Information Transparency

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Information Transparency: The test of trust between firms and consumers

Contents Page

Chapter 1: Introduction                                                                                                            3

1.1 Research Motivation                                                                                                       4

1.2 Research Aim                                                                                                                  5

1.3 Research Objectives                                                                                                        5

1.4 Scope and Limitation                                                                                                       6

Chapter 2: Literature Review                                                                                                    7

2.1 Overview of Corporate Transparency                                                                            7

2.2 The Definition of Information Transparency                                                                  8

2.3 Benefits of Information Transparency                                                                          10

2.4 Transparency In Manufacturing Process                                                                      10

2.5 Modern Marketing and E-retailing                                                                               13

2.6 Thai Consumer Behaviour                                                                                             14

2.6.1 Counterfeit Consumption                                                                                     15

2.6.2 Conceptual Meaning of Perceived Quality                                                          15

2.7 Research Hypothesis                                                                                                     16

Chapter 3: Methodology                                                                                                         18

3.1 Research Design                                                                                                            18

3.2 Sampling Plan and Sample Selection                                                                            19

3.3 Participant Screening                                                                                                    20

3.4 Data Collection                                                                                                              21

3.5 Compliance With Ethical Guidelines                                                                             22

Chapter 4: Results                                                                                                                    23

4.1 Data Collection and Data Analysis                                                                                23

4.2 Descriptive Statistics                                                                                                     23

4.3 Examining Relationship - Correlation                                                                           25

4.4 Chapter Summary                                                                                                            

Chapter 5: Discussion and Conclusions

Chapter 1: Introduction

As a Thai consumer, I have been consuming various types of products, especially luxury goods and even more on headphones products. When buying a new pair of headphones, one of the issues that arise is when a company claims that they use high-quality materials to create their product but omitted other pieces of information regarding the product in order to enhance their positive claims. For example, Beats by Dre is selling Beats Solo (2016) at the price of £169.95 and use words such as “premium headphone” on their website to market it as a high-grade product.

There are encouraging online peer reviews, for instance on Amazon, on how the product is worth the valuable that they advertised. However, there was an analytic examination of Beats Solo that found out that they used a different material such as metal to add weight to the headphone in which it accounted for 33% of the total weight of the headphone (Aguilar, 2015). Moreover, according to many research, the estimated cost of production of a Beats Solo is only about 8% of the retail price (Hahn, 2015). Adding more weight to a lightweight headphone can give consumers an impression that they are using a premium quality product as heavier products are associated with having higher quality and more functions. While Beats by Dre did not exactly tell false information, they certainly omitted much information that could turn around their claims and image towards the product itself. Brady (2014) specified that transparency in manufacturing is essential because it allows consumers to gain an overall view of the production line and this example is a prime case study of how transparency can be twisted in other ways. While we can agree on what terms “transparency” means, there seems to be a degree of how “transparent” a company choose to be towards their customers and how much information revealed could be considered “transparent.”

Consumers on a daily basis can see up to 3,000 marketing messages, and it is impossible to process every single advert they see. Only a few advertisements are being honest with customers by telling the truth about their products or services. A documentary film called ‘The Naked Brand’ (2012) once stated that 90% of consumers trusted peer review when they are about to buy new products. This includes both those who shop in-store and online. However, less than 20% of consumers trusted the advertisements they saw (The Naked Brand, 2012). This is where information transparency plays a significant role in consumers’ purchasing behaviour.

1.1 Research Motivation

The subject areas of Delivering the Value of Proposition and Consumer Insight has taught me about the methods of adding value products and services. They also taught me about having responsibility to the local community and consumers. I have developed an inquisitiveness regarding how information transparency can influence customer’s decision making process because there are many premium goods advertisements that are not being honest with their clients or choose to omit crucial information regarding the product.

Information transparency can be defined as the ability for a customer to have access to firms’ objective information (Liu, 2013). With the rapid growth of technology, consumers have everything at their fingertips where they can learn more about the product either from peer reviews or reputable YouTube channels. Therefore, avoiding transparency is no longer an option for a firm. However, some developing countries, such as Thailand, need companies to be more transparent and honest with consumers because they could be misleading consumers into making blindfolded purchases.

