Can a marketer be trusted with sensitive personal and financial information? Consumers increasingly expect their identity and personal information to remain confidential when they go on-line to shop, and that, coupled with fear of on-line fraud, is what stops many consumers from even considering digital transactions.

The Georgia Institute of Technology, in its "Tenth WWW User Survey," found that only 4 percent of on-line users routinely register at Web sites, and at some sites two-thirds of those not registering report a lack of trust as one of their reasons. They will become buyers only when marketers overcome the lack of trust that paralyzes many would-be Net shoppers. In response to those security concerns, marketers are working to build trust with consumers through their on-line interactions. The level of trust grows as marketers and consumers engage in a gradual "value exchange," through which consumers provide marketers with personal information and are rewarded in turn with products they actually want.

McKinsey research on more than 50 e-businesses shows that the on-line marketers pacing their industries do so by embedding trust into their interactions with consumers. They are forging a broad logic of trust based on constant and interactive value exchange between the buyer and seller. A company that creates and nurtures trust finds that customers return to its site repeatedly. CDnow, Amazon.com, and Onsale generate well over half of their sales from site loyalists. Contrast this with a typical underperforming retail site, where only a quarter of sales come from repeat buyers. Sites without a core of loyal customers must devote more capital to acquiring customers and eventually may find it difficult to survive.

Climbing the trust pyramid

Building trust that leads to satisfied customers is complex—but essential—for marketing executives. We have identified six elements that build a "trust pyramid" (exhibit). The base of the pyramid shows the three core elements needed just to be in the game: state-of-the-art security, merchant legitimacy, and robust order fulfillment. Winning marketers move well beyond the basics with more subtle trust builders that differentiate them from the also-rans: consumer control, tone and ambience, and, at the highest level, consumer collaboration. As the baseline level of trust and security rises, these points of distinction become more critical. Taken together, the six elements of trust create the confidence needed to turn browsers and ordinary customers into site loyalists.

State-of-the-art security

Use the best security measures on your site, and tell your consumers about them in easily understandable language. Shoppers at Netmarket are assured of "guaranteed safe shopping" with a no-compromises promise: "At Netmarket, you can shop with confidence. We use the latest encryption technology, digital certificates, secure commerce servers, and authentication to ensure that your personal information is secure on-line." Marketers at Lands’ End also understand how to reassure their customers on security issues. Its site states, "You have no credit card risk. Period."

Merchant legitimacy

Brands are important on the Web. They help shoppers sort out their choices when they have a limited range of clues as to the quality and function of a product. Familiar names with established records of performance go a long way toward building trust—so long as marketers continue to deliver that performance through their Web ventures. If your company lacks a recognizable consumer brand, three tactics can get you in the game:

1. Sell branded products. Netmarket, for example, depicts thousands of brands on its site, from Panasonic DVD players to Reebok shoes. The site’s tag line is "name brands at warehouse prices."
2. Ally your product or service with an established brand. Tel-Save, an unknown phone service provider, secured a privileged position on America Online, a brand recognized by 40 percent of US households. Now known as Talk.com, Tel-Save signed up 1.8 million new customers in the year after the deal was signed in December 1997. Its sales increased by 47.2 percent from 1997 to 1998.
3. Encourage prospective customers to sample your services through low-risk trials and creative offers. E*trade lets prospective investors take part in contests without risking real money. The Wall Street Journal offers a two-week free trial of its interactive edition. If consumers like it, an annual subscription costs $59 (print-edition subscribers pay $29 for it).

Fulfillment

Great security and brands can go only so far; a trust-building site must also fulfill orders efficiently and with minimal hassles. Nothing alienates a buyer more than getting thrown off-line, finding the site frozen, or making a wrong entry that causes the loss of pages of entered information. And at some sites, prospective buyers must slog through a lengthy registration process before discovering that sales taxes, shipping, and handling charges greatly increase the total price of their purchase. The best practice: explain all costs, and have an infrastructure that gets the right product to the right buyer in a reasonable period.

