ANTECEDENTS AND CONSEQUENCES OF CONSUMER PRIVACY CONCERNS: AN EMPIRICAL INVESTIGATION

Transcription

1 ANTECEDENTS AND CONSEQUENCES OF CONSUMER PRIVACY CONCERNS: AN EMPIRICAL INVESTIGATION JOSEPH E. PHELPS is the Reese Phifer Professor of Advertising & Public Relations and GILES D SOUZA is Associate Professor in the Department of Management and Marketing, University of Alabama, Tuscaloosa. GLEN J. NOWAK is Director of Communications, National Immunization Program, Centers for Disease Contrl and Prevention, Atlanta, Georgia. This research was funded by a grant from the Marketing Science Institute, the Direct Marketing Association, and the Direct Marketing Educational Foundation. Joseph E. Phelps Giles D Souza Glen J. Nowak f ABSTRACT The present study examines the interrelationships among antecedents and consequences of privacy concerns. The results indicate, among other things, that a consumer s attitude toward direct marketing and his/her desire for information control act as antecedents to privacy concerns. Privacy concerns, in turn, are negatively related to purchase behavior and the purchase decision process. Understanding the antecedents of privacy concerns provides a foundation for developing effective policies and practices to reduce such concerns while understanding the consequences of privacy concerns is essential to gauging just how important dealing with these concerns really are for marketers John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc. f JOURNAL OF INTERACTIVE MARKETING VOLUME 15 / NUMBER 4 / AUTUMN

2 CONSUMER PRIVACY CONCERNS INTRODUCTION As organizations increasingly rely on marketing databases that involve the use of personal information (Berry, 1994; Culnan & Armstrong, 1999), managers face the dilemma of responsibly protecting consumers privacy while using the information to maximize sales and profit. Of course, this remains a dilemma only as long as the choices (protecting privacy and achieving the organization s goals) are perceived as mutually exclusive. In fact, one may not have to choose between the two at all. For instance, if consumers privacy concerns influence their purchase behavior, then protecting privacy could actually have a positive impact on the company s sales and profit (Culnan & Armstrong 1999). Unfortunately, little empirical evidence exists regarding the consequences of privacy concerns. The research reported here examines the interrelationships among antecedents and consequences of privacy concerns. This includes an investigation of the relationships among privacy concerns and purchase behavior and the purchase decision process. While these bottomline -related consequences may initially be most interesting to marketers, it is important to note that it is the understanding of the antecedents that allows one to develop policies that address the root causes of privacy concerns. Thus, examining the interrelationships among the antecedents and consequences of privacy concerns can provide insights into the importance of addressing consumer privacy concerns and serve as a guide for developing policies that will help alleviate these concerns. RELEVANT LITERATURE Much of the early privacy research relating to marketers use of consumer information focused on documenting the general levels of consumer concern and assessing public opinion on information-privacy issues and practices (Katz & Tassone, 1990; Nowak & Phelps, 1992). Consumer concern about marketers use of personal information is now well documented (e.g., Equifax-Harris 1994, 1995, 1996, 1997). Some research has moved beyond general assessments of consumer concern and has begun to investigate the root causes of privacy concerns (e.g., Jackson & Wang, 1994; Milne & Boza, 1999; Nowak & Phelps, 1995; Sheehan & Hoy, 2000; Wang & Petrison, 1993). Current research is also beginning to take into account the multidimensional nature of information exchanges between consumers and marketers (Milne, 1997; Milne & Gordon, 1993; Phelps, Nowak, & Ferrell, 2000). This movement to produce a better understanding of the factors and situations that foster privacy concerns is important primarily because it is only with an understanding of the factors that underlie privacy concerns that policy and practices can be employed to reduce consumer concerns and enhance consumer trust. Thus, such information is crucial for marketers and public policy makers. Another important aspect of recent information privacy research is the examination of the consequences of consumer concerns. Understanding the attitudinal and behavioral reactions that stem from privacy concerns is as important as understanding the antecedents of such concerns. Without a sense of the consequences, it is difficult to judge just how important dealing with privacy concerns truly is for marketers. This is especially true with regard to the potential consequences of privacy concerns and related factors on purchase behavior and the purchase decision process. Milne and Boza s (1999) study is noteworthy in this regard for they examined the relationships among concern, trust, and direct marketing usage (where usage is defined in terms of number of purchases). They found that both trust and concern significantly impacted usage levels. Trust was positively related to usage, and concern was negatively related to usage. In addition to examining an important behavioral consequence, Milne and Boza (1999) present a model of the antecedents of concern and trust. Among the variables tested, their findings indicate that trust and perceived information control are negatively related to concern while attitude toward direct marketing is positively related to trust. 3

