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Seal of Approval

Over the summer I read an article about how certain writers were manipulating Amazon.com's book reviews by visiting the site and writing their own reviews under fake names. According to the story, some of them were well-known authors.

On some level, it is kind of amusing to think about some literary giant getting caught with his or her pants down for playing what pretty much amounts to a silly hoax. On the other hand, these types of tactics lower the integrity of Amazon's reviews and make them less reliable and thus a less valuable tool for consumers.

As we've seen a number of times this year, when companies try to manipulate public perception in a way that is below board, the end result is a public relations hit when their actions are eventually exposed. Silly or not, self-authored book reviews damaged the trust that other users had placed in Amazon's ratings. Apparently, it was a widespread and serious enough issue that Amazon made significant changes to the product review policy.

Trust has always been a necessary ingredient for commerce to thrive. And it's equally necessary today -- perhaps even more so. We need consumers to feel safe online if this industry is to reach its potential. We need to drive home the perception that credit card data won't be hacked. We need to promise that shared personal information won't be misused, and then we need to live up to that promise.

More and more, we're realizing that there's a payoff to building trust. According to Dr. Martha Rogers of Peppers & Rogers, a consulting firm focused on customer-based business strategy, "If you as a company do your job right in collecting and protecting the information of your customers and use that information wisely, you will eventually find yourself in a position to anticipate what the customer will need next. And instead of buying customer loyalty you'll be selling loyalty to customers."

So how do we build trust? I took a look at a few organizations that are tasked with increasing consumer trust online. The first are the seal programs, and the second are ratings companies. I wanted to see how effective these companies are at building trust, and start to look at the potential payoff to marketers who are successful at building an environment of trust.

Here is the Chapell view on trust metrics.

Privacy Seal Programs

Seals are designed to give prospective patrons a sense of trust, safety and confidence that a site displaying a seal won't do anything improper with personal or credit card data, nor will they let evil doers grab hold of that data. The premise behind an online seal is not unlike that of the Good Housekeeping Seal of Approval that my parents' generation found comforting. Consumers recognize a Web site displaying a seal as being a high quality site, or at least that's the idea.

Two of the major privacy-seal programs are BBBOnLine, a subsidiary of the Council of Better Business Bureaus (BBB) in Arlington, Virginia, and TRUSTe, based in Cupertino, California. With a history that spanned over 80 years, the BBB was already well known when they established their online seal programs. "The Better Business Bureau was created by the business community during the early part of the 20th Century back when consumer products liability and standards were basically non-existent," says BBBOnLine Executive Director Gary Laden. "Similarly, the BBB Online Privacy seal was essentially designed to help establish and enforce business standards for ecommerce businesses."

The CommerceNet Consortium and the Electronic Frontier Foundation founded TRUSTe in 1997. TRUSTe's mission is to provide a vehicle where companies can communicate their commitment to privacy so consumers know which businesses they can trust. "One of the objectives of TRUSTe is to separate out the responsible players and really highlight what they are doing as best practice standards," says Fran Meier, executive director of TRUSTe. "As we continue to establish standards of care for online privacy, we aim to facilitate the growth of the online channel."

The requirements for seal-holders are fairly similar under both of the programs. In order to display either the TRUSTe or BBBOnLine privacy seals on its site, a company must post a privacy statement that's easy to access and understand. Moreover, the site must incorporate fair information practices such as providing visitors with notice of the site's data collection practices, and provide them with choice and consent over how their information is to be used and shared.

How do seal programs ensure compliance among members?

A few years ago when they were in their nascent stage, there was considerable criticism directed at the online seal programs. Specifically, there were allegations that the seal programs were not particularly discriminating in the sites they accepted into the program, and that there was more than a little reluctance to throw anyone out for non-compliance. As the argument went, if everyone gets into the seal program, and nobody is ever dismissed, then there's a suspicion that the program isn't diligently policing members, and that therefore consumers have no reason to feel confident in the seal.

Most of those criticisms have quieted over the past couple of years. BBB Online only accepts about half of applicants for its privacy seal program. Similarly, TRUSTe finds that 10 to 15 percent of its applicants don't qualify for a seal. And while both BBBOnLine and TRUSTe report that very few seal holders have been asked to leave their respective programs, I suspect that this may be a result of the seriousness with which most sites are taking consumer privacy rights these days, and the lengths that programs go to ensure seal holder compliance.

For example, each program spends considerable effort auditing seal members. Each conducts reviews of their clients' privacy practices at least once per year. BBB seal holders know that the organization can and will audit them at any time as part of their compliance program. BBB also requires seal holders to notify them of any changes in privacy practices. TRUSTe works with a company called Watchfire to monitor seal holder's information collection, privacy policy linking and user tracking to help ensure that seal holder's online practices are in line with their stated policies. Both TRUSTe and BBB Online have dispute resolution programs in place that also provide insight into seal holder privacy practices.

Online Ratings Programs

Ratings programs are another way to build trust. While the ratings programs don't specifically focus on issues of privacy, security or trust, they do provide guidance on a Web retailer's ability to deliver a good customer experience. And nothing builds trust like objective evidence that other shoppers have had a good experience with a retailer.

