Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging Ashley Arnold University of Minnesota Professional M.A. in Strategic Communication - Capstone Paper August 2018 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging About the Author Ashley received her B.A. in journalism and mass communication with an emphasis in advertising from the University of Oklahoma in 2011. Her minor in enterprise studies expanded her learning into areas such as marketing, communications, business and psychology, but her dream to work at an advertising agency lead her to accept a job in Minneapolis after graduation. She began entry-level at an agency as an account assistant and worked her way up to account executive and then account manager, where she leads a team in the strategy, planning, execution and optimization of print and digital advertising campaigns for national clients across a variety of industries. Most of the industries included in this paper were selected because Ashley manages relationships with key accounts in these industries for her agency. They are also industries that in recent years have faced some level of struggle as it relates to consumer trust in the organizations that make them up. With this research she hopes to gain additional insights into where consumer trust currently stands and if/how the messages organizations (including her clients) communicate externally are affected. This paper is the final project in her completion of the Professional M.A in Strategic Communication program at the University of Minnesota. 1 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging Executive Summary The purpose of this paper is to examine relationships between industry type and consumer trust in the industry, and to examine relationships between industry type and consumer trust in messages from organizations in each industry. Five industries out of larger S&P 500 sectors were selected: banking, pharmaceuticals, insurance, social media, and wireless telecommunications. To quantitatively measure trust in each industry, a survey asked respondents to measure their trust across five dimensions established from existing literature. To determine trust in messages, interviews asked respondents to provide their thoughts and opinions on select messages from some of the top organizations in each industry. Survey results showed neutral to low levels of trust in all five industries in all five dimensions. Overall trust was highest for banks and lowest for social media companies. Messages specific to organizations that have recently come under scrutiny for illegal or ethically questionable practices were viewed more as attempts to improve their image, but overall it was the messages that displayed specific actions that were viewed as the most trustworthy and viewed most favorably. In addition, the messages themselves didn’t do much in any industry to change existing perceptions of the companies. Further discussion and recommendations for communicators are provided in this paper based on the results of these studies. 2 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging TABLE OF CONTENTS Introduction 4 Literature Review 7 Industry Overview 7 Dimensions & Definitions of Trust 9 Antecedents to and Outcomes of Trust 11 Trust Dimensions as Related to Industry Type 13 The Influence of Industry Trust on Organizational Trust - Institutional Theory vs. Functionalist Theory 16 Relationships between Messaging and Trust - Source Credibility Theory 17 Method 17 Results 21 Survey Results 21 Interview Results 27 Discussion & Recommendations 33 Limitations & Future Research 38 Conclusion 41 References 44 Appendix 50 3 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging Introduction In 2016, the Consumer Financial Protection Bureau hit Wells Fargo with the largest penalty in the Bureau’s history (Hayashi, 2016) after discovering employees were opening new customer accounts and transferring funds without customer consent in an attempt to meet sales goals. After the $185 million in fines and $2.5 million in customer refunds, it quickly discovered another consequence potentially more detrimental to its business: a destroyed reputation and falling share prices in the days and weeks after the breaking news (Glazer, 2016; Hayashi, 2016). The year before, the Bureau fined Citibank for “deceptive marketing and unfair billing of credit card add-on products,” and it plans to use a portion of these fines (among others) to compensate the victims of illegal practices uncovered in the banking industry (Hayashi, 2016). Earlier this year, the state of Massachusetts filed a lawsuit against a director at British pharmaceutical company GlaxoSmithKline, accusing her of “fueling the US opioid addiction epidemic” during her time at Purdue Pharma. Purdue, along with other drug makers, pharmacy groups and wholesalers, are facing lawsuits from more than 30 US government institutions and authorities for their roles in marketing prescription opioids to vulnerable people and deceiving doctors and patients on the dangers of prescribing the drugs for long periods of time (Crow, 2018). In addition to the scrutiny of drug side effects, pharmaceutical companies are facing mounting pressure to mitigate skyrocketing drug prices. However, despite the media coverage, public backlash, and criticism from President Trump, 3,653 price increases on 1,045 different drug products have been instituted so far in 2018, with the median increase being 8% (Rockoff, 2018). 4 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging Although four telecommunications companies account for 90% of US revenue in the wireless telecommunications industry (Hoover’s, 2018), T-Mobile and Sprint are currently defending a proposed merger of the two companies before Congress, the Federal Communications Commission and the Justice Department (FitzGerald, 2018). The benefits of an approved and successful merger are questioned by some antitrust activists, who are concerned about the idea of having only three players in what is already such a concentrated industry (USA Today, May 2018). In fact, this merger has been proposed in the past and failed, in part due to antitrust concerns (FitzGerald, 2018; USA Today, May 2018). In March 2018, Facebook began investigating reports that data firm Cambridge Analytica had improperly collected and held data about tens of millions of Facebook users and used that data during the 2016 election when it worked with Donald Trump (O’Reilly & Vranica, 2018). In addition to the fury expressed by consumers, advertisers began to pull spend from the platform and shares took a hit while all stakeholders waited to see how the company and regulators responded. The event wasn’t helped by the fact that the company had also recently faced questions about the credibility of the data it was providing on ad campaign viewership (O’Reilly & Vranica, 2018). The above stories have a lot in common. They all took place in just the last three years. They all come from organizations or trends in some of the largest industries in the United States. Most importantly, all of them made news headlines, and consumers seem to be questioning company motivations and the trustworthiness of big businesses more and more. It seems like when it comes to these industries, the only time we ever hear news stories about them or organizations in them, they’re negative or portrayed in an unfavorable light. For some, like Wells 5 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging Fargo and Facebook, the negative press was well deserved, but are these incidents having an impact on other organizations in these industries? Do consumers