1.2 Research Aim

The aim of this dissertation is to find the correlation between transparency and Thai consumer purchasing behaviour in electronic products market.

1.3 Research Objectives

1.    To examine and identify previous studies and literature to find correlation between consumer behavior and transparency.

2.    To explore what does it mean by information transparency in consumers’ perspectives.

3.    To identify any factor that would trigger consumers to pursue for transparency within the firms

4.    To identify variables that would affect consumers’ purchasing behaviour in using information or finding new information that will affect their decision making process.

5.    Conclude any significant findings and providing advices for consumers and organisations.

1.4 Scope and Limitations

This research intended to collect data from Thai student who is currently studying in the UK. Based on the literature review, males tend to spend more on the electronic products than female. Therefore, the quota sample was chosen, and allow more male to do the survey. There is also a limitation when doing an online survey since the expected sample size was approximately 250 responses. However, with a time constraint, this study manage to get only 150 samples with 77 respondents being females and 73 being males.

Chapter 2: Literature Review

In this chapter will be covering the theory of corporate transparency and the definition of information transparency. Followed by the benefits gained from information transparency and information transparency in the manufacturing process. Moreover, it also explores Thai consumer spending pattern and counterfeit consumption as well as the conceptual meaning of perceived quality. The hypothesis will be described in the last part of the chapter after reviewing the literature.

2.1 Overview of Corporate Transparency

Corporate transparency as a part of marketing in the modern age. Corporate transparency is the firm’s openness to the public, firm’s ability to supply specific information about their activities` to the outsiders (Bushman et al., 2004). There are 5 aspects when it comes to Corporate transparency: (1) Governance Transparency, (2) Financial Transparency, (3) Timeliness of financial disclosure, (4) Accounting principles used to measure financial disclosure, and (5) credibility of the financial disclosure. These principles and aspects were categorised by Bushman, Piotroski and Smith (2004) which focused on the effect of corporate transparency on some aspects of the firm, for example, investors, legal and political economy. It is essential for public sector firms to provide these 5 aspects to the stakeholders.

However, the journal by Bushman, Piotroski and Smith did not consider transparency in the manufacturing process. According to Brady (2014), there are 3 main reason why transparency in the manufacturing process is important: Firstly, to build trust and motivate process participants; Secondly, to support continuous improvement; Lastly, to gain a holistic view of the entire production. To some extent, firms only provide what ingredients or materials being used in the products. For example, Auto News (2015) provided a detailed documentary film on how Porsche produce 911 Carrera in the factory, but they did not specifically tell how they harvest the supply. This could raise the question that will consumers still purchase the vehicle if suppliers involved in unethical activities. Most of consumers are not well educated in the difference in price and true cost of the product. Information transparency is about the ability for stakeholders to have full access to the information they need, but not the information given by the company (Gebler, 2011).

Information transparency is not just about providing documents and information to the audience. Sometimes it involves open communication and being honest with customers or stakeholders. In this day and age, consumers want a truthful and honest information about the product so that they can weigh benefits gain from each one and make the right choice (The Guardian, 2014).

2.2 The Definition of Information Transparency

There are many definitions for transparency, but according to Yeyi Liu (2013), information transparency is customer’s subjective perception of being informed about the accessible objective information of the firms. However, simply giving the information to the client is not enough for the company to be transparent, the information must also be supported but multi-faceted information as well to make the information provided valid. Information transparency is heavily involved with customer relationship management and services, such as customer trust and customer satisfaction. The question arises about what should be included in the information to make it counted as a transparent information. In the research, Liu (2013) found out that the customers are likely to react positively to the information that includes third party review which they saw as the “unbiased” information over the information that the firm provided. Customers also think that it is the firm’s obligation to make sure that information can be easily accessed and easily understood. Technical terms should be replaced with a much for familiar terms for the best understanding. Liu (2013) also classified different types of information that are factors of transparent information:

●     Accurate Information

●     Objective Information

●     Comparative Information

●     Comprehensive Information

●     Pros and Cons

●     Other than the types of information Liu also talk about how the information is communicated or to be more precise, how the information should be presented to the customers. Understandable information – information should be easily understandable with the language and terms that the customers can easily comprehend.

