What is in the mind of consumer when it comes to transparency?

What is in the mind of consumer when it comes to

transparency?

Name: Song, Zhimao Student number: 10609466 Ms. Business Studies-Marketing

Supervisor: Joris Demmers Date: 2014-8-28

Content

2.3 Transparency and information asymmetry ... 9

2.4 Transparency and consumer skepticism ... 10

2.5 Transparency and trust ... 11

2.6 Transparency and communicating channels ... 13

3. Overall hypothesizes framework ... 14

4. Research Methodology ... 15

4.1Rearch method ... 16

4.2 Sample ... 16

4.3 Data collecting and coding ... 16

5. Findings ... 17

5.1What transparency means to consumer ... 18

5.2 Four types of transparency ... 18

5.3 Transparency and information asymmetry ... 21

5.4 Consumer skepticism, trust and transparency ... 23

5.5 The most trustworthy way to communicate with your consumer ... 24

6. Conclusion and discussion ... 26

7. Limitations and future research ... 28

8. References ... 30

Abstract

This exploratory study examines how consumer view transparency, including what types of information consumers consider relevant before they trust a company and what influences their purchasing decisions. Semi-instructed interviews were conducted with participants composed of different occupations, educational backgrounds, ages and nationalities. The qualitative data that was coded and discovered outlines 4 types of transparency by Hultman & Axelsson in a B2B environment, which also applies to B2C environment. Those findings have implications for (i) companies by helping them understand the importance of transparency to gain trust from consumers (ii) how to deliver their message to consumers in a trustworthy manner (iii) future researchers by increasing understanding of what is in the mind of a consumer when it comes to transparency.

Key Words: consumers transparency B2B B2C communication channels trust

1. Introduction

With the wide usage of the Internet, smart phones and social media platforms today, consumers are finding more and more easy to locate the information they need about companies, products and information services. A (Bhaduri & Brookshire, 2011) survey shows that while making purchasing decisions, transparency is now one of the most important factors that consumers take into consideration when making purchases and they are consequently becoming more demanding than ever. (Cohn & Wolfe 2013). This is the result of consumers wanting to know more about the companies and their products/services before they make a purchase decision. The world business environment is becoming more complex, turbulent, and competitive with accelerating business cycles (Dyer & Ha-Brookshire, 2008). In order for these companies to gain market share and stay competitive it is essential to accommodate consumers’ needs and provide relevant information. It

appears transparency is becoming a much more important factor for companies that want to gain the trust of their consumers in order to build a successful brand image. But there is limited literature available for consumers about transparency; something that clearly influences their purchasing decisions. (Cohn & Wolfe 2013).

The purpose of the study is to explore what transparency means to consumers. In today’s society consumers are becoming more and more concerned with the environment and the society we live in and they are demanding more transparent and sustainable products. By 2014, the market for such products is expected to increase by as much as 19% (Slavin, 2009). This shows that transparency is becoming more important. It has been suggested that the late 2000s global financial crisis occurred due to a lack of transparency. Some empirical research suggests that “where financial liberalization takes place in an environment where transparency is absent, a financial crisis is more likely”( Mehrez and Kaufmann, 1999). It is necessary to be transparent in a financial market as all parties involved need to know the rules and the importance of following them. The same goes for accounting practices. Information not only needs to be transparent but also reliable. “Based on sound principles and standards that enable investors and lenders to make consistent assessments of firms’ activities and risk profiles” (Vishwanath & Kaufmann, 1999). A greater transparency is also of benefit to the economy. “It improves resource allocation, enhances efficiency and increases growth prospects.” All these benefits of company transparency increase in importance in today’s society. As transparency has become a popular term, many companies are embracing the transparency policies to their daily practices, but we do not really know what transparency is from the perspective of the consumer. This paper will explore this question as well as investigate what communication channels are the most effective ways for company to communicate their transparency practices with consumers.

The findings of the present study suggest that transparency is becoming more and more important for consumers in today’s society. A company can become more transparent by providing relevant

information which consumer deemed relevant (See table 2). The result reported here has numerous managerial implications. First, how transparent the company is for the eyes of consumer depends on how much relevant information the consumer has from the company. Second, the marketers should communicate with the consumer about what information is important for them in that industry as the consumer might search for different information about different industries. Finally, communicating through a company website is the most trustworthy way for consumer to get their information. The study also has a few theoretical contributions to the field of marketing management research by showing what is in the mind of the consumer when it comes to transparency and the interrelationship between information asymmetry, consumer skepticism, trust and transparency. In addition, the study also found that the 4 types of transparency as Hultman and Axelsson outlined in a B2B environment apply to the B2C environment as well.

This paper will start in chapter 2 by providing an overview of the existing literature relating to transparency, information asymmetry and consumer skepticism. Chapter 3 outlines an overall hypothesizes framework of this study. A complete methodology section is in chapter 4. The findings of this research will be shown in chapter 5 and discussed in chapter 6. In the last chapter chapter limitations on this research will be explored.

