ServiceFriday: Performance Enhancing…Transparency?

In a world where service providers are growing more aware of the importance of being transparent with customers, a group of researchers conducted a study to interpret what constructs the performance transparency of service firms. The researchers then tested the effect of performance transparency on customer perceptions and examined the impact a firm’s ability to deliver on its’ service has in regards to performance transparency.

The study, published in the Journal of Service Research, first focused on identifying the similarities and discrepancies between service firms and customers in regards to what defines performance transparency. Researchers then developed a 4-item scale to test performance transparency. After studying with two different service firms, The Gap (clothing store) and HSBC (banking), researchers discovered that the 4-item scale was valid and reliable. “Both information accessibility and objectivity contribute to the measurement of performance transparency.” the researchers wrote.

Researchers then created a questionnaire booklet that focused on three kinds of service fields; a hotel, a retail bank, and an airline, which they distributed to 146 graduate students as part of a standard course. The students’ answers indicated that they had stronger purchasing intentions when the service firm’s performance was transparent, as opposed to the control condition which only offered general information on its’ service.

Next, data was collected by interviewing travelers outside a large, international airport where they were asked to respond to questions about different airlines. After thoroughly examining the data, researchers concluded that the ability of service firms to deliver on their product weakens the influence of performance transparency on purchase intention or the willingness of customers to pay a price premium.

“These results indicate that the positive effects of performance transparency are more pronounced when firm ability associations are relatively low rather than high.” This is a pivotal piece of information for management because it identifies the firms that exhibit lower levels of abilities as the ones who will profit most from being transparent about their performance. “For firms with high-ability associations, there seems to be little room for performance transparency to encourage higher purchase intention or more willingness to pay a price premium.”

Managerial implications

Management should take note of this study for a few reasons:

• Researchers crafted and developed a “managerially viable” 4-item scale that can effectively identify transparency.

• Performance transparency should be indicated by the objectivity and accessibility of information for the customer. The prior notion of transparency acknowledged accessibility’s role, but consumers are growing wise to the service information managers choose to omit.

• Customers’ purchase intention and willingness to pay a premium price for a service were influenced by performance transparency. This is vital knowledge because it indicates customers may be willing to spend more money on service firms that offer greater performance transparency.

Delve deeper into the importance of performance transparency by reading the full article at the Journal of Service Research. (A fee may apply.)