3 JOURNAL OF INTERACTIVE MARKETING Another study that discusses antecedents and consequences of privacy concerns is Phelps et al. (2000). They present, but do not empirically test, a conceptual model in which consumers privacy concerns are determined by four general factors: (1) the type of personal information requested, (2) the amount of information control offered, (3) the potential consequences and benefits offered in the exchange, and (4) consumer characteristics. Furthermore, they propose that these factors not only influence overall concern, but also influence consumer beliefs regarding marketers information practices and that the outcomes of overall concern and beliefs influence consumers future behavioral and attitudinal responses. Phelps et al. found that the amount of information control consumers held, as well as the type of information requested by marketers, had a significant influence on purchase intentions. Interestingly, both (control and information type) are reported in the literature (e.g., Culnan, 1993; Milne, 2000; Phelps et al., 2000; Sheehan & Hoy, 2000) as factors that also influence privacy concern. A few recent studies have also examined consequences of consumer privacy concerns in the online marketing environment. For example, Sheehan and Hoy (1999) report that as privacy concern increases, respondents are more likely to exhibit the following behaviors: (1) provide incomplete information to websites, (2) notify Internet Service Providers about unsolicited e- mail, (3) request removal from mailing lists, and (4) flame online entities sending unsolicited . Furthermore, as privacy concern increases, respondents were less likely to register at websites that request information. Similarly, a recent survey of 1,017 Internet users by the Pew Internet & American Life Project found that about 25% of Internet users have provided false information to a website and about 20% have used a secondary address to avoid giving a website real information. The Pew study reports, however, that although Americans overwhelmingly want the presumption of privacy when they go online.... most [Internet] users do not use available privacy protection tools (Fox et al., 2000, p. 2). It may be that these users are unaware of how existing technologies, such as the ability to disable cookies, can be deployed to protect personal privacy. According to a recent survey by Yankelovich Partners, however, the majority of respondents are acutely aware of an easy low-tech alternative. That survey found that 79% of respondents simply leave websites when required to provide personal information to proceed (EPIC Alert, 2000). Interestingly, the Yankelovich Partners study also reported that 90% of the respondents felt that privacy was the most pressing concern when shopping online, rating it more important than prices and return policies. It would be interesting to see how these respondents would actually behave if faced with a purchase decision situation where they are asked to give up some measure of privacy for a product they are interested in that is being offered at a great price. In other words, it would be interesting to examine the tradeoffs people make when facing a specific purchase decision. We ll return to this notion of the tradeoffs consumers make in the next section of this paper as it relates to a research question examined in the current research. In sum, although the literature does provide information about factors that appear to fuel consumer concerns, this research stream has appeared relatively recently. Less work has examined the consequences of privacy concerns, and scholarly research examining the relationships among the antecedents and consequences is, with the exception of the studies cited above, extremely difficult to find. Given the amount of attention privacy issues receive from the media, government, marketers, and consumers, it is surprising that so few academic studies have empirically examined both the antecedents and consequences of consumer privacy concerns. PURPOSE OF PAPER AND HYPOTHESES The general goal of this paper is to provide additional insight into the relationships among potential antecedents and consequences of consumer privacy concerns. Notably, this study includes an assessment of whether and how privacy concerns relate to the purchase decision 4