2. Literature review

2.1 Defining Transparency

What is transparency? Transparency is defined as a situation in which business and financial activities are done in an open way without secrets, so that people can trust that they are fair and honest (Cambridge Business English Dictionary Online 2014). Accordingly, companies will look to disclose all their information to consumers, including details such as product ingredients,

price-setting processes, human resource practices and their operation procedures in order to gain the trust of their consumers by demonstrating that they are fair and honest. Consequently, they will hope to achieve better business with their consumers. However, no matter how hard companies try to demonstrate that they are fair and honest, it is consumers in the end who decide whether they are fair and honest or not. Regardless of how much information companies disclose, only information which consumers need matters. According to various sources, the concept of transparency has also been described as the increased flow of timely and reliable economic, social, and political information (Vishwanath & Kaufman, 2001). This information could be about the creditworthiness of borrowers or the loaners, about government service provision or about the activities of international institutions. In this paper, they also described a lack of transparency as “someone-whether a government minister, a public institution, a corporation, or a bank—deliberately withhold access to or misrepresenting information or failure to ensure that the information provided is of adequate relevance or quality”. They also identified that transparency should encompass the following five attributes: 1) access: all media forms such as the, Internet, newspaper, radios, TV, public information notices, word of mouth should facilitate the flow of the information which is accessible to all on a equal terms; 2) relevance: all the information provided must be relevant as it is relatively hard to achieve because the information is subjective and the overload of information from internet threatens to dilute; 3) comprehensiveness: all the information should be easy to understand regardless of the education background. 4) quality: there should be a standard to ensure the quality of the information. If it is possible, information better verified through an external agency; 5) reliability. These five attributes are pivotal in making companies’ information more transparent and trustworthy. However, the paper didn’t address what information consumers really need. Consider transparency from the perspective of financial accounting (Bushman et al, 2004). It is associated with the availability of relevant, reliable information about periodic performance, financial position, investment opportunities, governance, value and risk of publicly traded firms. This is simply from one perspective and won’t necessarily apply to other industries. Would other industries require the same information

as financial accounting or would it require different information and what would this be?

2.2 Types of transparency

As discussed above, previous studies have suggested what transparency means for a company. However, the concept of transparency must be developed further. To accomplish this, Hultman and Axelsson outlined four types of transparency ( See figure 1), which are: cost transparency, supply transparency, organizational transparency and technological transparency (Hultman & Axelsson 2006). The first type is cost transparency. They explained that the buying firm’s ability to achieve effective sourcing might increase when information about costs as well as price becomes somewhat transparent. In their study, the raise degree of transparency by exposing price ranges to customers though the electronic marketplace, also “indirectly risked exposing prices to competitors”. In addition, the direction of price and cost related information on transparency was not reciprocal, but strictly unidirectional.

The second type of transparency is supply transparency, which is the ability to track the services of logistical firms that in turn allows the customer a higher degree of insight. The degree to which buying firms can see into the relevant supplying firms is extended. Their case study about the BetaCorp tried to induce an increasing degree of transparency in their supply chain by sharing information on material flows along the supply chain. “ BetaCorp enabled increased flexibility and speed, as well as decreased inventory costs”. However, some of the suppliers were reluctant to share information as well, the reason for this being fear of risk of a possible shift in the power structure of the relationship.

The third type is called organizational transparency, which is the idea that “exploitation of new technology may expand the relationship horizons in a business relationship”. Their study showed mistakes were made when the key account manager did not have all the key information. In order

to avoid addition problems, the solution was “ to increase the transparency even further and to ensure that all information concerning specific relationship was located in one place”. This type of transparency illustrated was organizational transparency.

The fourth type of transparency is technological transparency. This states that the level that firms share new technologies with other business partners may extend technological horizons. As discussed in the paper, one driving force in the automotive industry which increased production and collaboration of product development across firm borders was the sharing of technical information. This increased the efficiency of the product development process. However, they also mentioned that this information was not accessible to all the actors as it had restricted access and required authorization.

They argued that in a B2B environment, those four types of transparency applied to the buyer and supplier relationship and brought positive and negative consequences. Their study found out that transparency per se is not the goal in the cases they have outlined, but the promise of “efficiency and effectiveness inherent in transparency”. In the present marketplace where products can easily be compared, it made it more difficult to create close relation, because “ too much transparency would cause their products to become commoditized”. They also conclude in their study that there is a link between trust and transparency development. As of yet, there are only a few studies to suggest which types of transparency consumers care to know the most about. Furthermore, will consumer require the same information from the company? This leads us to ask the question what does it really mean for a company to be transparent? Do these four types of transparency apply in a B2C environment as well? Will there be a link between consumer trust and company transparency?

Figure 1, Typology of transparency for marketing management research (Hultman & Axelsson 2006)

This paper has discussed the meaning of transparency and we know what it means for a company. Now, lets take a look at factors which influence consumers’ views about determining whether a company is transparent or not.

2.3 Transparency and information asymmetry

The common feature of market interaction is information asymmetry. Sellers always have more detailed information than consumers (Akerlof, 1970). Akerlof explained in the auto market, there are good cars and bad cars (called “lemons” in American English). It can be very difficult for a customer to tell the difference between a good and bad car. Thus the consumer cannot determine the true value of his car. In this case, “there is an incentive for sellers to market poor quality merchandise, since the return for good quality accrues mainly to groups whose statistic is affected rather than to the individual sellers.” This caused a reduction in the quality of the products and in the size of the market. This uncertainty about the quality and lack of knowledge about the product would make consumer wonder, “is the product I bought a lemon?” This information asymmetry between all the economic parties influences economical behaviors and operation of the market (Stiglitz, 1993). In addition, information asymmetry enhances the

likability of consumers to generates more questions about the company and the products or services they provide. Akerlof discussed another market where trust is important. In the automobile market, a dealer could offer a guarantee/warrantee to insure consumer the quality of the car, in the labor market, employers could offer a contract build a trust relationship with their employees. What about other markets? How can they build this trust relationship? Will transparency help consumers reduce the uncertainly about the products and grow trust towards a company?

