An Empirical Evaluation of Information Features. and the Willingness to be Profiled Online for Personalization

Transcription

1 An Emprcal Evaluaton of Informaton Features and the Wllngness to be Profled Onlne for Personalzaton Neveen I. Farag Unversty of Mchgan Busness School Ann Arbor, MI M. S. Krshnan Mchael R. and Mary Kay Hallman e-busness Fellow Assocate Professor and Area Char of Computer Informaton Systems Unversty of Mchgan Busness School Ann Arbor, MI March 3, 2003 Please do not cte, quote, or dstrbute wthout permsson of the authors. Fnancal support for ths study was provded n part by the Mchael R. and Mary Kay Hallman fellowshp, the Marcy Magure fellowshp, the Informaton Systems Executve Forum at the Unversty of Mchgan Busness School, and the Summer Research Opportunty Program at the Unversty of Mchgan.

2 An Emprcal Evaluaton of Informaton Features and the Wllngness to be Profled Onlne for Personalzaton Abstract As customer nformaton becomes a crtcal success factor n the global networked economy, prvacy s of strategc mportance. Frms are able to use nformaton to mprove customer servce and offer personalzed features. By understandng the factors affectng consumer wllngness to share nformaton, managers can talor ther frm s e-busness offerngs to encourage consumers to partake n personalzaton actvtes. Ths study hypotheszed that frms can address the rsks of onlne proflng, and therefore encourage consumers to share ther nformaton, by makng consumers aware of frm procedures. Consumer concern over the nformaton collected and how t wll be used (INFO_USE), should affect consumers wllngness to be profled onlne. Customers wll allow ther actvtes to be montored and used to create consumer profles for busness use f they are prvy to the profle nformaton collected by the frm. Knowledge of frm procedures should ncrease consumer perceved control, thereby decreasng consumer perceved rsk, and eventually ncreasng partcpaton n customer relatonshp actvtes, ncludng personalzed servce and advertsng. Based on a survey of over 500 onlne consumers, our hypothess was supported through our fndng that customers who rate knowledge of frm procedures as a hgh concern, are also less wllng to allow personal nformaton to be tracked and stored n a profle used for personalzed servce and advertsng. The results of ths study should help managers talor ther frm s onlne servce offerngs, and consequently, maxmze useful and benefcal nformaton collecton across varous consumer-segments. 1

3 Introducton In today s networked global economy, the ablty to collect, analyze, and respond to user nformaton s of growng mportance. To survve, companes depend on vast quanttes of nformaton to buld rapport wth exstng customers and attract new busness (Culnan and Armstrong 1999). As the ease and avalablty of e-busness reduces face-to-face nteractons, frms must use consumer nformaton to attempt to offer personalzed servce that wll ncrease value, and consequently, consumer loyalty. As Peter Well and Mchael R. Vtale state n ther book, Place to Space: Mgratng to e- Busness Models, Informaton technology (IT) nfrastructure and the nformaton t contans, partcularly customer nformaton, wll be a crtcal success factor for all e- busness ntatves, thus rasng the stakes for the management of the frm's IT nvestments and assets. However, mplct n the collecton of consumer nformaton les a concern for consumer prvacy; nformaton prvacy s one of the most mportant ssues facng management practce (Safre, 2002; Mason, 1986). If managers are not careful, ther frms may be the vctms of consumer backlash for oversteppng the bounds of expected nformaton practces. In order to encourage consumers to partcpate n onlne nformaton collecton, a frm may therefore mplement polces and features that addresses a user s nformaton prvacy concerns. The mportance of IT related prvacy ssues s also seen through the growng global and governmental trend of ncreasng corporate prvacy regulaton (Dresner 1996, Frankln 1996, Hendrcks 1998). In addton, a pendng Congressonal prvacy bll would requre US companes to gve customers dgtal access to personal nformaton that frms possess (Thbodeau, 2002). Ths bll s an example of a growng trend towards 2

4 attemptng to nform the consumer. Informng the consumer of frm procedures dffers from exercsng far nformaton practces. A central element of far nformaton practces s the ablty of ndvduals to remove ther names from malng lsts (Culnan and Armstrong 1999). A central element of nformng consumers of frm procedures, however, s the ablty of consumers to actually see what of ther personal nformaton a company possesses. Thus, nformng the consumer deals more drectly wth allowng consumers access to the type of nformaton a frm possesses and how t plans to use t. The objectve of ths paper s to address the queston: How can a frm ncrease consumer wllngness to be profled onlne for personalzed offerngs? More specfcally, two research questons gude ths study: 1) How does perceved control, acheved through knowledge of nformaton and frm procedures, affect consumer wllngness to be profled onlne for personalzed offerngs? and, 2) How does consumer wllngness to be profled onlne dffer across personalzed servce versus personalzed advertsng? The major contrbuton of ths research provdes emprcal evdence that companes can garner ncreased consumer partcpaton n onlne nformaton sharng actvtes by provdng consumers wth knowledge of and access to nformaton and usage procedures. Through ncreased consumer partcpaton, frms should then be able to utlze the customer nformaton for compettve advantage. In the next secton, we revew and dscuss pror lterature. In secton three, we dscuss the theoretcal model and hypotheses of ths paper. In secton four, we explan the data and measurement. In secton fve, we present the analyss and results. In secton sx, we dscuss the results and ther manageral mplcatons. We then conclude the paper wth drectons for future research. 3