4 CONSUMER PRIVACY CONCERNS process and purchase behavior. More specifically, the goal is to examine the relationships among various factors in an attempt to answer the following hypotheses and research question. The first issue to be addressed is what factors act as antecedents of privacy concern? Although previous research suggests a number of possible antecedents, this study will focus on two factors that have generated a good bit of interest: (1) the amount of information control desired and (2) consumers attitude toward direct marketing. Previous research (e.g., Milne & Boza, 1999; Phelps et al., 2000) consistently suggests that the amount of information control desired by consumers is positively related to the amount of concern. However, there is some uncertainty regarding the relationship between consumers attitude toward direct marketing and the level of concern. Recent research in this area (Milne & Boza, 1999) found that the relationship between the two variables, albeit tilting negative as had been predicted, was not statistically significant. Given this information, we offer the following hypotheses: H1a: The amount of information control desired by consumers is positively related to the degree of privacy concern. In other words, the more control consumers desire, the greater their privacy concerns. H1b: Consumer s attitude toward direct marketing is negatively related to the degree of privacy concern. Such that the more favorable a consumer s attitude toward direct marketing, the less concerned that consumer will be about information privacy. The next area of interest examines potential consequences of privacy concern with a focus on whether or not privacy concerns are related to purchase behavior. Milne and Boza s (1999) findings suggest that concern is negatively related to direct marketing usage. This finding makes sense intuitively and supports what had been the presumption in this area of research. However, because of the paucity of empirical research on this issue, it is essential for others to examine this relationship if it is to be generally accepted. It is important to note that the present study provides more than just a second opinion on this matter. Milne and Boza measured usage by asking respondents the number of times they purchased goods or services by mail, phone, or Internet and adding the total number of purchases across the three methods. Self-report purchase behavior data is also used in the current study. However, in the present study the measure includes items assessing how recently items were purchased, how frequently purchases are made, and how much money was spent on catalog purchases in the last year. This RFM approach should provide a more detailed assessment of the purchasing behavior of the respondents with regard to catalog usage, an important form of direct marketing. Consistent with Milne and Boza (1999), we hypothesize: H2: Privacy concern is negatively related to purchase behavior. Whereas there was little previous research that examined the relationship between privacy concerns and purchase behavior, there is even less that examines whether and how privacyrelated factors affect the purchase-decision process. One exception, as mentioned earlier, is a study by Phelps et al. (2000). In their study, a series of full-profile conjoint scenarios were used to assess how factors such as control over information use, type of personal information requested, future mail volume, and resulting shopping benefits impacted consumer purchase intentions. Phelps et al. found that the more control the consumer had over the information collected by the marketer, the greater the purchase intention. They also found that purchase intention varied significantly depending on the type of information requested in the scenario. The benefit of using such conjoint scenarios is that one can assess the tradeoffs that consumers make among the factors thought to influence purchase. The reader may recall the comment made earlier questioning whether the respondents to the Yankelovich Partners study would really reject a great deal on a great product because of privacy concerns. Conjoint analysis was employed to assess just such tradeoffs. 5