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H2: The higher/lower level of information asymmetry leads consumer think the company is less/more transparent and vice versa.

2.4 Transparency and Consumer Skepticism

Companies’ promotional campaign messages, products or service advertisements are the direct ways that consumers gain information about them. However, research shows 70% of consumers think that advertising information provided is often untruthful (Calfee & Reingold 1994). As a result, consumers become more and more skeptical about the information they get from companies. This leads us to wonder why consumers are skeptical about the information that is disclosed about the company and its products. What kind of information do consumers think is relevant and how can we communicate more effectively? Consumer skepticism occurs not only because of falsely supplied information, but also when truthful information is presented (Polly & Mittal, 1993). This being the case, how can we make a consumer trust the information we have said and what is the most trustworthy way to deliver this information. There are two types of skepticism: situational skepticism, which is the momentary state of distrust for an actor’s motivations, and dispositional skepticism, which is an individual’s on-going tendency to be

Information   asymmetry    

Transparency    

suspicious of other people’s motives (Forehand & Grier, 2003).

Another interesting find proposes that consumers are skeptical of advertising not simply because advertisers sometimes lie or because their arguments lack credibility in the market place, but because skepticism helps individuals cope with advertising systems that are frequently perceived as trying to sell to them rather than to inform them (Koslow, 2000). This can often backfire for honest companies, which may send out warnings in promotional messages, in an attempt to curtail skeptical insights from consumers. Rather, this can just add to the problem. Furthermore, these effects may even “fly under the radar”, as warnings may backfire over time too (Steinhart et al, 2013). They discovered that warning messages can have two conflicting effects: “1) decreasing the appeal of the object of the warning; 2) increasing the apparent trustworthiness of the ad because of the two sided nature of the communication”. If this is so, how can companies be transparent and make consumers less skeptical about them and their products and services? What type of information should company communicate with its consumer in order to build a trust relationship?

+/-

H3: The more/less consumer skepticism toward a company, the less/more transparency

consumers think the company is and vice versa

2.5 Transparency and trust

In the study of Josang and Lo Presti (2004), they defined trust as “ the extent to which one party is willing to depend on somebody or something in a given situation with a feeling of relative security, even though negative consequences are possible”. In another study done by

Consumer   skepticism      

Transparency    

Parasuraman and Miller (2004), they stated that trust is “users’ willingness to believe information from a system or make use of its capabilities”. Based on those definitions, in a business to consumer interaction, trust can be interpreted as consumers’ willingness to believe information, both positive and negative information business that is provided and feeling secure about their purchase decisions.

In order to build a trust relationship with consumers, the study showed transparency played an important role in building trust in a business environment (Kanagaretnam et al, 2010). In their study, they used data from a controlled laboratory environment to study the impact of transparency and found that transparency “significantly increases trusting behavior in one-shot interactions.” Another study also showed transparency relates to trust as they found that leaders who gave more information, that is they were more transparent and disclosed more information in their communication “ appeared to instill higher levels of trust” in participants/followers who were asked to judge the leaders’ action (Norman et al, 2010). According to Sisco and McCokindale (2013), there is a strong link between transparency and the credibility (trust). Those non-profit organizations “that appear to be transparent were also seen to be more credible”. However, in a for profit organization, will companies also instill higher level of trust if they become more transparent and disclose more information to consumers? If so, what kind of information that company should disclose which consumer deem relevant?

+/+

H4 The more/less consumer trust the company, the more/less transparency consumer think the company is.

2.6 Transparency and the communicating channels

Despite all the above three factors that influence how consumers view company transparency, how company communicate with its consumer also plays a big part on consumers’ mind about transparency. With the advancement of the digital age, the rapid diffusion of information and communication technology has dramatically influenced the range of products and services that people buy and the channels in which they purchase these products and service. The wide usage of the Internet has allowed consumers to access information, created by firms themselves and consumers, which was previously unavailable or difficult to obtain (Labrecque et al, 2013). This consumption related information often comes in combination with recommendations from shopping nets and private product reviews (Hennig-Thurau et al, 2004). The improved range of choices (Facebook, Twitters, websites and so on) as well as the ease of access to information makes for better educated and more sophisticated consumers who are more demanding and hard to influence compared with offline shoppers (Brynjolfsson et al, 2003). A report by Nielsen (2011) showed that consumers’ media consumption has increased continuously over the past few years. “with more information available, consumers generally consumes more information in shorter time periods, which helps induce shorter adoption cycles and faster diffusions of market trends.” (Labrecque et al, 2013). This showed that advanced technology empowers consumers with information and knowledge, which in turn leads to calls for a more transparent market. This leads a question: which communication channels do consumers trust the most in this digital world we live in? How does a company be more transparent by using the right communicating channel? This is last hypothesis for my study.

H5: Communicating channels influence the strength of how consumers view company transparency policies.