BizRate, for example, is a shopping search engine that creates trust by providing objective, reliable information upon which consumers can make informed purchasing decisions. The BizRate Customer Certified Ratings Program provides shoppers with an objective and quantifiable measure of the overall customer satisfaction of thousands of Web retailers. In order for a Web retailer to be certified, it must participate in BizRate's customer survey program, and maintain a rating of satisfactory or better across twelve criteria measuring overall customer experience.

Epinions, a division of comparison-shopping service Shopping.com, allows consumers to read objective reviews of products and stores before they purchase. "We offer a platform for purchasers to share their experiences -- both good and bad," says Sarah Leary, VP of product marketing for Epinions. "And we've designed transparency into the platform so that site visitors obtain insight into the persons writing the reviews."

Transparency is a key to these programs in that it enables a prospective purchaser to get a sense of the reviewer's experience level as well as any inherent bias, enabling the purchaser to adjust their evaluation accordingly. So if a reviewer has posted 30 different reviews and others have rated his reviews as being helpful, a shopper would likely infer more credibility from that review than he might from something posted by a first time reviewer with no ratings.

Is there an ROI payoff for building trust?

Is trust merely a utopian concept or can firms really leverage trust as a brand differentiator? According to a study by research firm Yankelovich, most consumers tend to patronize "businesses that have earned (their) trust -- even if they tend to charge more than their competitors."

Companies that are trustworthy are more likely to receive personal information from consumers and thus are better able to deliver more relevant marketing messages, and a better overall customer experience. "For some leading organizations, like Procter & Gamble, Hewlett Packard and eBay, privacy is starting to emerge as a competitive advantage because it enhances the customer experience," says Dr. Larry Ponemon, chairman and founder of the Ponemon Institute, a think tank dedicated to advancing responsible information and privacy management practices. "Our results definitely suggest that companies with high consumer trust rating, brand loyalty and superior market reputation tend to place more resources on privacy risk management activities," says Dr. Ponemon. In fact, there is an ever-increasing body of research demonstrating that there is an ROI payoff for building a robust privacy program.

Are these organizations successful at demonstrating trust?

Do consumers recognize online seals and ratings as indicators of trust? There's been some great research conducted on the seal programs. A study conducted in 2002 by Professors Anthony D. Miyazaki of the University of Miami and Sandeep Krishnamurthy of the University of Washington concludes that "consumers are likely to believe that a site maintains a higher privacy standard when that site participates in an Internet seal of approval program."

Moreover, a study conducted in August of 2003 by BizRate indicated that roughly a third of respondents would be more likely to trust a site that carried a seal. And finally, the Yankelovich study concludes that "almost half of their respondents indicated that a positive review by a third party such as BBB or Consumer Reports would be a key driver in their perception of a retailer as being trustworthy."

The level of effectiveness of the seal programs may vary depending on the reputation of the seal holder. For example, according to Dr. Rogers, "in order for a seal to make sense for your company, the trust value generated by that seal should exceed the trust value generated by your brand. So if you are the #2, #3 or #4 brand in your category, or you're in a category that is generally less trusted by consumers, then a trust seal would have more value to you." That may explain why Amazon.com, Sears & JC Penny, companies who already have trusted brands, don't participate in online seal programs.

Similarly, seal program effectiveness may depend upon the base comfort level a particular consumer has with the online channel. The Miyazaki and Krishnamurthy study concluded that "the presence of seal logos were found to increase anticipated disclosure and patronage rates for consumers with relatively high online shopping risks, but had no effects on consumers with low online shopping risks." In other words, seal programs were found to have greater influence over consumers who are more apprehensive about online shopping, than those who are generally less apprehensive. Given this, the trust seals are particularly effective where they are most needed.

There is also research to suggest that online word-of-mouth forums are accurate measures of consumer sentiment. A study published in May of 2004 by professors Chrysanthos Dellarocas and Xiaoquan (Michael) Zhang of MIT Sloan School of Management and professor Neveen Farag Awad of the University of Michigan Business School examined the accuracy of consumer-generated online movie reviews. The study authors were able to build a model that takes user reviews posted on Yahoo! Movies during the first week of a movie release, and accurately predicts that movie's total revenues. Admittedly, that study does not directly pertain to trust. But I think it's safe to say that as ratings programs continue to develop a reputation as reliable barometers for consumer opinion, the level of trust consumers will place in them can only increase.

The Bottom Line

The correlation between trust and commerce cannot be overstated. As our industry continues to develop and refine the metrics around trust, and as we're able to obtain consumer buy-in concerning those trust metrics, we'll all be in a better position to enjoy the fruit of our endeavors. Many more consumers will come online, and many more of them will make purchases while they're here.

Alan Chapell is a consultant focusing on Privacy-Marketing -- helping companies understand privacy and incorporate consumer perception into product development. He has been in the interactive space for more than seven years with firms such as Jupiter Research, DoubleClick and Cheetahmail. Mr. Chapell is the New York Chapter Chairman of the International Association of Privacy Professionals, and he publishes a daily blog on issues of consumer privacy.

Chapell & Associates is headed by Alan Chapell. In 1997, Chapell founded the privacy program at Jupiter Research, an internet research firm focusing on the consumer internet economy. During his four and a half years at Jupiter, Chapell also...

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