5 JOURNAL OF INTERACTIVE MARKETING Thus, Phelps et al. (2000) provides insight into at least two factors (i.e., amount of control and type of information requested) that are directly related to the purchase decision process. The present study extends their work by examining the potential indirect effects privacy concern and other related factors may have on the purchase decision process. In other words, the current study examines variables that may play an indirect role in the purchase decision process through their relationship with the factors that Phelps et al. reported directly influenced purchase intention. More specifically, we intend to investigate the interrelationships among the direct factors reported and privacy concerns, willingness to provide different types of information, desire for information control, purchase history, and attitude toward direct marketing. Although no previous studies were found that examine the relationships in question here, a case can be made for each of the variables selected. As stated earlier, there is evidence that privacy concerns are negatively related to purchase behavior (Milne & Boza, 1999). Furthermore, attitude toward direct marketing and desire for information control are thought to be antecedents to privacy concerns (e.g., Milne & Boza, 1999; Phelps et al., 2000). If these relationships are present, then it intuitively makes sense to assume that these variables may also play a role in the purchase decision process. Purchase history, or past purchase behavior, should also play a role when a person is confronted with a new purchase decision (Guadagni & Little, 1983). Quite simply, past purchase experience, a result of past attitudes and beliefs, should influence future purchase decision making. For example, if a person frequently orders from catalogs, his/her experience should influence the importance of the specific factors present in the new purchase decision situation (Culnan & Armstrong, 1999). Finally, one might assume that there would be a strong relationship between a person s stated desire for information control and how they react when forced in a conjoint task to make tradeoffs among level of control and other factors. One might also assume that a person s stated willingness to provide different types of information would go hand in hand with the weight allocated to requests for different types of information in a conjoint task. However, what a person says and thinks or even would typically do in general may not adequately reflect purchase decisions made under specific conditions. Examining how well these general measures relate to a specific purchase decision should prove insightful. However, because such an examination of these indirect influences on the purchase decision process has not previously been addressed in the literature, there is little empirical evidence on which to build hypotheses. Therefore, we offer the following research question: RQ1: Do privacy concerns and/or related variables, (i.e., willingness to provide information, the amount of control desired, purchase history, and attitude toward direct marketing) indirectly play a role in the purchase decision-making process? RESEARCH METHOD Data Collection A national mail survey was conducted to collect data for this study. Two sampling frames were used. One represented known and recent catalog shoppers, while the other was a fairly extensive database containing over 100 million residential addresses. The catalog shopping frame and sample were provided by a national retail and catalog marketer; the residential sample was rented from a national list broker. One thousand randomly selected names and addresses were obtained from each sampling frame. Surveys were then sent to a subsample of 500 randomly selected names from each sampling frame. The intent was to survey a total of 1,000 households, with half being known catalog shoppers and half being randomly selected residences. The additional names and addresses were needed to replace undeliverable surveys. Fifty-six surveys were undeliverable and were replaced with randomly selected addresses from the appropriate list. 6

6 CONSUMER PRIVACY CONCERNS Response Rate and Respondent Profile A total of 556 completed and usable surveys were received, resulting in an overall response rate of 55.6%. The first mailing pulled 470 completed surveys. A second mailing, which went only to those who had not responded, produced another 86 completed surveys. A comparison of the first and second wave failed to detect any statistically significant differences between the two waves of respondents. The known and recent catalog shoppers list had a response rate of 61% (305 returned surveys), while the response rate was 50% for the listed household sample (251 returned surveys). The demographic profile of respondents is listed in Table 1. Variables of Interest and Measurement The material in this section is organized to reflect how the variables were introduced in the hypotheses and begins with the variables that are perceived to be antecedents of privacy concerns. H1a suggested that the amount of information desired by consumers would be positively related to amount of privacy concern. Consumers desire for information control was measured with the following questions: 1. Would you like to have more control or less control over the number of catalogs and advertising mail you receive? 2. Would you like to have more control or TABLE 1 Respondent Profile Demographics: Gender Age Female 60% % Male Marital Status Married Single 9 65 and older 18 Divorced/Separated 9 Widowed 7 Employment Status Full Time 50 Education Part Time 6 High School Grad 26 Self-Employed 7 Vocational School 8.6 Retired 23 Some College 27 Homemakers 6 College Grad 22 Full-Time Students 1.5 Graduate School 11.5 Unemployed 1.7 Income* $15,000 or less 9 $15,000 $24, $25,000 $50, Over $50, Note: A comparison of the two subsamples revealed the following differences: Respondents from the known shoppers list were more likely than those from the listed households subsample to be female (73% vs. 45%), between the ages of 25 and 44 (46% vs. 30%), employed full-time (56% vs. 43%), and to have indicated high school as their last formal education experience (31% vs. 21%). * Twenty percent of the respondents would not answer the income questions. The percentages given are based on those responding to the question. 7

