The University of Alabama

Private Eyes: Study Looks at Alleviating Customers’ Privacy Concerns

By Bill Gerdes
Photos by Jeff Hanson and Bryan Hester

The debate over consumer privacy rages on.

On one hand, consumer groups and government agencies continue to push for more stringent guidelines and laws for collecting personal information. On the other, companies and organizations are trying to gather information from consumers, in most cases, to provide better service and experiences.

Caught in the middle, it seems, are consumers, often unsure of their rights and concerned about the privacy and protection of their private information.

Beatty, left, and Mothersbaugh are among co-authors of a recent journal article about online privacy.

Two University of Alabama marketing professors, Drs. David Mothersbaugh and Sharon Beatty, along with two former UA doctoral students, recently published a journal article on consumer privacy. Their goal was to understand what would induce consumers to provide more information online and, as such, help provide Internet marketers guidance when designing their website strategies.

“While the acquisition of sensitive personal information is often the goal of online marketers, our research suggests that control, customized experiences and trust-building activities to reduce privacy concerns are critical to convincing consumers that it is in their best interest to divulge such information,” says Mothersbaugh.

Increasing the benefits of disclosure to the consumer is one key found in the research. This is an important factor, Mothersbaugh says, because many companies such as Google and American Express argue they are able to provide a more customized experience by collecting and using the consumer data they collect online.

Whether delivering greater online benefits to consumers is enough to entice disclosure depends on a host of factors, including a consumer’s online-privacy concern. The authors argue online-privacy concerns specific to the firm can be reduced by increasing consumer trust in the firm. This relates to brand image and brand equity.

Those brands with higher levels of equity are likely to be those to which consumers will give information more readily due to higher levels of trust and lower privacy concerns. It also appears that age may play a key role. The authors speculate that the more tech-savvy younger generation sees online-information collection as an acceptable “price they pay” to get more convenient and useful online experiences. Older consumers, particularly the less-tech savvy, appear less willing to see this as an acceptable trade-off.

The debate often gets muddled by the distinction between data combination and information privacy and security. When Google combines information from, say, Google Chrome and Gmail to gain a fuller picture of the customer, this is often viewed similarly to privacy and security concerns. This is understandable, the researchers say, because a deeper set of information on each customer means security and privacy breaches are more severe if they occur. And while data combination has been going on for years and predates the Internet, the ease of information flow online, online-identity fraud and the increasingly open Internet make this issue even more of a concern.

The researchers also found that giving consumers control over how their information will be used by the firm can increase disclosure, particularly if that information is sensitive in nature. One aspect of control that has become more troubling is the ability to control real-time-behavioral tracking through the use of cookies. A cookie can be placed on a user’s computer and then used by a firm to track user movements on the Web. Such behavioral tracking allows firms to customize the Web experience, including targeted ad placements. The Federal Trade Commission has pushed for some form of control in this area, and some companies are implementing it in the form of “opt-in/opt-out” controls. Both Google and Microsoft Internet Explorer now have various opt-in/opt-out features related to behavioral targeting and other privacy-related issues. Internet Explorer provides a sliding-scale approach in which users can severely restrict behavioral tracking or, if they are comfortable with it, allow for full behavioral tracking.

The FTC recently issued an updated set of privacy guidelines under a privacy framework. This framework includes three aspects, namely, (a) privacy by design, in which privacy permeates the practices and culture of the entire organization and not just the information technology department; (b) simplified choice, in which Internet marketers make it easier to understand choices and control information use; and (c) greater transparency, in which privacy policies and disclosures are clear, easy-to-understand and informative.

“These guidelines,” Mothersbaugh says, “broadly fit our basic findings. Privacy by design and greater transparency should enhance consumer trust and reduce privacy concerns, which will increase information provision. Privacy by design and simplified choice should give consumers a greater sense of control over their information and how it is used, which should enhance information provision as well.”

Less tech-savvy consumers are more reluctant to provide personal information, the study shows.

Firms also appear to be adapting to the new guidelines. For example, according to Google, its new design is meant to provide “meaningful choices” to protect privacy through features like encrypted searches, incognito mode in Chrome, off-the-record chatting, and general personalization opt outs.

“Our new policy simply makes it clear that we use data to refine and improve your experience” by getting consumers “better search results, ads and other content,” Google states on its website.

In addition, Microsoft Internet Explorer allows for a so-called “privacy browsing mode” whereby behavioral tracking (and targeted advertising delivery) of online consumer movements can be blocked by the consumer. Greater consumer control combined with an enhanced consumer experience is, or should be, the goal of any website, the researchers say.

“New privacy policies and features to help users control personal information will help make such goals transparent and, in theory, easier to achieve, says Dr. Katherine Lemon, editor of the journal in which the study published. “More firms can follow Google’s lead to redesign their websites and privacy polices so they can encourage customers to willingly disclose additional information.”

In recognizing the burdens of disclosure and the difficulty of overcoming consumer concerns, firms should consider matching their information requests to the specific needs at hand, the researchers say.

“A one-size-fits-all strategy to information gathering is not appropriate,” says Beatty. “Firms must consider both their information needs and the privacy concerns of their various consumer segments and request the least sensitive information possible for effectively marketing to each of those segments.”

Many aspects of privacy and consumer perceptions of privacy have yet to be examined, according to Mothersbaugh. One issue is how firms may actually increase the difficulty of consumers switching to competitor providers by gaining more information about their consumers. The information makes service delivery easier for the consumer and the firm. However, the difficulty of transferring information to another provider can become a barrier to consumers switching online. Such barriers could reduce the quality of consumer choices in the long run.

Giving consumers control over how companies will use their personal information increases disclosure, the research finds.

Another issue is how organizations can use advertising to “frame” the privacy issue in consumers’ minds. Ads that prime negative aspects of disclosure (online-identity fraud) may prime negative feelings about disclosure and thus, the researchers say, enhance consumer concern, reduce disclosure or enhance consumer vigilance in the online-privacy domain. Such ads might be helpful to government and consumer groups wanting to get consumers to be more careful with their information online.

Ads that prime positive aspects of disclosure (enhanced browsing/buying experience) may prime positive feelings about disclosure and thus enhance the likelihood that consumers disclose online.

However, firms must be willing to walk away from some customers, the researchers say.

“Some consumers may never be fully convinced of efforts to protect their privacy and may always view certain practices such as data combination as too high a price to pay for a better online experience,” Mothersbaugh says. “In these cases, company efforts are likely better spent serving customers who value their services enough to provide the requisite information.”

Dr. Mothersbaugh is an associate professor of marketing while Dr. Beatty is the Reese Phifer Fellow and Professor of Marketing, both in UA’s Culverhouse College of Commerce and Business Administration. Their research published in the Journal of Service Research. Dr. Lemon is the Accenture Professor at Boston College.