3. Overall theoretical framework

After studying the existing literature and combining findings of the present study, an overall theoretical framework has developed (see figure 2). The asymmetric information, consumer skepticism and trust are factors influence transparency and vice versa. For example, when a company becomes more transparent, consumers will gain more information about the company and its products or services (lowering the information asymmetry level between the company). Hence, consumers become less skeptical about the company and become more trusting of the company and its products or services. In the end, consumer views the company as more transparent.

Consumers are mainly looking for the 4 types of transparency information (Cost, Supply, Organizational, Technological) to reduce their skepticism toward the company and gain more information and decrease the information asymmetry level of a company. As a result, consumers use these 4 types of information to judge whether a company is transparent or not. Furthermore, these 4 types of information can help decide whether a consumer trusts the company or not. In addition, the communication channels act as a moderating influence on the strength of this relationship. Depending on which communication channels a company chooses, consumers’ trustworthiness towards those information varies. For example, a message from the company on their official website is might be more creditable than a message from their social media account.

H5 H2 +/- H3 H1 +/- H4 +/+

Figure 2, Overall theoretical framework

4. Research methodology

4.1 Research method

In order to find the true notion of transparency that consumers hold, the qualitative research methods are used. According to Yin (1984), qualitative methods assist researchers who desire to understand complex social phenomena and are appropriate when seeking knowledge about the fundamental characteristics of a phenomenon. In addition, qualitative methods also provide

1 Information   Asymmetry   2 Consumer   Skepticism     Transparency   Cost   Supply   Organizational   Technological   Trust   Communication  channels   Social  media   Emailing   Official  website   3rd  _{party  Authorization}  

insights and understanding of the problem at hand (Malhotra, 2007). I will conduct a set of semi-structured interviews. I chose interviews as my research method because it is the best technique to investigate, in-depth, exactly how the consumer thinks and feels about company transparency. As interviews allow researchers to access the interpretations of informants in their real world (Walsham, 2006). Therefore, in order to obtain detailed and in-depth knowledge of this topic, a semi-structured interview will be conducted. I adopted this method because it is appropriate for the study’s objectives; by supporting researchers in generating conceptual models in an exploratory research context (Mason, 1996). This should give me an insight into how they process this information and how they think it influences their purchasing decisions. The selection process for the interviewees will be entirely random, chosen from different genders, ages, races and education backgrounds.

4.2 Samples

The participant will be identified in two steps: first, the potential participants will be contacted either through my personal contacts, my supervisor’s contacts or through the snowballing technique by invitation (Appendix 1). Second, the participants will be selected if they are still interested in the research question after I have explained it to them. It’s hard to predict the response rate, however, a total of 15 participants will be selected (Appendix 2). Whilst this may seem like a small sample, a detail-oriented review of the interview transcriptions will show a recurrence of themes, indicating information saturation (Spiggle, 1994).

4.3 Data Collecting and Coding

After receiving permission from all the respondents, all the interviews are recorded and then transcribed by me. Following the transcription, the data is systematically analyzed and coded to identify emerging patterns and common themes (Strauss & Corbin, 1990) with regards to what is in the mind of a consumer when it comes to transparency. The interview questions used open

ended questions in order to allowing interviewer to pursue answers without imposing any prejudice -mined categorization (Fontana & Frey, 1994). The qualitative data analysis software NVivo has been used during the process of analyzing and coding the textual transcripts. The data was coded and analyzed with the goal of identifying common patterns, metaphors, salient themes and sub themes (Thompson, 1997) and then categorized with references to the existing literature (Hultman & Axelsson, 2006). They proposed 4 types of transparency, which are: cost/transparency, supply transparency, organizational transparency and technological transparency in a B2B environment. I want to determine whether a B2C environment consumer is looking for the same information and if those 4 types of transparency apply here. Secondly, different industries (for example, apparel and accessories, cosmetics, electronics and computers, food and beverages) were coded to find if consumers are looking for different information among different industries. Thirdly, different methods (for example, a company website, emailing, Facebook/Twitter, third-party authorization) of message delivery were coded to see which form is the trustworthiest way for a company to deliver the message.

5. Findings

Analysis of the date yielded some interesting findings. A majority of the participants in this study showed skepticism toward company information. This skeptical attitude is the resut of information asymmetry between consumer and companies. Those two factors influence the degree of transparency from consumers. At the same time, the more consumer trust in a company, the more transparent consumer views the company is. The data also shows the four types of transparency (Cost, Supply, Organizational, technological) Hultman & Axelsson (2006) outlined in a B2B environment also applied to the B2C environment as consumers demanding the similar type of information from companies (See table 1). The present findings also give more detailed insight about transparency and trust relationships. For example, Kanagaretnam et al (2010) found in their study that transparency can build a trust relationship between companies and consumer

but did not mention which mode to is the most trustworthy one to communicate with consumers and what kind of information to disclose to consumers in different industries. The current findings show that the company official website (See table 3) is the most trust worthy way to communicate with consumers in order to build a trusting relationship.

5.1 What transparency means to the consumer?

Many of the descriptions about transparency offered by participants were similiar to the definition in the Cambridge Business dictionary (online 2014). Participants responded that, for the majority of them, transparency means companies are open to consumers, are not telling lies and are allowing consumers to “see through” the companies with regards to who they are and what they do. As one participant said: “(Transparentcy) means being able to see to all the signs

up and down to the back and to the front, to be able to see everything.”