5 2) Pror Lterature Publc opnon surveys show that many ctzens are qute concerned about threats to ther nformaton prvacy (Equfax 1996; Westn 1997; Harrs and Westn, 1998). Several of the expressed prvacy concerns centered on how frms collect and use personal data. Prevous work has found that how a frm handles buyer-collected personal nformaton offlne affects the relatonshp between the frm and ts consumers (Hoffman, Novak, & Peralta, 1999). Prvacy ssues onlne are arguably not any dfferent than prvacy ssues offlne. However, due largely to the ncreased amount of nformaton onlne, and the fear of dentty theft (FTC Report, 1999), consumer comfort wth onlne proflng remans low. In fact, a Busness Week (2000) survey showed that 63% of those surveyed were not comfortable wth anonymous onlne proflng; 89% were not comfortable wth dentfed onlne proflng. Whle prvacy s an ssue, there s also a case for how frms can use onlne nformaton to beneft consumers; we next address ths stream of research. Research has shown that companes may be able to use profle nformaton to ncrease consumer value and move from mass merchandsng to personalzed servce (Pne 1993; Farag and VanAlstyne 2000; Farag and Krshnan, 2002). Blattberg and Deghton (1991) have shown that when detaled consumer-nformaton s collected, frms are able to engage n relatonshp marketng and target offers more accurately based on a customer s specfc nterests. Organzatons can therefore gan a compettve advantage from collectng and usng transacton data effectvely (Farag and Krshnan, 2002; Glazer 4

6 1991). However, the potental downsde of nformaton collecton, f mplemented mproperly, s that t may actually rase a user s prvacy concerns rather than create value (Bloom et. al 1994). Hence, the ssue of onlne nformaton collecton has receved the attenton of researchers, practtoners, and polcy makers alke. Several theores on the lnk between frm nformaton practces and ndvdual behavor are emergng. For example, Mlburg, Smth and Burke (2000) developed a conceptual model examnng corporate management of personal data, regulatory approaches to nformaton prvacy, and consumer reactons across cultures. Culnan (1993) tested an exploratory model that explans consumer atttude toward some drect marketng practces offlne. Wth ths model, Culnan showed that publc atttudes towards prvacy are lkely to vary based on dmensons of control. Smth (1994) developed a model to explan corporate approaches to nformaton prvacy polcymakng. Hoffman et al. (1999) suggested that two larger dmensons govern prvacy concerns: envronmental control and secondary use of nformaton control. Laufer et al. (1976) llustrated that perceved control over varous uses of nformaton results n less consumer concern over prvacy nvasons. In addton, Stone et. al (1983) showed the more a user values prvacy, or rather, the more concerned about prvacy, the less control the consumer perceves to have over personal nformaton. Stone and Stone (1990) developed a model for nformaton flows and physcal/socal structure n work envronments based on expectancy theory. The above stream of research s grounded n the basc defnton of prvacy found n psychology lterature. Prvacy s defned as the ablty of the ndvdual to control the 5

7 terms under whch personal nformaton s acqured and used (Westn 1967). Informaton prvacy, then, refers to the ablty of the ndvdual to personally control nformaton about one s self (Stone, et al., 1983). Hence, t may be nterpreted from ths defnton that one way to decrease the level of perceved prvacy rsk for the onlne consumer s to ncrease hs or her level of control over personal nformaton. Consstent wth ths lne of work, Culnan and Armstrong (1999) dentfy control as one of the two man nformaton prvacy concerns that occur wth frm handlng of personal nformaton. The other concern beng secondary use, where consumer nformaton provded for one purpose may be reused for another purpose wthout consent (Culnan, 1993; Smth et al., 1996; Godwn, 1991; Foxman and Klcoyne, 1993). In ths paper, we relate the perceved rsk of consumers, measured through perceved mportance of control, to ther wllngness to be profled onlne. Knowledge has been shown to be a determnant of perceved control (Wortman 1975, Azjen and Drver 1991, Armtage and Conner 1999). In addton, knowledge as a mechansm for control has been examned n pror organzatonal lterature (e.g. Sohn 1994). Prevous research has shown that Internet usage s constraned for some adults due to the perceved need for more knowledge and understandng of the medum (Klobas and Clyde 2000). In ths paper, we extend the dea of knowledge as a control mechansm towards mprovng consumer comfort. Whle consumer comfort wth a company s mportant n any settng, the threat of consumer dscomfort s heghtened n the Internet settng, where consumers can easly flame a company drectly by electronc mal or n Internet newsgroups (Bes and Trpp 1996). 6

8 In ths paper, we attempt to test consumer decsons to share nformaton wthn the framework of expectancy theory. Control s defned as a set of mechansms desgned to motvate ndvduals to work n such a way that desred objectves are acheved (Krsch 1996, Jaworks 1988). In the case of onlne customer relatonshp management, a frm s desred outcome s for consumers to partcpate n onlne proflng. A company s challenge, then, s to mtgate the perceved rsks of beng profled onlne, such that they can provde consumers the desred outcome of personalzed servce and personalzed advertsng. A classc conceptual model used to understand how ndvduals make decsons regardng varous behavoral alternatves n the face of perceved rsks s grounded n the expectancy theory model of motvaton (Vroom, 1964). The central theme of expectancy theory s that outcomes drve ndvdual behavor. Thus, ndvduals wll chose between alternatves by evaluatng the outcomes, or the antcpated future consequences of the alternatves. Whle prevous research has suggested that ssues of nformatonal control are essental n creatng a favorable consumer predsposton toward contrbutng nformaton to onlne frms, (Stewart and Segars, 2002), none have examned the ssue of control usng the expectancy theory framework. The contrbutons of ths paper to the lterature are as follows: 1) Ths paper adds to our understandng of knowledge and perceved control n the onlne context; 2) Ths paper examnes mportance of frm features towards decreasng consumer perceved rsk, and ncreasng consumer perceved control, across two contexts, advertsng and servce; and, 3) Whle pror studes have examned lkelhood of consumers to partake n onlne personalzaton from purely the consumer characterstc standpont (e.g. Chellappa and Sn, 2002), ths paper studes past consumer experences n the context of prvacy 7

