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The Importance of Trust to an Online Business

 3 min read / 

Trust is one of the three factors that assures the existence of collaborative economy, as Uber or Airbnb, the other two being the existence of a community and the wiliness to exchange. Interactions among individuals inside the community are essential as they build trust and tolerance and generate a social capital – social networks and the norms of reciprocity and trustworthiness that arise from them.

The Importance of Trust

The process of exchange is seen as the primary role of marketing, making the market focus on customers’ needs, wants and preferences to develop its relations and possible exchanges. Through exchange, consumers can buy or access products, develop relationships and achieve social and economic objectives. There are different modes of exchange (market exchange, gift giving and sharing), each guided by different principles and logistics, which allows for differentiation among them.

Sociologists George Wood and Juan Judikis define a community as “a group of people who have a sense of common purpose(s) and/ or interest(s) for which they assume mutual responsibility, who acknowledge their interconnectedness, who respect the individual differences among members, and who commit themselves to the well-being of each other and the integrity and well-being of the group”.

Trust and New Entrants

Trust has been always a key factor for every business’s success. If customers trusted one’s brand and its products or services, one would have a solid clientele as long as it lasted. The online market does not operate differently and trust is becoming its most valuable currency. This transformation was caused by a demand for a safer platform as the participants of the marketplace are virtually acquiring products or services from known and unknown companies or even unknown people. According to a 2014 study, the success of companies, especially the ones operating in collaborative economy models, is built on reputation and trust.

Due to this, in order to make transactions safer and less risky, companies are gathering data with ratings, testimonials, photos and videos of the products and reviews from specialists to develop a “reputational network”. The figure below, taken from the article “Where does loyalty lie in the collaborative economy?” written by Rachel Botsman, a collaborative economy global expert, in 2015 shows the value of reputation inside the sharing economy model, where the level of trust and reputation are proportional, thereby leading to a higher probability of transactions.

The Trust Market

The search for the generation and analysis of this data, creating this reputational network, is so big that a market opportunity appeared and companies like TrustCloud are trying to create a database of reputation rating that can be used by different websites. However, with its 1.79bn monthly active users, Facebook has the potential and is pointed to become the arbiter of online trust as it has already over passed the churn being linked and engaged with millions of external websites and people from all around the globe.

For incumbents or new entrants, disregarding their market, the measurement of trust is a success key to thrive in the market. As people have a bigger range of products or services to choose from, having a filtering governance will become a competitive advantage and allow an exponential growth of the system.

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Companies

Whatsapp Launches New Venture Aimed at Businesses

 1 min read / 

whatsapp business

Whatsapp has launched a new app targeted at businesses, called the Whatsapp Business App, which they claim will enable companies to “communicate more efficiently” with present and potential customers.

This forms part of Whatsapp’s wider strategy to branch out into the corporate world. It plans to use the app to generate new revenue by charging businesses for using the extra communication tools that will enable them to better connect with their customers.

Although the app is set for worldwide release, at present it will only be available in Indonesia, Italy, Mexico, the UK and US. It includes a feature which indicates a business is authentic with a green tick badge next to their name.

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Companies

Amex: Troubled Credit Card Company Reports $1.2bn Net Loss

 2 min read / 

Amex annual report

On Thursday, American Express, or Amex, reported a net loss of $1,197m in the fourth quarter, the first net loss the company has experienced for 26 years.

Although the company stated that revenue from interest expenses was up 10% to $8.8bn, Amex said recent reforms to the US tax code meant the company incurred extra costs, including a repatriation cost on its foreign assets as well as a devaluation of its deferred tax assets. It estimates total costs amounted to $2.6m.

For the full year, net income was $2.7bn compared with $5.4bn the company earned in 2017. However, even with the estimated $2.6m the company claims it incurred from the recent tax charge, net earnings were still $5.3bn, $100m lower compared to last year.

In New York, American Express shares (AXP) took a near 1% tumble at the beginning of trade with shares finishing the day on $99.90.  JPMorgan Chase and Goldman Sachs anticipate greater earnings for 2018.

“Overall, we believe the Tax Act will be a positive development for both the U.S. economy and American Express” said CEO and chairman Kenneth Chenault. Chenault also said he will be leaving Amex in “very strong hands” when his successor, Steve Squeri takes over next month.

American Express has suffered from an ever-reducing share in the credit card market and ended its 14-year relationship with American warehouse chain Costco who in 2016 made an agreement with the market leader, Visa.

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Companies

Tencent Extends Facebook Lead

Tencent Facebook

Tencent has shot past Facebook to become the world’s most valuable social network.

Editor’s Remarks: Although Tencent briefly overtook Facebook in terms of market cap in November, the recent selloff of Facebook shares prompted the Chinese tech titan to regain the lead. Facebook investors responded negatively to news that Mark Zuckerberg’s plans to highlight family and friend-based content on the newsfeed would reduce the amount of time people spent on the site. Shares in Facebook have fallen 5% since that announcement, enabling Tencent to gain a $19bn lead over the US company. Tencent’s growth has been spurred on by its diversification away from its flagship messaging app, WeChat, and into video games.

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