Transparency has also been described as the increased flow of timely and reliable economic, social, and political information (Vishwanath & Kaufman, 2001). The present study showed that consumers, in addition to supporting the existing findings, also want to have easy access to that information. One participant said: “(transparency) means having access to their files and being

able to understand clearly what they do” It was important for consumer to easily access and

obtain the information they needed from the companies

5.2 Four types of transparency

H1:B2B four types of transparency applies to B2C environment as well

One interesting find was that the four types of transparency outlined by Hultman & Axelsson in a B2B environment can be applied to a B2C environment as well. (Table 1) The first type was cost

transparency, which means information on costs as well as price becomes transparent to help the buying firms to achieve effective sourcing (Hultman & Axelsson, 2006). Participants showed a great deal of need to know the production costs and the margin companies made. One participant answered “Companies are willing to be open about all the elements that are involved. So that

includes commercial aspects, doesn’t it? How much profit you made and what is your cost?" This

showed, in a B2C relationship, consumers’ purchase intentions increased when more costs and price information was obtained.

The second type was supply transparency; the underlying principle here is that various flows of products and materials between the buying firm and the supplying firm might increase the ability to create transparency. (Hultman & Axelsson, 2006). In order to trust a brand and before they make their purchase decision, participants are concerned about the suppliers of a brand. They wanted information about where their products come from. One participant said “I want to know

how they work, the procedures for how they get their information, how they get their source, who are they working with, and their business procedures”. A clear supplier description would help

consumers have trust in the company they are dealing with.

The third type of transparency is organizational transparency which, quoting form their own words is “the flow of information concerning who does or can do what and who knows or might

know what may be seen as a dimension of transparency.” (Hultman & Axelsson, 2006) In

conclusion, the more you know about companies, the more you will trust to do business with them. There were no doubts that participants want to know more information about the companies they are dealing with or purchasing from. Participants showed great interest in company operations such as “what do they do?” “who they are dealing with” and “what are their procedures” As one participant said “but I think there is internal transparency. That is how

decisions are made, who is in charge of what.” Internal operations was mentioned by participants

The fourth type of transparency is technological transparency. This entails how companies share and use technology with other businesses. This may extend the understanding of technology for both companies and increase transparency. (Hultman & Axelsson, 2006). With rapid technological advancement, consumers become more and more aware of the new technologies companies use and definitely want get more information. The more they know, the more comfortable they are tot trust the company and use their product. “Having access, being able to

understand clearly what they do and their process. Yes, this kind of thing, have access to their files.” one participant explained.

Table 1, Four types of transparency for consumers

Type of transparency Description Exemplary quotations Cost transparency Want to know the

production cost and margin of the company

"Companies are willing to be open about all the elements that are involved. So that means commercial things, what is it ? How much profit you made and what is your cost?"

Supply transparency Information about suppliers companies are working with

“I want to know how they work, the procedures in how they get their information, how they get their source, who are they working with, the business procedure”

Organizational transparency

Information about how the companies operate

“but I think there is internal transparency something like that, that is how decisions are made, who is in charge of what” Technology

transparency

Information about the what company technologies

“having access being able to understand clearly what they do and their process, yes, this kind of thing, have access to their files

5.3 Transparency and information asymmetry

H2: The higher/lower level of information asymmetry leads consumer think the company is less/more transparent and vice versa.

+/-

Another interesting find was that information asymmetry between consumer and companies affects how transparent consumer think the company is. This is due to consumers wanting to know about different information for different industries. (Table 2) When consumers get enough information about a company or products (the level of information asymmetry between consumer and the company is low), the more transparent consumers think the company is. As one respondent said: “ The more you know about the company, what they do and who they are

dealing with, make it easier for me to trust the company as I know they have done their job properly.” On the other hand, consumer will view a company as not transparent if they cant get

enough information about the products or service. “i guess it is very hard suppose to trust a

company and i suppose you lie on the information that they give you.”

So what kind of information do consumers want to know about the different industries? How can companies become more transparent by bringing down the information asymmetry level and providing relevant information to consumer？As one participant said “I hope that governments

are putting pressure and making opportunities for factories in many countries to improve their conditions, but to be honest, I always look at the price, I will look if it is nice and suits me, I never ask how it is produced.” For industries such as apparel & accessories, participants seemed

aware of the scandals about harsh working conditions, unfair wages and child labor from the news outlets. However, it was not the factor that affected their purchase decision. In the end,

Information   asymmetry    

Transparency    

what matters is the price and the product’s attractiveness. This also applies to electronics and computer industries. Participants made their purchase decision based on the price and quality of the products. One participant said “I would like to know the exact price versus the quality ratio

and I want to be certain I won’t be paying for the brand. I want to buy the quality of the product.”

When it comes to the food and beverage industry, participants demanded more information about the company. Participants wanted to know everything about the food and drink they consume. As one participant explained “I want to know what is in it, what are all the ingredients, and I want to

know where was it made? I want to know when it was made.” This was the same with the

cosmetic industries. “I want to know whether it is safe. That is the most important thing and then

whether it is effective like they said in the instructions.” As those industries directly affect a

consumer’s health, safety and the effectiveness of the products, participants required more transparency from the company. The more they know, the easier for them to make the decision to buy the products. Complete trust was the key for consumers. They spent time to read the labels and research the products.

