reluctant to purchase in online environments (Gefen, Benbasat, & Pavlou, 2008; Pavlou, 2003).

Definitions of Trust

The notion of trust is complex and thought provoking. Hence, research literature on trust tends to be fragmented and the definitions show a high degree of disparity. No single, universally accepted definition of trust exits, yet there is general agreement that to engender trust one must act in a dependable, ethical, and desirable manner (Hosmer, 1995; Rotter, 1971). Trust implies that the other party can be believed (Gefen, 2000; Gefen, 2002b; Gefen, Karahanna, & Straub, 2003).

Source: Gefan et al., 2003.

Moorman, Zaltman and Deshpande’s define trust as: “a willingness to rely on an exchange partner in whom one has confidence (Moorman, Zaltman, & Deshpande,1992). ” This definition covers two approaches in the literature; firstly, trust as a belief, sentiment or expectation about the trustworthiness of an exchange partner, secondly as an intention or behavior reflecting vulnerability and uncertainty on behalf of the party who trusts, hereto referred to as the ‘trustor’. According to Moorman et al., both the belief and the intention/behavior components must be present if we are to speak of trust.

Mayer et. al define 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 (Mayer et al., 1995).”

Korsgaard et al. argue that trust is the confidence that team members have in the good will and honesty of their leader (Korsgaard, Schweiger and Sapienza, 1995). Similarly, Zucker’s definition trust does not include willingness but relates it in terms of confidence. Rather She has defined trust as “a set of shared social expectations that are essential for and determine social behavior, enabling individuals to respond to each other without the explicit specification of contractual details (Zucker,1986).” Hart and Saunders have defined trust as the confidence that another party will behave as expected, combined with expectations of the other party’s good will (Hart and Saunders, 1997 ). This trust is composed of a perception of the partners’ competence, openness, caring, and reliability. McAllister defines trust as “the extent to which a person is confident in, and willing to act on the basis of, the words, actions, and decisions of another” (McAllister, 1995). In the context of e-commerce, Gefen defines trust as a single dimension construct dealing with a consumer’s assessment that the vendor is trustworthy (Gefen, 2000). One can see that the definitions of trust are as varied and numerous as the research conducted on the subject.

Due to the lack of a single useful definition, McKnight and Chervany attempted to generalize the meaning of trust. They studied the meanings of trust in eighty trust-related research materials including various articles and books across different disciplines— psychology, social psychology, sociology, economics, political science, management, and communications. McKnight and Chervany then published the findings, which was confirmed with ninety-three trained students. They identified that there are 17 definitions of trust on average. These definitions are merged into five main categories, which are competence, predictability, benevolence, integrity and other (McKnight & Chervany, 2001)

Table 2: Categories of the trust definitions

Competence

Predictability

Benevolence

Integrity

(20.4%)

(6.1%)

(38.8%)

(26.5%)

Good, moral

Honest

Competent

Good will

Credible

Expert

Predictable

Benevolent, caring

Reliable

Dynamic

Responsive

Dependable

Source: McKnight and Chervany (2001, p. 3)

Factors Affecting Trust

As discussed above, it is clear that trust contains many meanings. Without a specific definition, it is difficult to convey what researchers mean in their work. It is also important to note that trust should not be narrowly defined since it will loses its original meanings. Therefore, to address all these aspects, in this research, trust in online shopping is defined as consumers’ thought about e-vendors being trustworthy, which contains one or more aspects of trust including: competence, benevolence, and integrity. Another factor that was common throughout the literature was as a related factor to trust was risk. Without the presence of a perceived risk, trust cannot be formed.

