Regulating Trust: Love It or Hate It?

Applications

CONTRIBUTOR / Kent Grayson

ASSOCIATE PROFESSOR OF MARKETING, BERNICE AND LEONARD LAVIN PROFESSORSHIP
KELLOGG SCHOOL OF MANAGEMENT / Marketing

Part 1 / Regulating Trust: Love It or Hate It? (0:00)
Context plays an important role in the trust that consumers have in an exchange. Trusting the institution can diminish the importance of personal relationships, though it can also provide a foundation for building strong bonds of trust with an institution’s employees.

Part 2 / When Trust Makes Things Too Easy (1:37)
Context is plays an important role in consumer trust in new industries, and professional associations can help build institutional trust. The validation they bestow gives consumers a reason to trust a company, but unfortunately, that trust is not always warranted.

Transcript

BUMPER: Regulating Trust: Love it or Hate it?

When we think about trust in the marketplace, we’re usually thinking about trust between the buyer and the seller and, do I trust you enough to give you money so that when you give me a product or when you provide a service, that it’s going to be good?

But there’s another level of trust that exists in exchange relationships, and that’s trust in the context in which the exchange occurs.

There’s a lot of research on the relationship between institutional trust and individual trust, and some research suggests that the more institutional trust exists, the less people feel like they have to build trusting relationships, because they’re protected by the institution.

But there’s also research that suggests that the more we trust in institutions, that provides a useful foundation for building even stronger trust with exchange partners. And the jury is still out on which is true and which isn’t.

A lot of firms don’t like to be monitored by professional associations, and they don’t like rules and laws that keep them from doing things that they might want to do with customers, and those laws and rules can make companies be less efficient and less profitable.

But they can also enhance the trust that the customer has in the institutions that protect trust and without them, the consumer may not want to engage with firms in the entire category.

And this is particularly relevant for new industries. We hear a lot about the sharing economy. One of the problems about some companies that operate in the sharing economy is that these institutions don’t necessarily exist which protect consumers from these problems.

If you’re working in a sector where there isn’t institutional trust, you have to build your trust one person at a time. At the grassroots level. And it seems like, for some of the companies that are operating in the sharing company, that if they do that and they start to build a critical mass, then the critical mass of trust within a particular social network serves as a certain institutional trust.

BUMPER: When Trust Makes Things Too Easy

Based on the research that I’ve done with a colleague in the mountain climbing industry, it seems that as consumers, when we’re going about our daily decision-making process, we sometimes are willing to place faith in institutions without necessarily knowing what those institutions do and without investigating.

So, the FDA — people think, “Oh, well, I’m going to buy this new product because the FDA approved it.” But there are lots of people who think the FDA is not very trustworthy. And there are reasons to maybe think that in certain product categories.

But many people still sort of, almost without thinking about it—it makes things easy. As I mentioned, institutional trust makes things easy for consumers. They believe, “OK, well I can trust this,” when that trust is misplaced.

And the amount of implicit trust (let me put it this way), the amount of implicit trust that exists in the institution of guiding and maybe in the professional associations that monitor is amazing to me as someone who doesn’t climb mountains.

They say, “Well, I went to a website, and I found this person, and my friend says they’re good, so I signed up for them to give them 60,000 dollars, to have them take me to the highest peak in the world where I might die.” And they’re still willing to place trust.