9 concerns, along wth consumer characterstcs, that affect consumer perceved control; and, therefore wllngness to be profled onlne. Culnan and Armstrong (1999) have prevously examned consumer wllngness to share nformaton, however they dd so n an offlne settng, and focused on the use of procedural farness, rather than nformaton access and usage awareness. Smlarly, Phelps, Nowak, and Ferrell (2000) examne the relatonshp between consumer purchase decsons and the amount of nformaton control gven to consumers n the offlne settng. Other studes have examned the lkelhood of consumers to partake n onlne personalzaton servces from purely the consumercharacterstcs standpont. For example, Chellappa and Sn (2002) examne consumer attrbutes, such as prvacy concern and personalzaton value, and how such attrbutes affect consumer lkelhood of usng personalzaton servces. Whle we also nclude consumer attrbutes, the man focus of our study s frm features that ncrease consumer perceved control onlne, decrease consumer perceved rsk, and thereby encourage consumers to allow onlne proflng towards personalzaton. Thus, whle control has also been looked at as t relates to Internet prvacy concerns (Dnev and Hart, 2002), the assocaton of consumer nformaton features and consumer wllngness to be profled onlne s yet to be examned. We, therefore, fll ths gap, whle also examnng the effect of such frm features across the contexts of personalzed servce and personalzed advertsng. 3) Theoretcal Model and Hypotheses Consumer wllngness to share nformaton onlne nvolves the evaluaton of the outcomes of onlne proflng. Consumers are, therefore, faced wth two alternatves, to 8

10 partake n onlne proflng, or to declne. A classc conceptual model used to understand how ndvduals evaluate such alternatves, and ther potental outcomes, s the expectancy theory of motvaton (Vroom, 1964). Our model s based on the central premse of expectancy theory of how ndvdual behavor s shaped. Expectancy theory states that three elements gude an ndvdual s evaluaton process: 1) Expectancy, or the belef that one s actons wll be followed by a partcular outcome; 2) Instrumentalty, or the expectaton that other outcomes wll lead to the expected outcome; and 3) Valence, or the attractveness of the outcome to the ndvdual. Fgure 1 llustrates Expectancy Theory. Perceved control over performance affects expectancy, or the perceved probablty that an acton wll be followed by a gven outcome. For expectancy to be hgh, ndvduals must beleve that they have some degree of control over the expected outcome. When ndvduals perceve that the outcome s beyond ther ablty to nfluence, motvaton to partcpate s low (Vroom 1964). Motvaton Force Force Drectng Specfc Actons Expectancy Perceved Probablty Acton leads to Outcome Instrumentalty Perceved Probablty Outcomes wll lead to Expected Outcome = * * Valence Value of Expected Outcome to Indvdual Fgure 1: Expectancy Theory F n j= 1 Expectancy theory was orgnally descrbed by Vroom as follows: ( EjV I ) = j j Where: E j = The strength of the expectancy ( 0 1) that act wll be followed by outcome j. V j =The valence of outcome j I j = The cognzed nstrumentalty of outcome j E j Ths framework has been appled n dfferent settngs; whle the elements of the theory are wdely accepted, researchers n multple dscplnes have also hghlghted the 9

11 challenges of emprcal valdaton. For example, n accountng, the theory has been appled to audt staff performance; however, only weak support was found for the model s predctve power (Ferrs, 1977). Thus, we do not explctly test expectancy theory, due to the sgnfcant problems of conceptualzaton and methodology assocated wth specfcaton of each of the elements of the theory, as several researchers have ponted out (Connolly, 1976). Rather, we attempt to valdate the effect of knowledge and perceved control on onlne proflng, by focusng on elements of expectancy theory that consumers can partake n to mtgate the rsks assocated wth beng profled onlne. In our settng, the outcome s measured n a sngle dmenson related to the experence of the customers after they have shared ther personal nformaton wth the frm. The outcomes the consumers may experence n return for the acton of takng part n onlne proflng range from useful personalzaton to nformaton msuse, resultng n emal spam, or even worse, dentty theft. Thus, the two extremes of the outcome are useful personalzaton, or nformaton msuse. The force, then, on the acton of whether the consumer should partake n onlne proflng or not s measured as wllngness to partake n onlne proflng. Useful Personalzaton Msuse of Informaton The man ndependent varable we examne n our study, features a frm can mplement towards ncreased perceved control, s assocated wth Expectancy, the lkelhood that an acton wll be followed by the antcpated outcome. Thus, we are examnng factors that ncrease the lkelhood for consumers that ther nformaton wll be used to produce an outcome of useful personalzaton. Note that the expectancy theory 10

12 nherently captures the tradeoff by ndvduals who surrender a measure of prvacy n exchange for some economc or socal beneft of personalzaton. Ths tradeoff has been drectly studed offlne as the prvacy calculus, whch measures the usage of personal nformaton versus the potental negatve consequences of dssemnatng personal nformaton (Laufer and Wolfe, 1977; Mlne and Gordon, 1993; Stone and Stone, 1990). Our study examnes ths specfc trade-off, whch consumers make n the onlne settng, and what frms can do to decrease consumer perceved rsk. Next we dscuss the hypotheses that lnk perceved rsk factors related to nformaton features, knowledge about frm prvacy polcy, consumer prvacy concern, and past prvacy experence. Indvdual control affects expectancy, or the probablty that the acton of sharng nformaton wll be followed by a gven outcome (Vroom, 1964); the greater such probablty, the greater the force to partake n the acton. Thus, we beleve that knowledge and perceved control onlne decrease consumer perceved rsk of onlne proflng, and therefore affect consumer wllngness to partake n onlne proflng. Hence, our hypotheses are algned wth the theory of the expectancy model. Hypotheses Informaton Features Pror studes have dentfed that consumers are less lkely to perceve a rsk, and therefore more wllng to share nformaton when consumers perceve the ablty to control future use of ther nformaton (Culnan and Armstrong, 1999; Bes, 1993; and Stone and Stone, 1990). In addton, Expectancy theory postulates that control decreases the perceved rsk of partakng n an acton by ncreasng the probablty that a gven 11