Benevolence

Bhattachrjee defines benevolence as: “Whether or not the firm: 1) Demonstrates receptivity and empathy toward users’ concerns and needs, and 2) Proactively makes good faith efforts to resolve users concerns and the third item is assessing overall firm benevolence (that is whether it acts in users’ best interest (Bhattachrjee (2002)”. Benevolence can be stimulated by generating opportunities for the structuring of a long lasting relationship between trustor and trustee. Riegelsberger et. al argue that “strong feelings of benevolence only evolve over repeated episodes of trusting and fulfilling” (Riegelsberger et al, 2005:402). Benevolence behaviors (interpersonal cues) can be perceived as manipulative and artificial behaviors if they are not genuine (Riegelsberger and Sasse, 2002). Therefore, benevolent behaviors should be genuine and not for strategic reason, otherwise they can spoil trust. This is why “ill-considered use of these cues can decrease both trustworthiness and usability of an e-shop” (Riegelsberger and Sasse, 2002).

Competence

A company’s competency can also influence consumers’ online trust and purchase intention (Balasubramanian et al., 2003; Koufaris and Hampton-Sosa, 2004), including features such as company size, good reputation, willingness to customize (Koufaris and Hampton-Sosa, 2004), and interactions with online consumers. Jarvenpaa states that “most consumers assume that a large company has better capabilities to fulfill their wants and demands” (Jarvenpaa et al., 2000) and increase their online trust (Koufaris and Hampton-Sosa, 2004). It is also proposed that a company with positive reputation does behave opportunistically, willingly continues to maintain its reputation (Doney and Cannon, 1997; Figueiredo, 2000; Jarvenpaa et al., 2000). Pennington et al., add that that a company with positive reputation responds to consumers’ concerns about products or services (Pennington et al., 2003). The perception of a company that is willing to customize has a positive relationship with consumers’ online trust and loyalty, and drives consumers to more actively participate in transaction processes (Koufaris and Hampton-Sosa, 2004). The availability of inter-consumer communications assists online consumers and helps to influence the perception of trustworthiness about a company; in this way, consumers are treated as a shared “family” by sharing information/value-beliefs, and feeling belongingness (Luo, 2002).

In defining competence Kim and Tadisina (2005:3) states “a customer’s belief that an e business has ability to do business”. Here, ability or being capable is the key to vendor’s competency. This is why “if a person feels someone lacks ability necessary for the relationship, this person will not place trust in that someone” (Lanford and Hubscher, 2004:316). The crucial point here is to convince consumers that a vendor has the ability to deliver products or services to the consumers. This is the stage at which a vendor has to offer varieties of values and assurances in order to meet consumers’ expectations.

Integrity

Koufaris & Hampton-Sosa state, “integrity implies that the trustee follows moral and ethical principles that are acceptable to the trusting party (Koufaris & Hmpton-Sosa (2004)”. Ridings et. al also state: “Integrity is the expectation that another will act in accordance with

socially accepted standards of honesty or a set of principle that trustor accepts, such as not telling a lie and providing reasonably verified information. …. It is closely linked with benevolence that allows community to properly function (Ridings et al, 2002).” While Belanger et al (2002:251) define integrity as “the evidence of the marketer’s honesty and sincerity”.

There is a close relationship between benevolence and integrity which in turn cause them to be interpreted as the same. In other words, integrity and benevolence might have the same meaning in the online realm (Ridings et al, 2002). The general perception of integrity focuses more on the product price, quality, and dependability aspects.

Risk.

According to Mayer et al., perceived risk is defined as the “trustor’s belief about likelihood of gains or losses outside of considerations that involve the relationship with the particular trustee (Mayer, Davis, and Schoorman, 1995).” Adopting their definition of perceived risk in the context of trust and applying it to the context of online trust, perceived risk of an online trust transaction involves the assessment of factors that are external to both the e-vendor and the customer. In other words, a customer’s perceived risk in an online transaction is determined by factors that are not in control of either the customer or the e-vendor. The perceived level of risk is compared to the trusting attitude of an e-vendor. Customers will demonstrate trust intention or trust behavior only when the level of trust exceeds the level of perceived risk (Mayer, Davis, and Schoorman, 1995).