Table 2, Different industries

5.4 Consumer skepticism, trust and transparency

H3: The more/less consumer skepticism toward a company, the less/more transparency consumer thinks the company is and vice versa

+/-

H4 The more/less consumer trust the company, the more/less transparency consumer think the

Type of industries Description Exemplary quotations Apparels &Accessories Working condition and child

labor. Fair wage

“I don’t want to buy clothes from where company treat their workers in harmful or unfair way”

Cosmetic Safety and effectiveness “I want to know whether it is safe. That is the most important thing and then whether it is effective like they said in the instructions” Electronics and Computers Quality and price “ I would like to know the exact

the price verse the quality ratio and I want to be certain I won’t buying for brand I want to buy the quality of the product”

Food and beverages Ingredient, production and healthiness

“ I want to know what is in it ? all the ingredients, I want to know where was it made? I want to know when it was made”

Consumer   skepticism      

Transparency    

company is.

+/+

The data collected from the interviews does support hypothesis 3 and hypothesis 4. Most of the participants expressed skepticism towards a company as they view the company as not transparent enough. As one of the participants said : “I'm pretty skeptical, I don’t trust any multinationals. i think

companies have been run by stock exchange markets with stockholders where profits and margins are dictates company policy.” Most of the participants expressed their skepticism and this explains their

reason for feeling that way. They don’t trust the information from the company and think the company is hiding information from them. This also shows the link between consumer skepticism and trust. Consumers are skeptical due to the lack of trust about what companies have said on their promotional materials, in other words, how transparent they are. One participant proved this statement by saying: “(in order to trust a company) it has to with the way you open up information to your consumers. i

think that should important aims for companies to be as transparent as possible. Supplying information.”

5.5 The most trustworthy way to communicate with your consumer

H5: Communication channels influence the strength of how consumer views firm transparency policies.

Another interesting finding was 47.7% of consumers thought company websites are the best way to get the information about a company. (Table 3) Participants said company websites were the first step for them to look up for the information they want, as it is more credible compare to other sources. The majority of respondents believe that a company’s website is a good source for

Trust       Transparency  

finding information and is trustworthy. At the same time, a neutral third party authorization would be a trustworthy way for a consumer to gain information too. Participants were sometimes skeptical about the company website as they believed it is also a way of marketing. One participant argued that “ just because they said they are, doesn’t mean they really are, so a third

party would be more neutral and will give you a fair representation of how the company will operate.” Social media, such as Facebook and Twitter are great tools for word of mouth

information. Participants liked the fact that social media is a faster way to get information. However, most of the participants doubted the credibility of the information and had skepticism about it. Then they looked up on other sources for further confirmation. However, if the information was from a friend or family member they knew already and in person. The credibility level went up. “People from social media platforms are not on the company side, they are not on

the consumer’s side. They are just doing something like they go for information, trying to disclose it to the public” Emailing was the least favorite way to send out information as the

6. Conclusion and implications

Based on the 15 interviews reported here, the findings suggested that transparency is becoming

Table 3, Communication channels

Type of methods Frequency of respondents Exemplary quotations and comments Company website 7(47.7%) “ The (company) website I found it is

very useful, if I looking for information, I want to find the information”

Majority of respondents believe that company website is a good source to find information and trustworthy.” Facebook/Twitter 3(20%) “People from (Social media) are not

front the company side, they are not from the consumer side. They just doing something like they go for information, trying to disclose it to the public”

Consumer thinks social media a great way to get word of mouth information about a company or brand.

Emailing 0(0%) “I think emails quite annoying”

Consumer does not want any information send to their email as the mostly consider it as junk mail.

Third party

authorization

5(33.3%) “ A third party would be more neutral and will give you a fair representation of how the company will operate” Consumer believes third party is trustworthy as they could give neutral fair judgments about a company

Note: N=15. Frequency reflects the number of respondents answered the question on “ what do you think is the most trustworthy way for company to deliver the company to you”

more important in our society as consumers become more aware of the products and services they are purchasing. Transparency in consumers’ minds can be defined as companies not telling lies and allowing consumers to “see through” the companies with regards to who they are and what they do. This study provides information that shows transparency is especially important in the food and beverage industry and cosmetic industries as those industries directly affect consumers’ wellbeing. In addition, the outlined 4 type of transparency by Hultman and Axelsson in a B2B environment also have proven to apply to B2C environment because consumers are looking for the same type of information when it comes to transparency.

A conclusion of this paper is hat there is an important interrelationship between information asymmetry, consumer skepticism, trust and transparency. The nature of information asymmetry between consumer and companies make consumers skeptical about information which companies provide. A higher level of information asymmetry leads to a higher level of consumer skepticism, which create less trust towards a company. In the end consumers will not believe the company is transparent. For example, for most of the interviewees, to trust a company and view the company as transparent, it requires the company provide the relevant information which they deemed important.(See table 2). Otherwise, no matter how much increased information the company tried to provide, consumer still won’t think the company is being transparent.