13 acton wll be followed by a gven outcome. Ths ncreased lkelhood then leads to an ncreased force to of acton towards onlne proflng. These fndngs may ndcate that the frst step towards encouragng consumers to partake n onlne proflng s to ncrease consumer perceved control. Frms may attempt to ncrease perceved control by allowng consumers to understand the type of nformaton a frm s collectng, and how that nformaton s beng used. In ths study, we examne nformaton features, or features frms mplement to nform the consumer of frm procedures. Such features may therefore ncrease consumer wllngness to be profled onlne. Frm mplemented features that allow consumers to vew and control the use of ther personal nformaton should effect the expectancy belefs of consumers, or rather that ther acton of beng profled onlne wll lead to the desred outcome of useful personalzaton. Thus, we hypothesze: consumers who rate mportance of nformaton features hgher wll be less wllng to partake n onlne personalzaton. Hypothess 1: The more mportant a consumer deems nformaton-features, the less wllng they are to partake n onlne proflng. Prvacy Polcy One way frms attempt to address consumer perceved rsks of onlne proflng s by postng ther prvacy polcy onlne. Prvacy polces address the expectancy porton of expectancy theory, or the expectaton that an act wll be followed by a gven outcome. The degree to whch frm practces are formalzed n wrtten polces has an mpact on ndvduals' perceptons (Vroom, 1964). In addton, announcng a frm's prvacy polcy has been shown to ncrease consumer perceved trust by allowng consumers to make nformed decsons about dsclosng ther personal nformaton (Culnan, 1999; Hansen, 12

14 2000). By postng a prvacy polcy, frms are essentally tellng consumers what outcome to expect when the consumer partakes n the acton of onlne proflng. Thus, by ncreasng the probablty of a postve outcome for the consumer, frms may use prvacy polces to ncrease consumer motvaton to partcpate n onlne proflng. Consumers that place a hgh mportance on frm prvacy polces, lkely perceve a lower probablty of a desrable outcome, and therefore want wrtten assurance. We then hypothesze that the more mportance a consumer places on onlne prvacy polces, the less the consumer wll be wllng to partake n onlne proflng. Hypothess 2: The more mportance a consumer places on a prvacy polcy, the less lkely that the consumer wll partake n onlne proflng. Consumer Prvacy Concern Consumer concerns are affectng Internet commerce. A 1997 study revealed that purchases va the Internet would receve a $6 bllon boost by the year 2000 f consumers beleved ther prvacy wasn t at stake durng such transactons (Greene, 1997). From a theoretcal standpont, personal values, such as prvacy concerns, affect the Valence porton of expectancy theory, or the attractveness of the outcome to the ndvdual. Consumers wth a hgher level of prvacy concern wll lkely perceve personalzaton offerngs to be of less value than consumers wth a lower level of prvacy concern. The more a user vews onlne prvacy as a concern, the less motvaton they wll have to partake n the acton of onlne proflng. Pror research has shown that users that express concern over ther own prvacy perceve lttle control over the use of ther personal nformaton (Stone et. al 1983) and are lkely less wllng to share such nformaton. We test ths fndng n our own settng, and specfcally n accordance wth expectancy 13

15 theory. Thus, we hypothesze that a consumer s ncreased concern for prvacy s assocated wth a lower desre to share ther personal nformaton, and therefore a decreased force towards onlne proflng. Thus, we expect that greater prvacy concern s assocated wth less wllngness to be profled onlne. Hypothess 3: The greater a consumer s general prvacy concern level, the less the consumer s wllng to be profled onlne. Prevous Prvacy Invason Personal experences gude behavor n actvtes that can be subjectvely deemed as prvacy-related (Bates 1964). In addton, personal experences cause a change n prvacy concern over an ndvdual s lfetme (Lous Harrs and Assocates, Inc. 1991). Prevous experences are accounted for n the Expectancy Model through Instrumentalty, the expectaton that other outcomes wll lead to the expected outcome. Consumers who have prevously had ther prvacy nvaded may not beleve that sharng nformaton onlne wll lead to the expected outcome of useful personalzaton. Ths decreased lkelhood of the expected outcome may result n a decreased motvaton to partake n the acton of onlne proflng. The role of past experence has been prevously analyzed offlne n two dfferent formats, wth mxed results. In one nstance, consumers were asked f they had experenced a prevous nvason of prvacy (Culnan, 1993). In a second nstance, consumers were asked f they had prevously dealt wth the frm. In the former, pror prvacy nvason experence was not shown to have a clear assocaton wth atttudes toward secondary nformaton use offlne, however prevous prvacy nvason experences could affect an ndvdual s concern for prvacy (Culnan, 1993). In the latter, 14

16 pror frm experence was the dstngushng factor from those wllng to store nformaton n a customer profle and those who were unwllng to do so offlne (Culnan and Armstrong, 1999). In our research, we look at the former, pror prvacy nvason experence, where prevous results have not been conclusve. Prevous research dd not fnd a sgnfcant assocaton between prevous prvacy nvason experence and atttude toward secondary nformaton use (Culnan and Armstrong, 1999). However, we are attemptng to assess the effect of prevous prvacy nvason experence n a dfferent context, the onlne context, rather than the drect mal context. Therefore, we expect prevous onlne prvacy nvason experence to have a sgnfcant effect on wllngness to partake n onlne personalzaton. Thus, we hypothesze that prevous prvacy nvasons decrease consumer wllngness to be profled onlne. Hypothess 4: Consumers who have prevously experenced an onlne prvacy nvason are less wllng to partake n onlne proflng. Personalzed Servce and Personalzed Advertsng Prevous research has shown that frms can mprove the perceved value of servces offered by mtgatng a customer s perceved rsk (Heskett et al. 1990). As dscussed earler, expectancy theory stpulates that the perceved beneft and the perceved rsk of an outcome effect consumer Valence perceptons, or the attractveness of the outcome to the ndvdual. The perceved beneft of an outcome, such as useful personalzaton, can motvate consumers to partake n onlne proflng, despte prvacy concerns. On the other hand, the perceved rsk assocated wth an outcome can decrease the force of acton toward partakng n onlne personalzaton. In ths study, we examne two separate contexts, personalzed advertsng and personalzed servce. We expect 15