7 JOURNAL OF INTERACTIVE MARKETING less control over the kinds of catalogs and advertising mail letters you receive? 3. When you order products by mail or phone, or make purchases with a check or credit card, you provide companies with information about you including your name, address, and phone number. Would you like to have more control or less control over what companies do with that information? Responses to these questions were summed to form a measure of consumers desire for information control. Privacy concern addresses the level of consumer concern for the way their personal information is used by firms. It was measured with a direct question. Respondents were asked, In general, how concerned are you about the ways that companies use personal information about you? They could choose one of four options: not very concerned, somewhat concerned, very concerned, or neither concerned nor unconcerned. H1b suggested that consumers attitude toward direct marketing should be negatively related to amount of privacy concern. Although we call this variable attitude toward direct marketing, it is more precisely a general measure of their evaluation of the direct mail and catalogs they receive. It was assessed by asking respondents to indicate their reactions to the following statements: Most of the catalogs and mail advertising I receive are helpful and informative and I enjoy reading or looking at most of the catalogs and advertising mail I receive. Respondents indicated their reactions using five-point scales that ranged from strongly disagree to strongly agree. Responses to both of these questions were summed to form a measure of consumers attitude to direct marketing. H2 suggested that privacy concern would be negatively related to purchase behavior. In particular, we were interested in their catalog purchasing habits. Three questions were used to assess consumers purchasing habits. The questions were used to obtain a sense of the recency, frequency, and monetary value of each respondent with regard to catalog purchasing. Specifically, the respondents were asked the following questions. When was the last time you, personally, purchased a product or service from a catalog? In an average or typical year, how many times do you order or buy products or services from a catalog? In a typical year, how much money would you estimate you spend on catalog purchases? The sum of an individual s responses to these three items was used as the measure of the intensity of the consumer s catalog purchase behavior. The research question asked: Do privacy concerns and/or related variables indirectly play a role in the purchase decision-making process? The research question includes all the variables mentioned above as well as willingness to provide different types of information and calls for an examination of the interrelationships among these variables with two factors known to directly relate to purchase intention. First, we discuss willingness to provide different types of information and then explain how the two direct factors were developed. It is perhaps important to mention again that willingness to provide different types of information is a measure of how willing the respondent is in general to share personal information with marketers. This variable was assessed by providing respondents with 16 specific examples corresponding to three different categories of personal information. Consumers were asked to indicate how willing they were to provide the information item listed to stores and merchants when making a purchase. The response categories were always willing, somewhat willing, not very willing, and never willing. Three sets of mutually exclusive variables were constructed by summing consumers responses to subsets of the 16 information items. The first set includes lifestyle and purchase related information (i.e., hobbies, catalog purchases, favorite TV programs, favorite stores, favorite magazines, favorite charities). The second set includes personal identification and financial information (i.e., telephone number, annual income, and social security number, kinds of credit cards, and most recent credit card purchases). The final set includes demographic information (i.e., age, marital status, 8