●     Consumer Review – many customers consider this to be the most vital kind of information. Most of them are obtained from a trustable third party.

●     Timely Information (updated timely) – any changes to the previous information must be informed by the firm.

2.3  Benefits of Information Transparency

In context with this dissertation, there are several articles regarding the business benefits of being more transparent. Transparency creates numerous benefits towards stakeholders of the organisation. Thus, also helps to improve the structure of corporate governance (Sonmez, 2014). Corporate transparency gives the right to access all kind of information in the organisation (Sonmez, 2014). This improves the availability of information to the public and could gain more confidence from investors. Hence, can prevent frauds and provide better protection for investors in the market (Sonmez, 2014). Moreover, a market with perfect information would increase the confidence in investors and market participants.

An effective transparency inside the organisation provides better communication system because there would be more coordination between supervisors and employees (Llopis, 2012). Adopting a more transparent leadership can lead to an increase in employee engagement and productivity (Hayward, 2015). An increase in transparency may have a positive impact on company’s reputation as well as positive word of mouth among employees. A great reputation means that there is a higher probability of employees being both attitudinal and behavioural royal to the company. Transparency and openness are the way to gain trust from employees and consumers.

2.4  Transparency in Manufacturing Process

Rosenblum and Huang (2012) has created “Naked Brand”, a documentary film focusing on corporate transparency has raised solid questions for this research: How does one correlate a company that has high corporate transparency with success? Are they more likely to be successful? Could the corporate transparency act as a modern marketing in the digital age? Also, what role does Transparency plays in the modern marketing?  As firms became more aware of their evolving customers, executives and top management of the firm had to adapt themselves to the modern customers. Kevin Plank, the CEO and founder of Under Armour and Porter Gale, Former CEO of Virgin America, are the prime example of these executives (The Naked Brand, 2012). Their firm realised how important trust from customers is, and are operating their firm based on that belief and invest in giving the customers’ experience. In the present, the number of smartphone users worldwide went as high as 2.6 billion and are still rising with more than 80% of the user researched their product before purchasing (The Naked Brand, 2012). The documentary also made a firm statement that about 90% of the customer choose peer review over advertisement (only about 20% trust advertisement).  Modern Customers these days are more sceptical and tend to believe other customers more than the firm itself.

Firm in the past had failed to include vital information in their advertisement such as MacDonald’s advertisement in 2003 (Cozens, 2003). This leads to popular belief that advertisement is untrustworthy and customers must find a new way to consume information about the product. This suggests that a clear communication between the firm and consumers is very important for the company’s image. This is why some companies choose to be open and completely transparent about their process from manufacturing to the marketing of the product in order to appeal to their customers. A very great example of this is Patagonia, a company that sells outdoor activities product. Patagonia introduced the concept of “The Footprint Chronicles” that allows their customers to see the details of their product from the ingredient of their product to the manufacturing process. The details also included what the ingredient and the method of manufacturing had on the environment and why did they choose this particular ingredient and process.

According to Tapscott and Ticoll (2003), firms that adopt transparency to its business strategy are likely to become successful which could lead to a rise in competitiveness and profit in the long run. While Christensen (2002) claimed that transparency is a tool that shipped corporate’s way of communication. Not only transparency helps to improve the overall image of the company, some even contribute to reducing the cost. Green business environment sometimes helps to reduce the waste cost, improving the budgeting spending in the company. In the time where everything is connected with network and people has access to almost limitless information, it is easy to share the information, whether it is bad or good. The interesting part about transparency claims in these companies is that even if there is no government organisation checking the validity of these allegations, the effect of this information open to the public is already showing. When a company is trying to take shortcuts, and working its way around the problem, the backlashes that they got from those actions are often worse than laying it out in the first place. This almost making transparency a compulsory action when it comes to crisis management.

2.5  Modern Marketing and E-retailing

When talking about modern marketing, Green (2015) states that “Modern Marketing is a holistic, adaptive methodology that connects brands with real customers and drives business results by blending strategy, creative, technology, and analysis.” Technological development reduces the barrier to entry for producer and also allows consumers to have more access to information. The internet is a gateway for consumers to get access to information. As a result, consumers are more informed and more sophisticated in which it makes industries more competitive.