17 consumers to place dfferent values on the two outcome contexts, due to varyng levels of perceved beneft and rsk of the actvtes. Such a dfference n each outcome s attractveness should therefore affect consumer wllngness to share nformaton.. Prevous research has attempted to understand consumers wllngness to tradeoff personal nformaton for benefts (Westn 1991) across varous ndustres. Such research found that publc atttudes toward such tradeoffs were nconsstent across varous ndustry contexts; such nconsstences suggest a varance n consumer perceved benefts across ndustres. Industry dfferences are lkely embedded n the servce type offered to the customer. Therefore, n ths study we examne consumer wllngness to be profled onlne across two types of servce offerngs, rather than ndustres. Due to the negatve connotaton of advertsng (McLaughln 2002), consumers assess the benefts of personalzed servce and personalzed advertsng to be dfferent. However, snce most of the ndependent varables are such the greater concern should translate n to less wllngness to share; we expect the hypotheses to hold across the two contexts of advertsng and servce. The hypothess we expect to be dfferent across contexts s Hypothess 4, dealng wth prevous prvacy nvasons. Recall that we beleve that prevous prvacy nvasons affect Instrumentalty, or the expectaton that other outcomes wll lead to the expected outcome. Because the outcome of personalzed advertsng s generally vewed as less valuable than personalzed servce, we expect that a prevous prvacy nvason wll have a sgnfcant effect on consumers motvaton to partcpate n an actvty wth negatve connotatons, namely onlne proflng n the advertsng context. On the other hand, we beleve that personalzed servce wll be vewed as an outcome less 16

18 assocated wth prevous negatve outcomes, and thus pror prvacy nvasons wll not have a sgnfcant effect. Ths leads us to the followng hypotheses: Hypothess 4a: Consumers who have prevously experenced an onlne prvacy nvason are less wllng to partake n onlne proflng n the advertsng context. Hypothess 4b: Consumers who have prevously experenced an onlne prvacy nvason wll be just as lkely to partake n onlne proflng n the personalzed servce context as those consumers who have not prevously experenced an onlne prvacy nvason. Importance nformatonknowledge features Importance of Prvacy Polces Prevous Onlne Prvacy Invason Prvacy Concern Wllng to be profled onlne for Personalzed Servce Wllng to be profled onlne for Personalzed Advertsng Fgure 2: Research Model 4) Data and Measurement The context for ths research s the use of personal nformaton gathered through web stes and user wllngness to allow personal nformaton to be collected and used by frms onlne. The study s based on a fresh analyss of data from a survey done at a large Internet servce provder durng the summer and fall of The survey focuses on 17

19 ssues of personal nformaton collecton through specfc onlne scenaros, as well as general atttudes and user demographcs. The survey was desgned to focuses on how people respond to stuatons where personal nformaton s collected onlne. In a prestudy, t was found that varance across partcpants n nformaton sharng habts was best revealed through questons based on specfc onlne scenaros. Thus, specfc purchasng scenaros, focused around nformaton goods and fnancal servces, were utlzed. The survey also amed to determne partcpants' general atttudes and demographcs. Atttude and demographc questons were taken from other studes, such as Westn (1998), so the sample could be matched up aganst the prevous studes. For all the constructs of ths study, explct questons were used as a mechansm for dervng nformaton from the partcpants. The survey was developed and pre-tested on non-techncal employees and summer students of the servce provder, as well as wth two classes at Harvard and the Massachusetts Insttute of Technology (MIT). Prospectve survey partcpants were selected from the Dgtal Research, Inc. (DRI) Famly Panel. The DRI Famly Panel s a group of random Internet users that partcpate n product evaluatons and survey responses for Famly PC magazne. Approxmately one-thrd of the panel members are FamlyPC subscrbers, and most of the panel members who are not subscrbers joned the panel after vstng the FamlyPC Web ste. Invtatons to complete the Web-based survey were emaled to 1,500 Famly Panel members (selected randomly), resultng n 523 completed surveys n November of 1998, a response rate of 35%. Code numbers were used to ensure that each respondent completed the survey only once, and a sweepstakes was offered to encourage partcpaton. 18

20 Smlar to recent work on nformaton prvacy (Stewart and Segars 2002, Harrs and Westn 1998), the sample dffered from a natonally representatve sample n educaton, Internet usage, and household ncome. Summary demographc nformaton s shown n Tables 2A and 2B. Table 2A: Demographcs (Yes/No) Varable Yes No Use Computer at Home 375 (98.4%) 2 (.5%) Use Computer at Work 260 (68.2%) 119 (31.2 %) Send or Receve Emal 379 (99.5%) 2 (.5%) Vst Web stes 379 (99.5%) 2 (.5%) Are you Male or Female Male: 183 (48.0%) Female: 195 (51.2%) Table 2B: Demographcs Varable Mean Std. Dev. How often do you use the Internet? (1= once a month, 7 = several tmes a day) In What Year dd you frst hear about the Internet? What s the hghest level of school completed? (1= Less than Hgh School, 5= Post graduate) Total 1997 Household Income (1= $15k or less, 6 = $75k or over) How many people lve n your household How many chldren, ages 8-12, lve n your household? All of the tems selected for use n ths study were chosen from the larger questonnare admnstered by ths large Internet servce provder. Most of the tems used were sngle questonnare tems that algned wth the construct beng assessed (For example a sngle queston of whether a person would be wllng to partcpate n onlne proflng for onlne personalzed servce was used to measure a consumer s wllngness to be profled for personalzed servce.) The tem selecton was based on the atttude the construct was attemptng to assess. There were two constructs where multple tems were selected, namely Prvacy Concern and Informaton Features. For these constructs, all tems that theoretcally fell nto ether the category of consumer prvacy concern or 19