Leading Web companies are streamlining the purchase and fulfillment process. Amazon.com has led the industry with a "1-click" mechanism, through which buyers enter an address and credit card information for the first sale only. After that, Amazon.com remembers the details. Marketers also are beefing up customer service to provide fast and accurate answers to queries arriving on-line and through call centers.

In practice, even the best companies will sometimes stumble in fulfillment. But a mishap can be an opportunity for a company to show its best face and build trust with its clientele. Consider the experience of Hastings Entertainment and its gohastings.com site. The company announced its site with newspaper ads offering a package of three popular video movies for $9.99. The trouble was that buyers reaching the site found a notice saying it was still under construction. By afternoon, the message had been replaced with a toll-free number through which users could place an order for the videos. Buyers also got a T-shirt as part of gohastings.com’s apology. What could have been a marketing meltdown was transformed into a reasonably happy story.

Control

Even with credit card security assured, consumers learn to trust the marketers they deal with only when they know that they—not the marketers—control access to personal information. Marketers who ask permission for personal details are taking the smart approach. E*trade, for example, discusses the benefits provided by cookies on a user’s hard drive (the cookie ensures that preferred settings appear without the customer logging in each time), then asks the user for permission to place a cookie.

Some marketers are recruiting consumers to serve on panels that independently audit privacy policies. Others use third-party audit services such as those of the Council of Better Business Bureaus (BBB). Sites may qualify for the BBBOnLine seal when they adopt robust privacy policies and agree to consumer-friendly dispute settlement procedures. More broadly, consumers like to feel that they are in control of the buying process. Accordingly, marketers at the GMBuyPower site provide consumers with comparative information on competitors’ cars. After all, consumers will go somewhere to find that information. GM builds trust by letting consumers know that it understands that they have a choice and that they control the buying decision.

Tone and ambience

Leading marketers post an easy-to-read privacy statement and explain how they collect and handle customer information

Trust building encompasses more than the strictly technical aspects of a Web site. Consumers want to know that marketers will handle their personal information with sensitivity. Without ironclad confidentiality, consumers will never move ahead with a value exchange. Leading marketers post an easy-to-read privacy statement and explain how they collect and handle customer information. Lands’ End addresses this issue on its Landsend.com site, stating, "We’ll never misuse the information you provide us."

Design and content are other critical elements. "E-Commerce Trust," a January 1999 study by Cheskin Research and Studio Archetype/Sapient, points to the importance of ease of site navigation as one influence. A site’s appearance also says a great deal about a marketer. Value America, a virtual retailer, stresses the importance of "white space" and presents products in an uncluttered, friendly setting that shoppers find appealing.

Drawing on the next wave of personalization technologies, marketers will be able to customize the on-line store ambience for each consumer. For example, on a music site, a classical music aficionado might receive an audio selection and visual merchandising that would reflect that sensibility; a heavy-metal fan would enjoy a more raucous presentation.

Marketers set the right tone with their customers when they are straight about all aspects of the relationship, such as how they deliver services. Amazon.com now lists all its "publisher-supported placements" and explains its acceptance of co-op funds after controversy over its unstated policies. Other marketers carefully indicate that pricing may vary according to the channel through which a product is sold. The home page of Tower Records notes, "Pricing at towerrecords.com applies for on-line purchases only. Sale pricing may not apply in Tower retail stores."

Collaboration

A site nurtures trust when it encourages its customers to inform each other about the company’s product and service offerings. A Yankelovich Partners survey reveals that consumers consider other users of a product to be the most trusted source of advice when considering a purchase of that product. Thus, chat groups let consumers query each other about their purchases and experiences. Amazon.com customers, for example, have posted hundreds of wildly divergent opinions about a single book.

