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Faculty Research

When it comes to buying stuff, who do you trust to sell it: Government, nonprofits or for-profits? BYU study says...

COVID-19 tests were in short supply two months ago, but now testing options abound, from free tests mailed by the U.S. government to those available from pharmacies and nonprofit healthcare providers. All other factors being equal, is there an advantage to accessing a test through any one of these avenues?

According to a recent BYU study, consumers would likely say that there is. The research showed that when the price and quality of goods and services — in this case, COVID tests — is the same, consumers favor nonprofits over the government and the government over for-profit companies. They’ll even pay a premium: for example, $3.51 more for a health test provided by a nonprofit and $1.90 more for a health test provided by the government, compared to one from a for-profit.

BYU business professors Curtis Child, Eva Witesman and Chris Silvia stand in the Tanner Building.
Photo by Jaren Wilkey/BYU Photo

“That to me indicates where consumers place their trust,” said BYU business professor Eva Witesman, who authored the study along with Marriott School of Business colleague Chris Silvia and BYU sociology professor Curtis Child.

The researchers suspect that consumers trust nonprofits most because they believe nonprofits have the purest intentions. “Nonprofits are commonly thought to be more trustworthy because they are prohibited from earning profits that are then used to enrich shareholders,” Child said. “In theory, this prohibition allows them to be mission-focused.”

But Witesman pointed out that “nonprofit” shouldn’t be viewed as shorthand for “honorable.” In practice nonprofits can look much like other companies, making a profit by selling goods and services. It’s also important to consider the specific goals of a nonprofit.

“People associate nonprofits with philanthropy, and rightly so — many nonprofits do good work and are subsidized by the government in important ways — but nonprofits don’t always align with everyone’s values,” she said. “There are a lot of nonprofits that people might view as a threat to things they care about.” Conversely, some for-profits can also do good even while making a profit.

For the study (which was conducted before the COVID-19 pandemic), the researchers presented 529 participants with one of two hypothetical purchases, a generic health test or museum admission tickets, and offered different combinations of price, user ratings, third-party certification and sector.

User ratings were the most influential information overall, but when all other factors were the same, subjects relied heavily on nonprofit status to make decisions. They were 30.63% more likely to choose a nonprofit health test and 36.52% more likely to choose nonprofit museum tickets over products whose sector wasn’t stated.

For Witesman, the study’s takeaway is a buyer beware. “I think we need to dig a little deeper and be a bit more informed as consumers, because the way we spend our dollars matters a great deal. Markets operate best when people have good information about what they’re buying.”

The study may have additional implications for the government, which consumers seem to trust more than for-profits — likely because they distrust profit motives — but still less than nonprofits.

The government often provides programs that eligible people don’t choose to participate in, Witesman said, including services related to COVID-19. Even though consumers’ confidence in nonprofits may be inflated, governments can learn from how nonprofits connect with consumers to boost buy-in for their own services. They might also consider partnering with nonprofits.

“Nonprofits tend to be warmer and tend to want to connect with individual clients or donors,” she said. “And governments programs tend to feel dry and formal. They don’t make the same effort that the private sector does to market and brand services and to be consumer friendly. Our study shows that this kind of signaling matters a lot.”

The study was published in the Journal of Public Administration Research and Theory.


Writer: Christie Allen