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Performance transparency

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Article

Merlo, O., Eisingerich, A., Auh, S., Levstek, J. “The benefits and implementation of performance transparency: The why and how of letting your customers ‘see through’ your business.” Business Horizons, Volume 61, Issue 1, Pages 73-84 (2018)

Summary

This study focuses on transparency of the product-related information available to customers. The authors use the term “performance transparency” and they address the business benefits and ways of implementing it.

First, the authors investigated whether performance transparency leads to customer outcomes that can be profitable for an organization. The result reveals performance transparency increases the level of trust that customers place in a brand. Customers are willing to pay more for that brand as a result. Businesses have much to gain from being transparent. 

Second, the authors analyzed the characteristics of successful transparency initiatives in a wide range of industries from across the globe. The result uncovers the following seven most effective strategies within the control of management to leverage transparency.

  1. Balance the quality and quantity of information.
  2. Ensure that information is part of the purchasing process at the right time and in the right place.
  3. Help your customers help you.
  4. Manage transparency as both a proactive and a reactive process.
  5. Embrace transparency even if it means negative reviews.
  6. View transparency as more than just customer-generated reviews.
  7. Use neutral third-party websites.

What this means for food and agribusiness

Transparency can be a powerful weapon for any agribusiness, especially in the current market where e-commerce is transforming agriculture. Farmers in the U.S. are increasingly turning to e-commerce to procure essential items, moving away from physical stores and regional farming cooperatives. The Farmers Business Network (FBN), an online farming supply merchant startup backed by Google Ventures, launched a service last year that enables farmers to monitor nationwide supply prices. Weed killers, for example, can cost up to four times as much in one part of the country as in another, according to FBN. Many agribusinesses are already adopting e-commerce strategies and forward-thinking managers are harnessing sales with effective strategies to gain the most from the benefits of transparency.

One challenge regarding transparency, however, is ensuring one is comparing similar product and service bundles. For many producers, agricultural retailers have often bundled services with products, charging only for the product. Some differences in pricing by region might be due to nothing more than differences in the product-service bundle. In some geographies there might have been a culture of charging separately for products and services. The cultural difference around bundling could explain some of the wide price ranges from geography to geography.

One key characteristic of transparency is a willingness to let customers see through a firm’s offerings. Producers are likely able to choose for themselves the most relevant product and service offerings from a menu. Agribusinesses will have to balance the quantity of information (a full a la carte offering) to the quality of information (how products and services work together to create a sum larger than the part).

Another key characteristic is the intentional sharing of information that is usually not shared. Many suppliers to Walmart gripe about the onerous demands that come with the relationship. What they omit from that conversation is the amount of information collectively shared among the supply chain that did not exist before Walmart. Particularly as agribusinesses shift from serving thousands of small, fairly similar producers to a few large, very different producers, the conversation becomes about value co-creation. This requires additional information sharing to establish trust in the relationship.

A final key characteristic is the provision of information pertaining to a company’s products and services that is accessible and objective. This puts large demands on agribusiness professionals to find objective sources. Third-party and university trials can help in this regard. Bringing this unbiased view in a manner that informs the decision maker will help build the transparency. Communication cannot selectively exaggerate positive attributes and understate negative ones. You might liken this communication to Progressive Insurance’s “Price Gun” pitched by spokesperson Flo. Agribusinesses might need to be more willing to own up to shortcomings relative to competitors.

A strong transparency strategy should express truth, honesty, frankness, and candor. To make the information accessible, agribusinesses must not only make the information available, but also make it easily understood by their customer. Providing too much or too complex information may cause transparency to backfire as customers face even higher levels of uncertainty which may result in negative reactions. This will take some training and coaching to get all individuals who interact with customers to understand the importance of transparency. Additional examples of the activities that suppliers can do include: effective website design, analysis of customer data, and testing of customers’ understanding of technical language.

AUTHOR
Michael Gunderson
Michael Gunderson
March 27, 2018