21 features a frm could mplement towards ncrease consumer nformaton control, were factor analyzed, as explaned below. Dependent Varable Two dependent varables were used to measure consumer wllngness to be profled for customzed servce and customzed advertsng. These fve-pont Lkertscaled varables are: 1) consumer wllngness to be profled by a famlar ste for customzed servce (CSERV); and 2) consumer wllngness to be profled by a famlar ste for customzed advertsng (CADV). All nstrument queston detals can be found n Appendx A. Independent Varables Prevous research has found that, n the context of systems development, a clent s knowledge of a project s nstrumental n allowng the clent to feel n control (Krsch 1996). In ths study, we am to extend these fndngs and the expectancy theory of motvaton to the onlne clent-frm relatonshp; thus, we expect that clent concern over knowledge of nformaton and use (INFO_KNOWUSE) wll decrease ther wllngness to share nformaton onlne. The frst ndependent varable, knowledge of nformaton and use (INFO_KNOWUSE), was measured by four three-pont Lkert-scaled tems. The four tems were factor analyzed usng a varmax rotaton. All four tems loaded unambguously on a sngle factor and were combned to form the knowledge of nformaton and use (INFO_KNOWUSE) construct (Cronbach alpha=0.75). The second ndependent varable, mportance of prvacy polcy (PRIV-POL), s amed at provdng a contrast to the knowledge of nformaton and use ndependent 20

22 varable. It s possble that consumers have no nterest n knowng the detals of what nformaton s beng stored and how t s used. Rather, they may only be nterested n knowng that the company has a prvacy polcy. Thus, we control for the mportance of such a prvacy polcy through the use of a sngle three-pont Lkert-scaled tem. Pror research has also establshed that demographc varables are assocated wth an ndvdual s prvacy concern. For example, Culnan (1995) found that demographcs, experence wth drect marketng, and prvacy concern were sgnfcantly assocated wth ndvdual knowledge regardng nformaton removal procedures. However, pror research also suggests that such demographc dfferences are captured by both atttudnal and behavoral varables (Azjen and Fshben 1980). For ths reason, we control for the demographc varables prvacy concern and prevous prvacy nvason 1 only. An ndvdual s prevous experence can shape ther concern n nformaton sharng. As shown n prevous work (Culnan 1995), concern for prvacy was measured usng one demographc varable, namely, whether a partcpant beleved hs or her prvacy had been prevously nvaded (PREV-INV). Seventy-three respondents (19.2 percent) reported beng vctmzed by what seemed to be an nvason of ther prvacy onlne (compared wth 21 percent from Culnan s 1995 study and 23 percent from the 1991 Equfax survey). Concern for nformaton prvacy s a tested, multdmensonal construct (Stewart and Segars 2002, Smth et. al 1996). However, due to the lmtatons of the secondary data used, we elected nstead to control for general prvacy concerns, as prevously done by Culnan (1993). Prvacy concern was measured by two four-pont Lkert-scaled tems. The two varables were factor analyzed usng a varmax rotaton. Both tems loaded 1 We dd run the model controllng for gender, educaton, and computer usage. The results of the varables of nterest were unchanged, and the varables dd not add much explanatory power to the models. 21

23 unambguously on sngle factor and were combned to form a general prvacy concern (PRIV-CONC) scale (r=0.59, p<0.0000; Cronbach alpha= 0.87) Table 3 contans descrptve statstcs for, and correlatons between, the dependent and ndependent varables. Table 3 Descrptve Statstcs and Inter-Construct Correlatons for Dependent and Scaled Independent Varables Varable Mean S.D. CSERV CADV INFO- KNOWUSE PRIV- POL PREV- INV CSERV CADV INFO KNOWUSE PRIV-POL PREV-INV PRIV-CONC Table 4 Descrptve Statstcs and Inter-Item Correlatons for Dependent and Scaled Independent Varables Varable PRIV- CONC PRIV- CONC INFO- USE1 INFO- USE2 INFO- USE3 INFO- USE4 PREV- INV PRIV- POL 1 2 PRIV-CONC PRIV-CONC INFO-USE INFO-USE INFO-USE INFO-USE PREV-INV PRIV-POL Methodology Our dependent varables, wllngness to be profled for customzed servce (CSERV), and wllngness to be profled for customzed advertsng (CADV), are both fve-pont Lkert scaled tems. Essentally, the dependent varables are rank-ordered ordnal varables; though level two s hgher than level one, the dfference n wllngness to be profled between levels two and one s not necessarly the same as the dfference 22

24 between level three and two. Hence, use of smple multple regresson n such a case would lead to neffcent ordnary least squares estmates (OLS) (Kmenta 1986). In order to overcome the lmtatons of OLS n ths settng, a multnomal logt or probt choce model can be utlzed. Snce there s an nherent orderng n the fve levels of proflewllngness, we utlze an ordered probt model for estmaton (Zavona and McElvey 1975). We develop the ordered probt formulaton below. We defne a latent (unobserved) contnuous varable that measures the contnuous (cardnal) value of profle-wllngness. In the standard regresson framework, the latent varable s a lnear combnaton of the explanatory varables as provded below: Latent varable= β ' X ε (1) + Note that X s a vector of explanatory varables for the th consumer, β ' s the assocated vector of parameters, and ε s the stochastc error term, whch s assumed to be normally dstrbuted across observatons n a probt model. In addton, δ s the threshold for the th level of wllngness to share nformaton. The translaton of the latent varable to the observed varable s gven n Appendx B. To ensure that the probabltes sum to one, the probablty of wllngness to be profled at level 5 s the complement of the sum of the probabltes of the remanng four values. In order to ensure that all probabltes are postve, the followng condtons must be met: δ3 > δ2 > δ1 > 0 (2) Where the cutoffs δ, δ, and δ must be estmated along wth the parameter β ' Detals on the cutoffs can be found n Appendx B. The lkelhood expresson for an observaton, s stated as: 23