This paper shows how important transparency is for consumers before they make their purchase decisions. Thus, it is wise for a company to take action be more transparent. There are a number of managerial implications companies can take from this. Firstly, consumers are skeptical about the information companies send to them, so a firm should be honest and take responsibility for what it says and does. Once something negative has happened to its brand or products, it is best to be honest about what exactly happened and be open to consumers. Consumers value honesty and companies who take responsibility. They can forgive the companies for what happened but will never forget when a company covers up or misleads. Secondly, consumers trust information

from official website and 3rd party authorization. So a company should try to communicate with its consumer through these two channels. A company should invest in its official website, as this is a primary source for consumers to look up information about the company and its products or services. For an alternative option, get a third party organization to check the features a company claims about your products and put it on its label. A neutral third party will bring trust to consumers. Third, company could provide different information related to their industry to be more transparent from consumer point of view and gain consumers’ trust. (See table 2) Otherwise, regardless how much else information companies provide, consumers will still view the company as non-transparent and less trustworthy.

This paper makes a few theoretical contributions to the field of marketing management research by showing what is in the mind of the consumer when it comes to transparency and the interrelationship between information asymmetry, consumer skepticism, trust and transparency. In addition, it also has found the 4 types of transparency as Hultman and Axelsson developed in a B2B environment also proved apply to B2C environment as well. This illuminates broader aspects of the transparency concept from the point of the consumer. Last but not the least, by showing the framework of the interrelationship between information asymmetry, consumer skepticism, trust and transparency from this paper, it may serve as a foundation for future qualitative or quantitative research.

7. Limitations and future research

One potential limitation for this study is the question of whether the participants were answering the questions entirely and thoroughly due to the time constraints involved; some may have had trouble fully articulating their thoughts at that time, as English is not their native tongue.

The findings of this research will help future researchers to understand better what is in the mind of the consumer and provide a framework for the kinds of information consumers deem relevant.

More importantly, these findings help organizations to understand what consumers think about company transparency and provides a basis for them to explore relevant information consumers believe is important.

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Appendix 1

Invitation letter Dear XXX

I would like to invite you for a 30 minute interview on company transparency.

My name is Zhimao Song and I am currently working on my master thesis, concerning the issue of company transparency at the University of Amsterdam. Not only will your participation be highly appreciated, but your opinion on company transparency will be instrumental in adding to the significance of my research data.

The whole interview is anonymous, your privacy and details will not be shared with any third parties. The purpose of this study is solely for research and not for commercial usage. Your travel expenses will be reimbursed and a small gift will be provided as an appreciation of your participance.

Thank you very much for your time, I am looking forward to hearing from you soon. Kindest regards,

Zhimao, Song

Appendix 2, Interviewee information

Name Nationality Gender Age Education Occupation

Anne Fleur Dutch Female 32 MA Brand manager

Erik Pieter Ridder Dutch Male 30 MA Lawyer

Dennis Van Galen Dutch Male 45 H.B.O Theatre director/teacher

James Egan Irish Male 28 MA Planner for Bvlgari

Monica Ams Romanian Female 23 MA Student

Anna Raissa German Female 24 MA Student

Christina Hansen Norwegian Female 23 MA Student

Jasper Dutch Male 23 MA Student

Stephane Moquette Dutch Male 26 BA Small business owner Karel May Dutch Male 33 BA Customer service representative

Siqi Pan Chinese Female 25 BA Customer coordinator

Patrick German Male 25 MA Consultant

Yerahm Kim Korean Female 27 Ma Housewife

Appendix 3, Transcripts

Interviewee information Name: Anne-Fleur van den Wall Bake Age:32 Gender: F Nationality: Dutch Education: MA

Occupation: Brand Manager

Odd number = Interviewer Even numbers= participant 1. thank you very much to participant this interview Anne 2. no problem

3. I'm just wondering what do you think transparent means

4. transparent, first of all it is a question market. its depend on how you look at it.i think there is transparency with in the organization. but also transparency to the consumers. so what i mean is that for example within the organization, that people in the bottom of the organization they know what is happening in the top. so what are the CEO is deciding or the general manager, what decisions they are making and also how it calls, stakes, so for the people in the lower part of the organization so they know why managers made which decision.i think that is important and also about future plans so that they are involved with the future plan decision making and to be open about it. not only to talk about the good stories , but also saying we are on the pressure or being open about it. that is my opinion about transparency with in the organization. then there is also transparency to the

consumer.i think consumers getting more and more demanding. so they want the

organization to be open and to be more truthful that can be any kind of aspects. can be in production in costs, the marketing stories behind it if it is true or not and social policy of an organization, so those are the example what i mean transparency with consumer that consumers are more demanding for organizations to be more transparent.

5. but as an consumer yourself, what kind of information you want to know before you make your purchase decision ?

6. yes, i think it is also depends on the products. you have low involvement products and you have high involvement products, for example, toilet paper, you just think it feels nice and this what i can afford its fine but more complex products that are more expensive like car, computer or even maybe clothes you want to know how it produced or it is being done in a good way that consumer believes for the environment , like the factories how its

produce, the materials but it is also depend on the consumers.

7. you actually mentioned couple of industries, and thats actually gonna be my next question, when it comes to apparels or accessories, in this industry, what kind of information you want know

8. what do you mean accessories ? 9. i mean clothing industries

10. okay, i think it is again it depends on consumer, for example, for meat buying products consumers in holland, that is no accessories, that only 5% of the business is bio and

environment friendly oriented consumer that actually means 95% of consumers are price oriented . i think that is quiet similar to accessories and clothing. that most dutch people are price oriented. they are looking for bargain in cloth rather than how it is produced. 11. but for you personally, when you deicide to buy clothes what kind of information you

want to know about the company ?

