Improving Customer Compatibility with Operational Transparency

Ryan W. Buell; MoonSoo  Choi

Working Paper | HBS Working Paper Series | 2019

Improving Customer Compatibility with Operational Transparency

by Ryan W. Buell and MoonSoo Choi

Abstract

Through a large-scale field experiment with 389,611 customers considering opening a credit card account with a nationwide retail bank, we investigate how providing transparency into an offering’s tradeoffs affects subsequent rates of customer acquisition and long-run engagement. Although we find transparency to have an insignificant effect on acquisition rates, customers who were shown each offering’s tradeoffs selected different products than those who were not. Moreover, prospective customers who experienced transparency and subsequently chose to open an account went on to exhibit higher quality service relationships over time. Monthly spending was 9.9% higher and cancellation rates were 20.5% lower among those who experienced transparency into each offering’s tradeoffs. Increased product usage and retention accrued disproportionately to customers with prior category experience—more experienced customers who were provided transparency spent 19.2% more on a monthly basis and were 33.7% less likely to defect after nine months. Importantly, we find that these gains in engagement and retention do not come at the expense of customers’ financial wellbeing—the probability of making late payments was reduced among customers who experienced transparency. We further find that the positive effects of transparency on engagement and retention were attenuated in the presence of a promotion that provided financial incentives to choose particular offerings. Taken together, these results suggest that providing transparency into an offering’s tradeoffs may be an effective strategy for informing customer choices, leading to better outcomes for customers and firms alike.

Keywords: behavioral operations; operational transparency; customer compatibility; customer behavior; Consumer Behavior; Decision Making; Operations; Strategy;

Language: English

Format: Print

43 pages

SSRN Read Now

Citation:

Buell, Ryan W., and MoonSoo Choi. "Improving Customer Compatibility with Operational Transparency." Harvard Business School Working Paper, No. 20-013, July 2019.

Working Paper | HBS Working Paper Series | 2019

How Transparency into Internal and External Responsibility Initiatives Influences Consumer Choice: Evidence from the Field and Lab

Ryan W. Buell and Basak Kalkanci

Amid growing calls for transparency and social and environmental responsibility, companies are employing different strategies to improve consumer perceptions of their brands. Some pursue internal initiatives that reduce their negative social or environmental impacts through responsible operations practices (such as paying a living wage to workers or engaging in environmentally sustainable manufacturing). Others pursue external responsibility initiatives (such as philanthropy or cause-related marketing). Through three experiments, conducted in the field and lab, we compare how transparency into these internal and external initiatives affects customer perceptions and sales, and explore the psychological processes linking transparency to sales. The results provide converging evidence that transparency into a company’s internal responsibility practices can be at least as motivating of consumer sales as transparency into its external responsibility initiatives, incrementally increasing a consumer’s probability of purchase by 13.6% and 45.8% across our two field experiments, conducted in social and environmental domains, respectively. We further investigate the perceptual effects of transparency into internal and external responsibility initiatives and find that the underlying psychological mechanisms linking both types of transparency to consumer purchase intentions are highly consistent. Transparency into internal and external initiatives increases perceived altruism, cause sincerity, corporate ability, trust, favorability, and consumers’ beliefs that the company is an attractive employer, which in turn drives sales. Taken together, our results suggest that it may be in the interest of both business and society for managers to prioritize internal responsible operations initiatives, to achieve both top and bottom line benefits, while mitigating social and environmental harms.

Keywords: Sustainable Operations; corporate social responsibility; operational transparency; Corporate Social Responsibility and Impact; Environmental Sustainability; Consumer Behavior; Perception;

Citation:

Buell, Ryan W., and Basak Kalkanci. "How Transparency into Internal and External Responsibility Initiatives Influences Consumer Choice: Evidence from the Field and Lab." Harvard Business School Working Paper, No. 19-115, May 2019. View Details

Cite View Details SSRN Read Now

People often feel malicious envy, a destructive interpersonal emotion, when they compare themselves to successful peers. Across three online experiments and a field experiment of entrepreneurs, we identify an interpersonal strategy that can mitigate feelings of malicious envy in observers: revealing one’s failures. Despite a general reluctance to reveal one’s failures—as they are happening and after they have occurred—across four experiments, we find that revealing both successes and failures encountered on the path to success (compared to revealing only successes) decreases observers’ malicious envy. This effect holds regardless of the discloser’s status and cannot be explained by a decrease in perceived status of the individual. Then, in a field experiment at an entrepreneurial pitch competition, where pride displays are common and stakes are high, we find suggestive evidence that learning about the failures of a successful entrepreneur decreases observers’ malicious envy while increasing their benign envy in addition to decreasing their perceptions of the entrepreneur’s hubristic pride (i.e., arrogance) while increasing their perceptions of the entrepreneur’s authentic pride (i.e., confidence). These findings align with previous work on the social-functional relation of envy and pride. Taken together, our results highlight how revealing failures encountered on the way to success can be a counterintuitive yet effective interpersonal emotion regulation strategy.

Faculty & Research

Improving Customer Compatibility with Operational Transparency

Abstract

Citation:

About the Authors

More from these Authors