see them as isolated incidents, or as proof that certain industries just can’t be trusted? Can communication help an organization when consumers think all organizations like them aren’t acting in their best interest? There is a significant amount of research looking at source credibility and its effect on consumer attitudes and behaviors. In existing literature, three characteristics have been repeatedly cited as core attributes of credibility: expertise, trustworthiness, and goodwill (Perloff, 2014). This study will look at trustworthiness by itself and consider whether organizations in the US banking, insurance, pharmaceutical, social media, and wireless telecommunications industries face communication challenges due to a lack of consumer trust in their industry. This type of research is important for organizational leaders to understand whether brands and companies in their industry face communications challenges and a lack of consumer trust just due to the type of business they do, not brand perception or any specific actions they have taken. External communications professionals can benefit from this research by gaining an understanding of what their audiences’ attitudes are as they relate to trust. More importantly, this research can provide a baseline for organizations to use when studying trust in their own organization. They will be able to see if their industry as a whole is struggling with perceptions of being untrustworthy and create communications plans to address customer concerns. This paper will review the results of two studies and existing literature in an attempt to answer the following questions: RQ1: What is the relationship between industry type and consumer trust in organizations across different industries? 6 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging RQ2: What is the relationship between industry type and consumer trust in communication messages from organizations across different industries? As noted above, the primary outcome sought in this research is to examine whether organizations in certain industries face communication challenges with consumers due to a lack of consumer trust in the industry. The secondary outcome is to gain insight into consumer trust in these industries across different dimensions, including reliability, security, transparency, and whether they believe organizations in these industries value their customers and are working in customers’ best interests. These results will then be compared to consumer responses related to trust in messaging communicated by organizations in these industries, to determine if there is a relationship between trust in industry and trust in message. Literature Review Industry Overview Research exists for consumer trust in larger social institutions, including business, government, non-government organizations and media (Edelman, 2018), but research looking at levels and dimensions of trust in specific industries is limited. Industries are defined as “a group of firms that offer a product or class of products that are similar and are close substitutes for one another” (Walker Jr., Mullins, 2014). Industries are sub-categories of sectors, which are 10 major groupings of similar companies in the US that investors use when analyzing corporations (Kennon, 2018). From the S&P 500 index, the below industries will be considered: Banking (part of the “financials” sector) - There are almost 5,000 commercial banks and ​ 770 savings banks in the US banking industry as of 2018 (Hoover’s, 2018). According to Hoover’s (2018), these companies’ primary operations include accepting deposits and making 7 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging financial loans to organizations and consumers. Some of the largest banks in the US include Bank of America, Citibank, JPMorgan Chase, and Wells Fargo (Hoover’s, 2018). Insurance carriers (part of the “financials” sector) - There are around 35,000 ​ establishments in the US that “underwrite insurance policies and annuities that are paid out in the case of death, illness, injury or damage to property” (Hoover’s, 2018). Some of the largest insurance carriers in the US include Anthem, AIG, MetLife, Prudential Financial, State Farm, and UnitedHealth (Hoover’s, 2018). Pharmaceuticals (part of the “health care” sector) - Companies that manufacture and ​ process medicines fall into the pharmaceutical industry. There are about 1,700 companies in this industry in the US, with major players including Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson, Merck & Co, and Pfizer (Hoover’s, 2018). Wireless telecommunications services (part of the “telecommunication” sector) - ​ Verizon Wireless, AT&T Mobility, T-Mobile US, and Sprint Communications are the four largest wireless telecommunications companies in the United States, accounting for about 90% of industry revenue (Hoover’s, 2018). While this industry is often linked to mobile phones and other mobile internet-connected devices, this paper will only focus on the telecommunications companies themselves, as providers of voice calls, text messaging and internet access. Social media (part of the “consumer discretionary” sector) - For this study, social media ​ will be looked at as an industry - as organizations that offer products and services to users online. Because it is not classified as an industry in itself, Hoover’s (2018) includes Facebook, Twitter, LinkedIn, and other related and subsidiary social media companies in an “internet publishing, broadcasting & search portals” industry. Companies in this industry publish content online and 8 Ashley Arnold - Hard to Earn but Easy to Break: Consumer Trust and Ways to Improve it with Messaging operate websites that allow others to publish and find content online. It’s important to note that with this group of organizations the primary source of revenue comes from advertising instead of consumer dollars, while the other four industries in this paper rely on consumer spending or investing as their primary source of revenue (Hoover’s, 2018). Dimensions & Definitions of Trust As noted above, while there is a significant amount of research on the concept of “trust,” much of the current literature related to business and communication looks at trust in brands and organizations, and the literature surrounding trust in industries is limited. Researchers have developed and hypothesized a variety of dimensions that could factor into an organization’s or brand’s perception of being trustworthy. One dimension that has received significant attention as a definition of trust is reliability, or an organization’s ability to consistently do for consumers what it says it will (Delgado-Ballester et. al., 2001; Sung, 2010; Song, 2012). Delgado-Ballester et. al. (2001) also included a dimension of “intentions,” suggesting that a trustworthy brand won’t take advantage of its consumers in any way. Using the Delgado-Ballester et. al. dimensions as a baseline for further study, other researchers also pulled in dimensions of expertise, or the skill and knowledge of the organization (Sung, 2010), and the “disposition toward a brand characterized by positive expectation of and willingness to rely on the brand” (Xingyuan et. al., 2010), the latter still signifying the importance of reliability. Lassoued and Hobbs (2015) broke out dimensions even further, including competence (quality and safety), credibility (having messaging that is believable and delivering on that messaging), benevolence (the organization’s benefits it will provide the consumer), and reputation (consistency in delivering both a quality product and honest communication) in their 9