12. i hope it is produced in a nice way, i expect the government put laws on the organizations to make sure that it where the countries produced will be done is a relatively okay way. you can't prohibit all kinds of production according to western opinions. for example, child labor or very long working days. i don't think you can change that quickly in a short time. but i hope the government putting pressure and making opportunities for factories in those countries to improve their conditions. but to be honest, i always look at the price as well, i will look if it is nice and suits me, and then i look at the price and then i say yes .but i never ask shop how it is products or i look at the table to see if it s made in china or Bangladesh. no .

13. so how about other industries , for example when you purchase electronic products like phones or computers, what kind of information you want to know

14. mmmm once again, I'm very dutch consumer and very bargain oriented. but also i have habits buying certain brands for example, i happen to have a mac book as well, to match with my mac i also have a iphone. it is easy to connect each other. so i don't have sunsum so i never look into other brand of phones making that decision based on this arguments. and also i think all phones and laptops they are made in a same kind of countries and in the similar kind of conditions so i never ask for the conditions for those factories but i know it is very very poor from the media

15. so do you think all this information all make the company more transparent

16. i think the companies need to be more transparent when consumer asks for it. as for me , as an consumer i am not asking for it so the organization is not make their process transparent because it had bad influence on their image. and therefore the value that they can ask for the product so they are might not to be transparent on things that might be negative in our eyes in western world. i also think that nonprofit organiztions and

countries like EU who have certain laws can change things in a long term . but also media has a really big role to play. but really it is like a hip,it is very important for consumer for couple a months and then its not important anymore.

17. the last industry i want to ask is food and beverage, it is essential to our daily life, so what kind of information you want to know about the food you eat and trust the food company. 18. food is a hot topic in the Netherlands, especially because there is being a lots of messing

about with for example the meat product, so the trust in our food is going down. but once again, the dutch consumer is still looking for the bargain.i don't think that market leaders in our food industry. we have to focus them to become more transparent. and to choose those products to show that we are involved in the food that we buy so with certain products i do buy for example biological or how do you call. locally produced foods but not on a daily bases all of my food. first all, the offer is not there, so you don't

always have the choice , there is only limited of categories that you can make the choice , its also got to do with the flavor. I'm used to certain kinds of flavor.once again their price,also i have work in a supermarket at AH head-office, that for example, biological is not always good because something 100 % biological but there can be dead frog lying in the water, because it is polluted. you can't put poison to the water to keep those frog stay alive .it is always between animal friendliness and biological on the other side, so the way we were raised as western people, we always think, oh this is biological and this is good. so it is not such a black and white world. so for me as consumer i found it is quiet

complex to make good choice on that as well.

19. and why you think nowadays transparent is more informant than before

20. it is gotta to with because it is getting so complex and organizations are become so big. you don't know the supplier anymore. like i don't know 50 years ago. you went to a butcher, and you knew the meat is coming from the farm in the neighborhood or the teas from the market place, but now it is all produced in France or Germany and in holland in huge factory. it mades food a lots cheaper and you can keep for a longer time because in the past with in two days you have to throw it away. but on the other hand big production made things less transparent. because lots of stakes are involved .yes you don't want to share everything with consumer as a organization right now.

21. well, compared with other aspects of a products, for example, brand, price and quality, how important transparent is for you ?

22. ah, i think, ooh i think it is a very difficult question, I'm not a consumer always looking for transparency, but i am service oriented if i contact, dutch people are eager to complain , if part of this is not working for example, in comparison with other countries, consumers in other countries if they don't like like the quality of the products, they just buy another products. in holland we complain, it means that we are involved and then we ask the company to be open and be honest with the questions we have. so i think more and more organization are aware of the consumer being online and sharing their negative but also positive experience online they are more and more becoming willing to be more transparent, but me personally, yes service is more important if they reply to it. and their honest in their answer rather than i know they decision making and which prices are behind it so on.

23. but which way do you think it is the best trustworthy for the companies to deliver all those information you need ?

24. yes, the website i found it is very useful, if i looking for information i want to find the information . but not only on the own website, but also with forums or other website with people who i see as expert in that category. so objective in my eyes of people, and i found it in a good way for example teams in certain organizations where they take it very seriously and they also respond as a company or as a brand on those forums and discussing pages and so on to help the consumer get the right awesome they have. 25. I see. before we finish he interview, are there anything you want to say or add about

26. not really. the things i said are always being said. like for example. it is become more and more important consumer become more demanding online explain plays a very big roll in that, but still many organizations are very traditional and multination oriented . and not ready yet for becoming more transparent. in long term i think it would becoming so important, that they will lose the battler with the organizations that are ready for this change. because they will be head right now, for example, me right now, I'm very much price oriented , but i think in future i will become more and more aware of where the products are produced and so on. but on the other hand, i always think it is a luxury thing, because organizations that are ready for it, they need to hire people to tell stories, which will make the price of the products and services go up as well. so, good products are usually are more expensive and for dutch consumers they are still very price oriented. maybe not as quick as other countries like Germany or something to adopt it.