The advancement in technology enables development of electronic retailing (e-retailing) which allows the retailer to offer products and services directly to the customer via the online network. The study suggests that internet retailing consists of 4 components (Atorough, 2013): (1) Availability and accessibility, (2) new market, (3) communication, and (4) Efficiency. The characteristic listed made the Internet a challenging ground for the market even though it offers potential opportunities for both increasing the number of their customers globally and also reducing their cost. Here are some of the summarised features that emerged from the extensive usage of Internet as the means of retailing:

●     Availability and Accessibility - Accessing the internet has become effortless nowadays for each household. This makes it easier for the retailers to reach consumers and offer the products right to the customers’ hands at all times (Atorough, 2013).

●     New markets - The Internet allows retailers to reach new market globally. As people began to adopt new technology and embrace the concept of E-commerce for shopping, the market continues to expand effortlessly (Atorough, 2013). This will create new opportunities for the brand to develop with diversification to suit their global customers

●     Communication - Two-way communication is an interactive feature that is offered extensively by the internet for a retailer to reach their buyer. This interaction will help retailers to target and segment their customers based on feedback which they could receive almost instantly (Atorough, 2013).

●     Efficiency - The Internet enables retailers to save cost and reduce overheads. Retailers can reach their customers almost all the time with minimal cost and without incurring labour cost, significantly helps the retailer in managing their budget needed (Atorough, 2013).

2.6  Thai Consumer Behaviour

The previous study by Sereetrakul et al. (2013) has revealed that there is difference in consumer behaviour between male and female students, where males are more likely to consume more electrical goods (especially computer equipment and games) than females. This data is useful since it would help to create the sampling plan and target mostly on male customers. Meanwhile, Thai female student heavily spends on cosmetics, clothes, and entertainment. Moreover, the study by Wiangwisad (2008) also reveals that gender difference can result in differing spending behaviour such as Thai male students aged 13 to 18 are more likely to spend more money than female students. However, the study by Sereetrakul et al. (2013) also reveals that there are no significance difference purchasing habits when it comes to comic books and magazines between male and female students.

2.6.1        Counterfeit Consumption

According to a study on consumption of counterfeit goods which is widespread amongst different age gender and socioeconomic, it is revealed that the consumption is not a subculture as people once assumed but rather occurs just like everyday shopping (Rutter and Bryce, 2008). The consumption of counterfeit goods became a common routine of social practices. There have been studies to understand consumers’ intention to purchase counterfeit goods related to various variables such as attitudes, buying behaviour, and product use (Eisend and Schuchert-Guler, 2006). Rutter and Bryce (2008) had identified cost being the prime factor for purchasing counterfeit goods for most of the product categories. Consumers that choose counterfeit goods over original product believed that legitimate goods are overpriced and choose to experience the similar product at a lower price. Cheap counterfeit goods are viewed more as a mean to increase the number of owned items (Rutter and Bryce, 2008).

2.6.2        Conceptual Meaning of Perceived Quality

The majority of Thai consumer relied opinion on the internet and word of mouth from their trusted source or consumer in order to evaluate their decision-making process (Panusbordee, 2013). Product quality is the biggest concern for Thai consumer in their process of decision making (Thairath, 2012). In addition to peer review, the origin of a product also affected the perceived quality of that product as well as it is often associated with the level of industrial and technological development of that origin, especially when developed country and developing country are being compared. The status of the country of origin has a significant impact on the product’s quality perception (Usunier, 2006).

As perceived quality is subjective, it is more tasking to measure when compared to the real product quality. While real quality can be accurately compared to specification and functional evaluation perceived quality is being measured based on the imperfect information of human perception (Smallwood & Conlisk, 1979). Perceived quality also included psychological experience in addition to the physical utilisation.

Wright (1975) had found that consumers often shorten their decision-making process by using their perceived quality based on the judgement on extrinsic cue, for example, the origin of a country that the product was produced rather than the real product specification. A prime example of this when consumers are to compared five-star restaurant with another. Consumers would perceived that the five-star restaurant of having a higher quality despite the fact that they never been to either of the restaurants.