Perceived risk is situational and involves the assessment of possible losses and gains in an interaction. An individual’s perceived risk of the situation is therefore posited to moderate the relationship between one’s trust attitudes and behavioral intention to trust (Mayer, Davis, and Schoorman, 1995).. The level of trust is compared to the level of perceived risk, and if risk is higher than trust attitudes, individuals will be less likely to engage in trusting behavior. Conversely, if the level of perceived risk is lower than the level of trust, individuals will be more likely to engage in trusting behavior.

Source: Ofuonye, 2008

Trust in e-commerce

“The Internet has become an essential business marketing paradigm related to the development of platform for trading, distributing and selling products this B2C e-commerce is trust (Corbitta , Thanasankita & Yib, 2003).” Trust is a fundamental between organisations, among organisations and principle of every business relationship Hart and Saunders, 1997). Quelch and Klein noted, ‘‘trust is a critical factor brought e-commerce to an entirely new level in stimulating purchases over the Internet (Quelch, L.R. Klein, 1996).’’ While Keen argues that the most significant long-term barrier for realising the potential of Internet marketing to consumers was the lack of consumer trust, both in the merchant’s honesty and in the merchant’s competence to fill Internet orders (Keen, 1997). Trust is a crucial factor on the Internet since an e-vendor is considered a business entity with which consumers are economically engaged in online transactions. “Trust is considered as the key factor for maintaining sustained relationships between the transacting parties. Slyke et al. argued that in Web-based shopping, there may be increased uncertainty with respect to e-vendors since consumers have no direct face-to-face interactions with them (Slyke, 2004). Moreover, vulnerability for consumers stem from the fact that they should provide their personal and financial information to e-vendors in order to complete their online transactions. This puts consumers at risk because the online environment exposes them to the threat of possible opportunistic behaviors by e-vendors such as masquerading, misuse of personal information, and even credit card fraud (Slyke, 2004). Pavlou and Jarvenppa et. al state that for this, perceived risk negatively influences consumer’s intention to transact online and decreases the likelihood of such transactions. Therefore, in this arena, trust helps consumers overcome perceptions of uncertainty and perceived risk, and engage in trust relationships with e-vendors (Jones and Leonard, 2008).”

Importance of Trust in E-commerce

Doubt, lack of trust is a fundamental reason why many users won’t purchase goods or services from e-commerce Web sites. Evidence suggests that the principal reasons why people do not purchase via the internet are related to online security and policy, reliabilities of companies (Gefen, 2000), and web site technology. Online trust is an important determinant for web sites to succeed in marketplace (McKnight and Chervany, 2001; Balasubramanian et al., 2003; Grabner-Krauter and Kaluscha, 2003; Koufaris and Hampton-Sosa, 2004), and for retaining long-term relationships with consumers (Reichheld and Schefter, 2000; Gefen et al., 2003).

The importance of trust is elevated in e-commerce because of the high degree of uncertainty and risk present in most on-line transactions. Jarvenpaa et al. empirically showed the favorable effect of trust on consumer purchase intentions . Thus, the role of trust is of fundamental importance for adequately capturing consumer behavior in e-commerce. Perceived risk is also an important element of B2C e-commerce that is likely to affect consumer

behavior.

Consumers and businesses must feel confident that their transactions will not be intercepted or modified, that both sellers and buyers own the identity they claim, and that the transaction mechanisms that are available are secure and legal. “There is a growing body of research literature dealing with online trust, in which e-commerce is one prominent application. Several studies contend that e-commerce cannot fulfill its potential without trust (Kuttainen, 2005.)”