25 L = 1 2π 5 j= 1 l j l j 1 e 2 z 2 dz Dj (3) where the upper lmts of the ntegral are: l 0 = -, l 1= β ' X, l 2 =δ1 β ' X, l3=δ2 β ' X, l4=δ β X, and l5= +. In equaton (3), only one of the fve ntegrals apples for a 3 ' specfc consumer response of wllngness to be profled for customzed offerngs. Thus, wth each observaton treated as ndependent, the lkelhood expresson for all consumers s the product of the lkelhood for each ndvdual consumer. n L= L. (4) = 1 The vector of explanatory varables X conssts of four factors: 1) knowledge of nformaton and use (INFO_KNOWUSE); 2) mportance of prvacy polcy (PRIV_POL); 3) prevous prvacy nvason (PREV_INV); and 4) general prvacy concern (PRIV_CONC). In addton, we nclude an ntercept term; each element of the β vector measures the margnal mpact of the assocated explanatory factor. Note that due to the non-lnearty, we cannot drectly compare the parameters by magntude. The model specfcaton s as follows: β ' X = α + β INFO _ KNOWUSE + β PRIV _ POL + β PREV _ INV + β PRIV_CONC Although we model the underlyng measures of wllngness to have personal nformaton used by a famlar ste for customzed servce (CSERV_FAM) or customzed advertsng (CADV_FAM) as a lnear combnaton of the factors, the probablty assocated wth each ratng s nherently nonlnear as ndcated n equaton (3). 24

26 5) Results and Analyss We estmated the probt model for the two ndependent varables, customzed servce (CSERV) and customzed advertsng (CADV), ndependently. The maxmum lkelhood estmates of the parameters of these models are presented n Table 4. Table 4: Maxmum Lkelhood Ordered Probt Estmators Varable CSERV (p-value) CADV (p-value) INFO_KNOWUSE ** (0.040) ** (0.031) PRIV_POL (0.102) (0.641) PREV_INV ( 0.583) * (0.080) PRIV_CONC ** (0.000) ** (0.001) Log Lkelhood Value Prob. > χ As predcted n our hypotheses, the man ndependent varable of nterest, concern over knowledge of nformaton and use (INFO_KNOWUSE), s negatvely sgnfcantly assocated wth wllngness to be profled onlne for both models, customzed servce, and customzed advertsng. In addton, the demographc control varable of general concern for prvacy onlne (PRIV-CONC) s negatve and sgnfcant across both models. However, the demographc varable of prevous prvacy nvason (PREV_INV) s not sgnfcant n the case of CSERV; t s, however, postve and sgnfcant n the case of CADV. The overall results for the ordered probt model for CSERV were also sgnfcant (Log Lkelhood= , Prob > 2 χ =0.0002). All the sgnfcant parameter estmates are negatve. For negatve parameters, a larger negatve magntude suggests a lower probablty of wllngness to be profled for customzed offerngs. 25

27 However, the relatonshp s ntrnscally nonlnear; we cannot proportonately compare across the negatve parameter estmates. The thrd column of Table 4 summarzes the results for the second model, where the dependent varable s wllngness to be profled onlne for customzed advertsng (CADV). Here, demographc control varables, prevous prvacy nvason (PREV_INV), and general concern for onlne prvacy (PRIV-CONC) are sgnfcant. By contrast, prevous prvacy nvason (PREV_INV) was not sgnfcant n the CSERV model. The overall results for the ordered probt model for CADV sgnfy a robust model; the model explans a sgnfcant amount of varance (Log Lkelhood= , Prob > =0.0000). All the sgnfcant parameter estmates are negatve n the case of model 2, the CADV model. These results provde support for the man hypothess of the study, namely, that the value of perceved control, assessed through concern over nformaton-knowledge features, would be negatvely assocated wth consumer wllngness to be profled onlne. Consumers that are concerned about havng access to ther nformaton wthn company databases are less wllng to share nformaton. The same fndng holds true for consumers who belabor the length of tme n whch personal nformaton remans n a frm database. These results suggest that managers may need to focus on such concerns to ncrease the lkelhood of customer wllngness to be profled by ther frm. By addressng these concerns, frms are lkely to ncrease the number of consumers wllng to be profled onlne for customzed servce or customzed advertsng. The concern for a prvacy polcy, on the other hand, was nether sgnfcant n the case of customzed servce, nor n the case of customzed advertsng. Thus, consumer 2 χ 26

28 rated mportance of a prvacy polcy was not found to be assocated wth a wllngness to be profled onlne for customzed servce or advertsng. Lastly, we hypotheszed that demographc varables, such as general prvacy concern and prevous prvacy nvasons, would be assocated wth a consumer s wllngness to be profled for customzed offerngs. In both ordered probt models, the general prvacy concern s sgnfcant, provdng support for the hypothess that general prvacy concern would be negatvely assocated wth such profle-wllngness across contexts. Hence, users more concerned wth prvacy are statstcally less lkely to share nformaton onlne. However, pror prvacy nvason experence was sgnfcant only n the context of onlne advertsng, not n the case of onlne servce. Therefore, users wth prevous prvacy nvason experence have a lower probablty to be wllng to be profled onlne for customzed advertsng. However, such a result does not hold true wth regard to onlne servce. As noted earler n assocaton wth expectancy theory, ths may ndcate a dfference n Valence perceptons, or the attractveness of the outcome to the ndvdual, across the two contexts. Assumng consumers perceve the benefts of onlne servce to be greater than onlne advertsng, they wll be more motvated to share nformaton for onlne servce. Ths ncreased motvaton to share nformaton wll make prevous prvacy nvason experence nsgnfcant n the onlne servce case, but sgnfcant n the onlne advertsng case, as our results suggest. 6) Dscusson Effectve use of customer nformaton s a crtcal success factor for frms onlne. Through proflng consumers and presentng customzed servce and advertsng, frms 27

