Lotso box

On Marina's visit to the Disney Store last week, the genial cashier asked for ID. This wasn't surprising: a talking Lots-O'-Huggin Bear doesn't come cheap, and when you pay by credit card for purchases over a certain amount, retailers routinely ask for picture ID.

What was surprising—and instructive—was the way the cashier asked for it. "Could I see your ID?," he said, promptly adding, "Just because your card is not signed on the back." Most merchants just ask for ID—they don't explain why, let alone do it in an almost apologetic tone.

To someone who'd co-authored a book about how behavioral economics can help your business, this brief explanation was telling. Experiments using the Trust Game have shown that although trust doesn't inspire trustworthiness, distrust tends to get punished. For example, when a participant playing the role of "Investor" entrusts the other player with the minimal possible amount (such as $1), the Trustee is more likely to keep the money than if the Investor had opted to trust the Trustee with the game's maximum amount (such as $10). In other words, the Trustee interprets the relatively small dollar amount as a sign of distrust—and exacts a "distrust penalty."

It's reasonable to assume, then, that if you want to avoid the distrust penalty, you should either be more trusting or explain why you're acting cautious. The Disney cashier took the latter approach.

That's smart: being too trusting (by taking any credit card presented to you) can come back to bite you if thieves exploit your trust. (Again, being trusting does not in itself encourage trustworthy behavior; in fact, it can attract exactly the wrong type of customer.) But acting distrustful can make good customers feel like the company doesn't like them. The simple addition of "Just because your card is not signed on the back" lets you have the best of both prudence and diplomacy.

This is just one example of how a savvy retailer can profit from an understanding of human attitudes toward trust. In our next post, we'll show how Zappos does something similar in a different context.

Copyright Kay-Yut Chen and Marina Krakovsky, http://www.secretsofthemoneylab.com

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