“In research on business-to-consumer (B2C) e-commerce, trust is regarded as a mental short-cut to a buying decision, where the buyer is faced with the uncertainties of product quality and vendor reputation (Grabner-Kräuter, 2002). Some suggest that trust can turn a potential online consumer from a curious “window shopper” to an actual buyer (McKnight, Choudhury,

Kacmar, 2002). Empirical evidence indicates that knowing and trusting the web site are the overriding concerns for Internet consumers when doing business with an online vendor (Reichheld and Schefter, 2000). The literature on online trust essentially makes the assumption that risk and dependence, such as giving out personal and payment information to an e-vendor, is higher in e-commerce than in traditional, physically conducted commerce. Therefore

the need for trust also is higher (Kuttainen, 2005)”

Trust is a crucial element in any business discipline and transformation, which involve information technology (Journal of Strategic Information System Editorial, 2002). In relation to this belief, Tang et al (2003:342) state, “Trust is the foundation upon which commerce is built, and in the virtual world it may be the fuel for the locomotion”. Lee and Turban (2001) highlight lack of trust as the most commonly cited reason in market surveys why consumers do not shop online. The authors argue that “the importance of trust in e-commerce cannot be overestimated” (p.77). This claim is motivated by the fact that shopping on the Internet is more uncertain and riskier than traditional shopping. The reason for this is that online shops are not well known to the consumers, the consumer has no opportunity to physically examine the product before buying, and the consumer cannot protect any sensitive private or financial information that the seller receives (ibid). Other factors that contribute to the higher level of uncertainty in e-commerce environment are:

“Lack of physical contact, in terms of location, touching goods and the human factor (face-to-face or verbal communication). This limits the consumer ability for assessing the quality and suitability of a product (Lynch et al, 2001).

Not being able to observe body language and emotional signals which might have a positive effect on building a trustworthy relationship between the customer and the vendor (sales person). In the absence of a live social interaction between a buyer and a seller, the quality assessment of a product or services becomes difficult in the online environment compared with the traditional commerce. For example, when a sales person is asked for more detailed-information of a product or service (just for being sure of the satisfactory level of the quality or the price of that product or service). Hence, in computer mediated environment, many signals of personal interaction are absent (e.g. facial expression, gesture, body language), (Krauter and Kaluscha, 2003). This also results in a consumer being unable to assess the integrity, benevolence, or ability of vendor as easy as in the traditional commerce.

The lack of control and the limitation of tracking of the purchase procedures after sending information from the consumer (Personal Computer) to a web vendor’s server. Despite the fact, that many web vendors claim that they use encryption system. However, there is a possible risk of secondary use of the consumers’ information while it is transmitted and settled on the business side server. The encryption system works through an electronic channel, and not at the server side of company. It means all consumers’ information exists on the server of the vendor without encryption and others at the server side can have access to this information (Khazaei, 2006).”

“Apart from the short-term functions of trust in B2C e-commerce , trust also provides several long-term benefits to e-vendors. These include enhancement of ecommerce acceptance ) and e-commerce adoption, maintenance of long-term relationships between e-vendors and customers , establishment of consumer commitment, improvement of customer satisfaction, increase in customer loyalty, gaining a competitive advantage, price tolerance, a decrease of privacy concerns, and forgiving occasional mistakes made by e-vendors (Pittayachawan, 2007.)”

Conclusion

This research offers a beginning point of understanding between the relationships of trust, the factors affecting trust and the importance of trust in B2C e-commerce. Future research may provide some additional insights into the nature of electronic trustworthiness, and ultimately ways to inspire trust in online transactions. It is clear that given the number of different definitions of trust, that there needs to be work done to determine a single yet comprehensive definition to be used in e-commerce research. Furthermore, continued research is necessary to quantify existing levels of consumer trust in e-commerce and online shopping,

The findings of this review also revealed that trust has a definite impact on consumer behavior in online shopping. Qualities of e-vendors including but not limited to competence, integrity and benevolence affect consumer confidence, consequently their trust, and then affect consumer trust towards e-vendors and e-commerce. Trust positively impacts satisfaction and commitment, which are important components driving consumers to commit to purchases. These outcomes lead to sales and growth of e-commerce.

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