Study Reveals Key Way for Suppliers, Stores to Build Strong Trust

Dr. Ozalp Ozer

Dr. Özalp Özer

In many marketplaces, customers rely on their service providers or suppliers to help them make purchase decisions. But when there is a potential conflict of interest, the best way for a supplier to earn a customer’s trust is to share information rather than offer advice or accept delegated authority.

New research by a team at the Naveen Jindal School of Management suggests that this more hands-off approach builds the most trustworthy relationships.

The study, written by Dr. Özalp Özer, Dr. Upender Subramanian and Dr. Yu Wang, was recently published online in the journal Management Science.

 “Advice is telling them the action that should be performed, while accepting delegation is performing it for them,” said Özer, an Ashbel Smith Professor in the Jindal School’s Operations Management area. “If you want to build a trusting relationship, don’t advise and don’t accept delegation. Instead, provide the information — tell them what you know.”

For example, if a grocery store asked a household care product supplier to help decide how much shelf space to devote to the supplier’s products, then the supplier can take one of three approaches.

“The way we design processes in business may have an impact on trust and trustworthiness,” Özer said. “Even though we are only thinking in monetary terms, the processes that we put in place may have an impact on whether or not we are going to build trust.”

Dr. Subramanian Upender

Dr. Upender Subramanian

The first and least effective way to build trust would be to decide how much space the store should allocate for the products.

According to Özer, any limits set by the store would often be seen by the supplier as permission to do what it pleased as long as it didn’t surpass that limit — even if the ideal allocation might be lower than the limit. Furthermore, stores would anticipate the suppliers seeing those limits, and therefore would often set the limits too tightly in the first place.

The second way would be for the supplier to advise the store on the amount of shelf space to devote to the products. The supplier has a fiduciary incentive to tell the store to use more space than is needed.

The third and best way for the supplier to build trust, according to the findings, is simply to provide the store with market information and let the grocer decide how much space to allocate for the products based on that information.

Özer said the study’s findings can be applied to any relationship between an expert and a person or entity seeking the expert’s opinion.

“The majority of the time, that relationship is such that the expert often has an incentive to manipulate his or her opinion to gain personal advantage,” Özer said. “But, even in those contexts, we still seek the opinion of the expert because we need assistance despite that conflict.”

When deciding the best approach to take, the key is whether there is a conflict of interest, Özer said. If there is one, then the best approach is simply to ask for information.

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Tagged: research SOM