Building brand satisfaction and loyalty through transparency

25 October 2018 12:41

Building brand satisfaction and loyalty through transparency

Read new CSI blog written by Ove Oklevik, Herbjørn Nysveen and Per E. Pedersen.

By Ove Oklevik, Herbjørn Nysveen, Per E. Pedersen

We are quite sure you have heard other people talk about brand transparency lately. As a brand manager, you may have talked about it yourself. Brand transparency is pointed out as the marketing priority number 1 (Blackistone, 2018) these days, and others even argue that transparency is the emerging brand paradigm with potential influence on customers’ switching behavior, their loyalty, and their willingness to pay (Stein, 2018). Transparency is about reducing the information asymmetry between brands and their customers, it is about information sharing, and it is about brands giving “complete visibility of manufacturing process for their products” (Prahalad and Ramaswamy, 2004, p. 31). In November 2017, we blogged about the significance of transparency as a building block in co-creation (Prahalad and Ramaswamy, 2004). Our main message was that transparency is important because it is a precondition for realizing the value of the other building blocks of co-creation (dialogue, access, risk assessment).

In this blog we look more specifically into effects of transparency on the outcome variables brand experience, brand satisfaction and brand loyalty. The results we report are based on a study among customers (n=594) of banks, restaurants, hotels, and mobile operators. The study has a broader scope than just transparency, and also looks into influences of the other building blocks of co-creation. In the results reported about transparency below we have controlled for the effects of the three other building blocks of co-creation.

The results from our study show that transparency has positive influences on sensory, affective, behavioral, and relational brand experience (no influence was revealed on cognitive brand experience). This means that transparency is interesting and appealing to customers’ senses, that it induces brand emotions, that it activates brand customers behaviorally, and that it strengthens the relational tie between the customer and the brand (Brakus, et al., 2009; Nysveen et al., 2013). Intuitively, we may believe that these positive influences of transparency on brand experience should lead to higher level of brand satisfaction and brand loyalty. Although this is partly correct, the story is a bit more complicated than that. The results show that the influence of transparency on sensory experience is transformed into positive influences on brand satisfaction, but shows no influence on brand loyalty. The positive influence of transparency on affective experience has no influence on brand satisfaction but leads to higher brand loyalty. The influence of transparency on behavioral experience shows no further influence on brand satisfaction and actually a negative influence on brand loyalty. Finally, the influence of transparency on relational experience transfers into both more satisfied and loyal customers.

These results have interesting managerial implications. Brand experience is a function of customers’ engagement with a brand. Hence, Ramaswamy and Ozcan (2016) argue for the importance of brand engagement platforms. To transfer transparency into strong sensory experiences, the design of brand engagement platforms, should be done in a way that engages customers’ senses in a positive way. This will further strengthen brand satisfaction (and through that brand loyalty). The positive influence of transparency on affective experience may be realized by explicitly referring to brand values such as benevolence and integrity (Mayer et al., 1995) as part of being transparent. The positive influence of transparency on behavioral experience is tricky as it has no influence on brand satisfaction and negative influence on brand loyalty. We recommend that brands communicate their transparency clearly and in a way that do not require considerable behavioral efforts from the customers. Finally, the positive influence of transparency on relational experience is transferred into both brand satisfaction and brand loyalty. To realize these effects, managers may emphasize that they have the same values on transparency as the customers, they may point to the importance of reciprocal openness in close relationships, and underline that close partners (the brand and the customer) should be honest and open with each other. By understanding the role of brand experience as a mechanism through which brand transparency influences brand satisfaction and brand loyalty, we hope brands will not only be transparent, but be transparent in wise ways.

Related article

Transparency: The key to successful co-creation

To succeed with co-creation, brands have to work along four building blocks: Dialogue, access. risk assessment and transparency. Although all four are important, we here want to emphasize the specific importance of transparency.

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