How to convince your online customers as a newcomer?

A growing number of established companies are turning to e-commerce as an additional sales channel. Plenty of smaller start-ups, however, choose to set up only an online shop, without investing in physical points of sale. How can you convince first-time consumers to buy your products or services online, as an unfamiliar vendor? Are all kinds of guarantees sufficient? Or should you consider investing in a customer review module? An experimental study by Professor Kristof Stouthuysen and his colleagues offers some useful recommendations.

Mechanisms for convincing customers to buy

How can you convince online customers that you are a trustworthy vendor? Kristof explains that there are various mechanisms for this. “Scientific research has shown that having an appealing site is an important asset. References to social networking sites, such as Facebook and Instagram, also inspire trust. And using a well-known and reputable payment gateway, such as PayPal, also helps. But there is still some debate about the effectiveness of the guarantees which the company behind the online shop offers and the added value of customer reviews.”

Guarantees and customer reviews

“Guarantees include a money-back guarantee or guarantees about secure payments and privacy policies”, Kristof adds. “They aim to create a sense of security and in principle are legally binding mechanisms. Larger e-commerce sites often use customer reviews, whereby customers are invited to share their opinion of their shopping experience with comments and/or stars. They give an indication about the extent to which the online vendor lives up to its promises and about the quality of the services and/or goods supplied by the vendor.”

Two types of trust

Guarantees and customer reviews send different signals but are both used to inspire trust.

This study distinguishes between institutional trust and trust in the competencies of the vendor. Institutional trust denotes the consumer’s trust in the internet as a structure, and in the legally binding nature of the vendor’s guarantees. Trust in competencies means the consumer trusts that the goods or services will be as described and that the online vendor will fulfil its promises.

Theoretical models

What is the relative impact of guarantees and customer reviews? How do they influence a consumer’s purchasing behaviour?

“We have developed theoretical models in which we compare the impact of these two mechanisms”, Kristof explains. “Which mechanism has the greatest impact on which type of trust? But also: what is the impact on the intention to buy, on the consumer’s actual purchasing behaviour? And how can we explain this? Our models estimated the impact of the two mechanisms on trust, of these mechanisms on consumers’ purchasing behaviour and, finally, of trust on purchasing behaviour.”

“We also wanted to see whether the type of customer influences this, namely experienced consumers who are used to making online purchases versus novice consumers who almost never buy online. We also used a model to measure this effect.”

Controlled experiment

A controlled experiment was organised to test the models.
“More than 200 master’s students participated in the experiment. We developed an online shop for a fictional start-up, an online vendor of DVD box sets. The students were shown different screens, with and without guarantees, and with and without customer reviews. In every instance they were asked to indicate to what extent they agreed with statements about institutional trust and trust in the competencies of the vendor, and to which extent they were inclined to purchase the DVD box sets. We asked them how often they shopped online – on a scale ranging from “never” to “daily” – adding their level of online shopping experience as a moderator variable. Other control variables included disposition to trust, gender and internet usage.”

Kristof underlines the importance of this kind of controlled experiment. “You can draw more accurate conclusions about causality because you focus on the study variables, which allows you to control for distorting variables.”

Clear results

The outcome of the experimental study confirmed all the assumptions, barring one:

  • As expected, guarantees have a higher positive effect on institutional trust than on trust in competencies, while the opposite is true for customer reviews. “This comes as no surprise”, says Kristof. “Over the years, the legal protection for online purchases has improved. While vendors offer these guarantees, there is no guarantee that they will live up to their promises. The customer reviews give a better indication about the vendor’s trustworthiness.”
  • The team also established that trust is a vital condition for convincing customers to buy. The impact of the two vendor mechanisms – guarantees and customer reviews – on consumers’ purchasing behaviour is explained by their impact on trust. Both institutional trust and trust in competencies were found to influence this.”
  • “Contrary to our expectations”, Kristof adds, “institutional trust does not have a greater impact on inexperienced consumers’ intention to buy. Conversely the study did confirm that trust in the online vendor’s competencies is more likely to influence the purchasing behaviour of an experienced buyer than that of an inexperienced buyer.”

Practical tips

So what does this mean for online start-ups?

  • Institutional trust is important, both for experienced and inexperienced consumers. Always clearly state your guarantees and terms and conditions, about returns for example.
  • If you want to convince experienced consumers to buy from you, then investing in a customer review module or platform is definitely worthwhile.

“Admittedly, you expose yourself to criticism with a customer review module and it is an additional cost as you have to purchase the module and monitor reviews. But this study undisputedly shows that these customer reviews have a positive effect”, Kristof concludes.

Source: The paper ‘Initial trust and intentions to buy: The effect of vendor-specific guarantees, customer reviews and the role of online shopping experience’ was published in Electronic Commerce Research and Applications 27, p. 23-38, 2018.

About the authors: Kristof Stouthuysen is Associate Professor in Accounting and Control at Vlerick Business School and a part-time Professor in Management Accounting at KU Leuven. Ineke Teunis and Evelien Reusen work as a researcher and Assistant Professor respectively at the Rotterdam School of Management (The Netherlands). Hendrik Slabbinck is Associate Professor of Marketing at Ghent University. 

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