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TRUST CENTRAL TO E-COMMERCE

Posted on November 30, 2001

      Trust -- or the lack of it -- is emerging as one of the critical roadblocks to success in e-commerce and online marketing initiatives, according to a report by management consultants McKinsey & Co.

      The report cited a Georgia Institute of Technology survey that found only 4 percent of online users routinely register at Web sites. About two-thirds of those not registering reported a lack of trust or privacy as one of their reasons.

      "Consumers increasingly expect their identity and personal information to remain confidential when they go online to shop, and that, coupled with fear of online fraud, is what stops many consumers from even considering digital transactions," wrote McKinsey. "They will become shoppers only when marketers overcome the lack of trust that paralyzes many would-be Net shoppers."

      The report's authors, Sandeep Dayal, Helene Landesberg, and Michael Zeisser, wrote that consumers would be more likely to fork over personal information and complete online purchases only if they're rewarded for the effort -- for instance, with information, promotions or products that they actually want.

      McKinsey said its research on more than 50 online businesses suggests that many Web marketers are attempting to build this "value exchange" by building in constant and interactive communication with the buyer. For instance, the consultancy said that companies that do this well -- as examples, McKinsey named CDnow, Amazon.com and Onsale -- generate more than 50 percent of their sales from returning users.

      The typical e-tailer, however, fails to communicate effectively with consumers, thus failing to make a compelling argument for why consumers should turn over their information. According to McKinsey, only a quarter of sales come from repeat buyers -- which can be costly, since the company must continually spend new money that's lost on customer churn.

      "Building trust that leads to satisfied customers is complex -- but essential -- for marketing executives," said McKinsey, which identified three core elements needed "just to be in the game." Those are adequate security and safeguards; order fulfillment; and familiarity with the brand -- either that of the site, or its products.

      Additionally, the authors found that another tactic that paid off involved giving users a measure of control over their experience with the marketer -- for instance, E*Trade discusses the benefits provided by placing cookies on users' hard drive, and then asks for permission to do so.

      "Trust building encompasses more than the strictly technical aspects of a Web site," wrote McKinsey. "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."

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