29 can ncrease consumer value as well as frm revenue. The challenge for frms, then, becomes collectng and usng nformaton n such a way that consumer prvacy concerns are addressed. Ths study examned the role of perceved control, mplemented through nformaton-knowledge features. Such features can be used to address a consumer s wllngness to be profled onlne for customzed offerngs. The results have sgnfcant manageral mplcatons, as they suggest that frms can garner ncreased customer partcpaton n customzed offerngs through the mplementaton of nformatonknowledge features. Such ncreased consumer partcpaton may then translate nto a compettve advantage for companes. The fndngs of ths study are n accordance wth Expectancy theory, and also wth prevous fndngs that ndcate that perceved control over events and uses of nformaton, result n a consumer s decreased concern for prvacy nvason (Laufer at al. 1976). In ths case, the mportance of perceved control reflects an ncreased consumerconcern about sharng ther nformaton wth onlne frms. Whle prevous fndngs have also shown that users wth a greater prvacy concern perceve lttle control over the use of personal nformaton (Stone et. al 1983), ours s the frst study to show that perceved control would ncrease a consumer s tendency to be profled onlne for customzed offerngs. At the outset, we expected that the mportance of a prvacy polcy would be sgnfcantly assocated wth a wllngness to be profled onlne. The lack of such a sgnfcant assocaton was ntally surprsng. However, upon reflecton, one possble reason for such a result became clear: prvacy polces largely go unread by consumers. In fact, accordng to Forrester Research, less than 1 percent of the vstors to sx major 28

30 onlne travel stes durng Aprl 2001 actually read prvacy polces (Regan 2001). Thus, whle consumers may rate a prvacy polcy as mportant, few of them actually take note of the polcy when usng a ste. Examnng the wllngness to be profled onlne n the specfc contexts of onlne servce and onlne advertsng hghlghts envronmental dfferences. The most dstnct dfference between onlne servce and onlne advertsng s the effect of mportance of prevous prvacy nvason. Prevous work dd not reveal a clear assocaton between prevous prvacy nvason experence and atttudes toward secondary nformaton use (Culnan 1993); therefore, ths sgnfcant result n the case of onlne advertsng s qute nterestng. The dfferng result across contexts regardng prevous prvacy nvason suggests that people consder customzed servce more benefcal than customzed advertsng and are therefore more wllng to be profled onlne, despte prevous onlne prvacy nvasons. Onlne advertsng, on the other hand, s largely perceved as less benefcal (McLaughln 2002). Prevous prvacy nvason s, therefore, assocated wth a lower wllngness to be profled onlne n the case of customzed advertsng. Lmtatons and Future Research Lke other emprcal research, ths research also has several lmtatons, and the results need to be read wth cauton. As descrbed above, the study was based on secondary data analyss of a survey desgned to measure opnons toward prvacy and nformaton sharng onlne. Concern for nformaton prvacy s a tested, multdmensonal construct (Stewart and Segars 2002, Smth et. al 1996). However, due to the lmtatons of the secondary data, we nstead controlled for general prvacy 29

31 concerns, as prevously done by Culnan (1993). Indvdual questonnare tems were desgned to be unbased. However, several tems, such as prevous prvacy nvason, were measured usng sngle questonnare tems. In addton, the sample has a slght bas n favor of more educated, affluent, and Internet savvy ndvduals. Therefore, the results should be vewed wth some cauton. The strength of the research s that the data sample s consstent wth other recent work regardng nformaton prvacy (e.g. Stewart and Segars, 2002), and the results are consstent wth theory. Concluson Personalzed servce s ncreasngly becomng a source of value for both consumers and frms (Farag and Krshnan, 2002). However, nvestments n personalzaton may come at the cost of consumer prvacy. Prvacy has, therefore, become an ssue of strategc mportance for companes operatng n the nformatoncentrc, networked global economy. In order to provde consumer-drven customzed servce, frms must compel consumers to provde them nformaton. Through the use of nformaton-knowledge features, we examned the effect of perceved control on a consumer s wllngness to be profled onlne for customzed servce and advertsng. We found that concern over knowledge of nformaton and usage s assocated wth a decreased consumer wllngness to be profled onlne across contexts. However, we also found that the perceved beneft of customzaton affects the mportance of prevous prvacy nvason on that very wllngness. In the case of customzed servce, where beneft s more apparent to consumers, prevous prvacy nvasons are not sgnfcant; the potental beneft of the servce outweghs the potental rsk of a prvacy nvason. In the 30

32 case of customzed advertsng, on the other hand, the beneft s less apparent, and the rsk of an ntruson, (.e. emal spam) s more apparent. In such a case, prevous prvacy nvason s sgnfcant. Thus, companes must focus on reducng such perceved rsk through mplementng nformaton-knowledge features. For managers to be successful n encouragng consumers to partake n onlne customzed servce, ther frm s entre nformaton practces should be gven unfettered accessblty. Such accessblty may even be provded n a lmted format. Future research may therefore examne, over tme, the effectveness of varyng levels of accessblty on consumer wllngness to be profled onlne. In ths study, we have provded results managers can utlze to encourage consumer partcpaton n onlne proflng for customzed servce and advertsng. Our fndngs should therefore help frms talor ther onlne servce offerngs and maxmze nformaton collecton across varous consumer segments, as a result. 31