One site that built an entire business and brand by innovatively collaborating with consumers is eBay. Its governing model of trust is its feedback forum, where buyers and sellers rate each other. The detailed records of transaction histories show eBay users what they can expect from other users. The Web site also uses its network of users to spread the word about its activities, a tactic known as "viral marketing." That is, users can e-mail auction notices to their friends.

Corporations also can choose to separate themselves from the opinion process by linking customers to external sites. Auto manufacturer Saturn has links to auto magazines and price and ratings guides.

Building trust

Bringing the six elements of trust to your Internet value proposition, though, does not automatically lead to deep, trusting relationships. That comes through a step-by-step process in which the consumer and marketer exchange value. Each time the consumer volunteers some personal information, the marketer rewards the consumer with a more personalized service. This mutual give-and-take eventually leads to an advanced collaboration based on trust.

Our research has identified four stages of trust building:

Attraction

At the first stage, the consumer browses the site and even makes a transaction. No real relationship exists between the marketer and the consumer, and none may be warranted. The best strategy is to provide the consumer with information, without demanding any in return. At first blush, this may seem like an imbalance between what marketers give and what they get back. But what the consumer is giving the marketer is something quite valuable: time and attention, along with a view of how the site is traversed.

The time and attention translates into the "mind share" needed to create a brand preference. The average consumer on Ralston Purina’s Dog Chow Web site, which offers no product for sale, spends more than six minutes per session learning how to care for pets. That’s far more time—and concentration—than consumers devote to a 30-second TV ad.

User-driven personalization

At the second stage, consumers start shaping Web pages to their specific tastes. For example, CDnow customers can personalize their home pages with favorite artists and wish lists. The company shows that it is willing to deliver some value to the consumer before gaining financially. Charles Schwab now invites users to set up a personal page through the MySchwab service, where users can not only track stocks but also get customized sports news, weather information, and even cartoons. Users aren’t required to open a Schwab account to do so.

Marketer-driven personalization

In the third stage, marketers begin using insights provided by consumers to beam information back to them. Thus, CDnow uses its knowledge of consumers—developed at the earlier stages of trust—to suggest products they might like, which consumers then rate as either on- or off-target. As the process continues, CDnow learns consumers’ preferences and zeroes in on what they really like. It is worth emphasizing that marketers should rein in their urge to make immediate use of data and personalization technologies. This approach takes patience, a trait lacking at many marketing organizations. Too often they bombard consumers with promotional offers as soon as they get their hands on an e-mail address. We suggest a gradual approach, as nothing aggravates many Internet users more than unsolicited e-mail.

The best companies will let users set the pace of personalization and of contact from marketers

A best practice is to let the user set the pace of personalization and contact from marketers. User-driven personalization should precede marketer-driven offers. Recent research by Professor Youngme Moon of the Harvard Business School has shown that premature personalization can backfire. Moon found that consumers were less likely to buy products pitched to them through messages if the messages were based on information they had not given to the marketer themselves. According to "Is Your Web Site Socially Savvy?" a May–June 1999 Harvard Business Review article, consumers were more likely to buy when the message was personalized and based on information they had volunteered.

Trust-based collaboration

At the final stage, the marketer and the consumer work together closely. The consumer gives the marketer access to the most sensitive personal information (family, finances, or health) and in turn gains customized experiences and consultative problem-solving assistance. In our view, very few on-line marketers have reached this level of trust with their consumers.

The pace of value exchange varies by industry and situation. For example, mortgage shoppers may provide financial information in their very first interaction if they need a quick answer. In other situations, the process moves more slowly. And because costs rise as marketers go up the trust staircase, they must decide just how far they need to go to create the most profitable relationships. Trust building at a basic level may be enough for some marketers, particularly if greater trust does not bring greater spending by consumers.

Only by sustaining trust can marketers expect to establish enduring relationships with consumers, and it is by keeping a central focus on that idea that marketers build a value exchange that delivers consistent and progressive mutual benefits. With the six building blocks of trust in place, marketers should be able to chart a course for building great on-line businesses.