Proposed Model for Business-to-Consumer E-Commerce - Realizing E-Customer Loyalty: Managerial Recommendations, Build Trust

Consumers rely heavily on the online vendor’s image as a proxy for trustworthiness (Jarvenpaa & Tractinsky, 1999; Lee & Turban, 2001). This is because of the lack of intrinsic product cues that are generally used to evaluate quality. Indeed, Yoon (2002) found that Web site trust shown is significantly related to corporate awareness and image. Specifically, Einwiller (2003) found that a reputation-trust relationship is particularly pronounced if the consumer’s experience with online shopping is low. Customers who had gained much experience with a particular retailer were significantly less influenced by retailer’s reputation than those who had never or rarely bought something from the respective retailer. We thus posit that corporate image is positively related to customer trust (H1).

Chen and Dubinsky (2003) reported that online retailer image is a forward indicator of value in the online context. This is corroborated by Strader and Shaw (1999) who found that in Internet marketing, unless a seller’s price is significantly lower than prices of a trusted seller, switching costs will inhibit the consumer from buying from the unknown e-seller. Thus, we argue that corporate image is positively related to perceived value (H2).

Meanwhile, Sirdeshmukh, Singh, and Sabol (2002) suggested that perceived value is an important partial mediator of the trust-loyalty relationship. Customer relationship value may only develop when the customer has "confidence in an exchange partner’s reliability and integrity" (Morgan & Hunt, 1994, p. 23). Safety, credibility, and security are important to reduce the sacrifice for the customer in a relationship and therefore lead to higher e-relationship value. Hence, we postulate that customer trust is positively related to perceived value (H3).

Finally, Hoffman and Novak (1996) argued that the likelihood of Internet product purchase is influenced by the amount of consumer trust regarding the delivery of goods and use of personal information. Trust influences loyalty by affecting the consumer’s perception of congruence in values with the good/service provider (Gwinner, Gremler & Bitner, 1998). Also, when there is perceived similarity in values between the firm and the consumer, the consumer is more entrenched in a relationship. This is also evidenced in research by Gefen (2000) and Chircu, Davis, and Kaufman (2000) which showed that customer trust has a positive effect on e-adoption intention. We thus propose that customer trust is positively related to e-customer loyalty (H4) and perceived value is positively related to e-customer loyalty (H5).

Realizing E-Customer Loyalty: Managerial Recommendations

This next section suggests three strategies to attain the tao of loyalty through effective management of each of the three constructs of interest: building trust, realizing corporate image equity, and providing customer value.

Build Trust

As discussed earlier, lack of trust is one of the main reasons that consumers and companies do not engage in e-commerce (Castelfranchi & Tan, 2001). We argue that efforts to build trust should focus on three areas – transactional security trust, information privacy trust, and exchange trust – each with its own function in motivating consumer participation in exchange.

Transactional security trust refers to, first, the customers belief about the etailer’s expertise in providing a secure shopping environment and, second, the consumer’s expectation about an e-tailer’s ability to protect personal information from unauthorized access by third parties (i.e., hackers). Typically, customers expect that an online company’s Web site will provide methods for secure exchange of financial information with them (Ranganathan & Ganapathy, 2002). To assuage customers on this aspect, firms should put in place reliable control systems that can be easily understood by customers. Expedia.com, an online travel agency, explains to its customers that when personal information is sent over the Internet, their data is protected by Secure Socket Layer (SSL) technology to ensure safe transmission. To further assuage concerns about the robustness of its security systems, the firm also obtained certification from RSA Data Security, Inc., a top maker of security-related hardware and software.

Like transactional security trust, information privacy trust is conceptualized in terms of two dimensions – unauthorized tracking and unauthorized information dissemination – that refer to an e-tailer’s privacy protection responsibilities (Hoffman & Novak, 1996). Research has shown that fairness of a company’s Web site with respect to information privacy is a significant factor in building trust and in ensuring the continuation of the relationship with the e-retailer (Culnan & Armstrong, 1999). For example, Expedia, an online travel portal, has an extensive privacy policy detailing the type of information that is collated, with whom the information is shared, and the control users have over their information. An audit firm, PricewaterhouseCoopers LLP, is hired to ensure compliance in their information privacy practices.

Exchange trust is defined in terms of competence and benevolence as they apply to an e-tailer’s promise fulfillment function (Sirdeshmukh, Singh & Sabol, 2002). Specifically, exchange trust is customer confidence that the e-tailer (1) will fulfill its transaction-specific obligations consistent with the terms of the purchase agreement or other internally-held reference standards developed as a result of interaction with other e-tailers or nonstore retailers (competence) and (2) will not engage in opportunistic behavior at any time in the process of product or service delivery (benevolence). A type of service, online virtual community, is emerging to mitigate exchange risks. One of the better-known ones, eBay’s Feedback Forum, provides information on sellers’ reputation based on feedback from previous trades. Traders having high reputations may enjoy price premiums in online market competitions.

It should be highlighted that trust in the e-tailer does not have to be a necessary condition to purchase online. It has been argued that lack of trust in organizations can be offset by trust in the control system (Tan & Thoen, 2000). In this respect, a trusted third party model appears also to be taking shape. For example, eBay imparts to buyers and sellers the confidence to trade online by providing financial instruments, such as Cyber Cash and escrow, establishing guarantees for transactions and addressing privacy and delivery reliability concerns. Finally, a wide variety of so-called trust seals (e.g., Trust-e, WebTrust, BBB online) have been introduced for use on Web sites. These seals are issued by organizations that certify the procedural controls of Web sites (e.g., that the Web site handles payments securely and reliably).