8 CONSUMER PRIVACY CONCERNS TABLE 2 Measures Variable Number of Items Cronbach s Alpha Experience 3 Items 0.84 Attitude to Direct Mail 2 Items 0.74 Control 4 Items 0.73 Willingness1 (Lifestyle and Shopping Information) 7 Items 0.92 Willingness2 (Personal Financial Information) 5 Items 0.80 Willingness3 (Demographic Information) 4 Items 0.87 occupation, and education). A summary of the measures and coefficient alphas is given in Table 2. The final two factors require a bit more explanation as they represent the amount of importance that respondents attach to (a) the amount of information control they are given and (b) the type of personal information requested from them in a specific purchase situation. As reported in Phelps et al. (2000), a series of full-profile conjoint scenarios in the context of shopping for clothing were used as stimuli to assess how factors such as control over information use and type of personal information requested impacted consumer purchase intentions. The scenarios asked respondents to assume that they were shopping for clothing and they had to make a purchase decision based on the purchase conditions described. To reduce the likelihood of shopping preference influencing the results, the scenarios did not specify a distribution channel. Rather, consumers simply were to assume they were shopping either at a local store or from a catalog. For each profile, respondents were asked to indicate how likely they would be to purchase clothing from a company using a 4-point likelihood scale anchored by 1 (definitely would not) and 4 (definitely would). A fifth column provided unsure as an option. The conjoint partworths were estimated at the individual level, and the adjusted R-squares were significant in over 75% of the cases. Type of personal information requested had four levels: personal finances, media habits, lifestyle, and demographics. The weight that consumers give to the type of information requested when making a purchase decision can be gauged from the range (max min) of the four partworths estimated (D Souza & Rao, 1995; D Souza & Weun, 1997). Thus, a new variable, the weight given by consumers to the type of personal information when making a purchase, was constructed as follows: Max (partworths for personal finances, media habits, lifestyle, and demographics) Min (partworths for personal finances, media habits, lifestyle, and demographics). Control over information use had three levels: full, some, and no control. Just as with type of personal information, a new variable, the weight given by consumers to the control over information use when making a purchase was constructed as follows: Max (partworths for full, some, and no control) Min (partworths for full, some, and no control). ANALYSIS AND RESULTS With the description of the variables in place, the system of equations used to analyze the data can be presented. Please note that these equations were used solely for testing our hypotheses and research question and that we are not positing a theoretical model in this paper. The variables were assigned the following symbols: the level of consumer s concern for the way their personal information is used by firms (Y 1 ), the intensity of the consumer s catalog purchase behavior (Y 2 ), the weight given by consumers to the type of personal information they are required to provide the marketer when 9

9 JOURNAL OF INTERACTIVE MARKETING TABLE 3 Simultaneous Equation Regression Model System Weighted R Dependent Variable (Equation #) Independent Variable Parameter T-Value Probability T Concern (1) Attitude to DM Concern (1) Attitude to Control Experience (2) Concern Type of Personal Information Weight (3) Type of Personal Information Weight (3) Type of Personal Information Weight (3) Type of Personal Information Weight (3) Amount of Control Weight (4) Willingness1 (Lifestyle and Shopping Information) Willingness2 (Personal Financial Information) Willingness3 (Demographic Information) Experience Willingness3 (Demographic Information) Amount of Control Weight (4) Attitude to Control Amount of Control Weight (4) Experience making a purchase decision (Y 3 ), the weight given by consumers to the amount of information control they exercise over the information they provide when making a purchase decision (Y 4 ), the consumer s attitude toward direct marketing (X 11 ), the consumer s expressed desire for control over their personal information (X 12 ), and three variables that represent a consumer s willingness to provide marketers with specific types of information. The types of information include lifestyle and shopping information (X 31 ), personal financial information (X 32 ), and demographic information (X 33 ). A simultaneous equation regression model, consisting of the following four equations, was set up to answer the hypotheses and research question posed in this study: Y X X 12 e 1 (1) Y Y 1 e 2 (2) Y X X X Y 2 e 3 (3) Y 4 41 X X Y 2 e 4 (4) Findings Confirmatory factor analysis was done for the independent variables of our empirical model. The adjusted goodness of fit index (AGFI) of the model was 0.88, and vastly superior to models with no factors (random error explaining the items), one factor (for all items), and a model with one factor for the 16 willingness items. The model was fitted using three-stage least squares. All parameters were significant at below the 1% level, and the system R-squared was The results are shown in Table 3, and a path diagram of the model is given in Figure 1. The model clearly indicates that (1) consumers attitudes toward direct marketing and their desire for control over personal information are related to their level of privacy concern; (2) increasing levels of concern for privacy diminishes the intensity of catalog purchase behavior; and (3) when making purchase decisions, the weights consumers assign to the type of information they must surrender and the amount of control they have over personal information is related to their catalog purchase behavior, their willingness to surrender different types of personal information (i.e., lifestyle and shopping 10

10 CONSUMER PRIVACY CONCERNS FIGURE 1 Privacy Model (R All Parameters Significant at 1%) information, personal financial information, demographic information), and their desire for control over personal information. The model also illustrates that consumers concern for privacy mediates the effects of (a) their attitude toward direct marketing and (b) their desire for control on catalog purchase behavior, which, in turn, mediates the effect of consumers concern for privacy over the weights consumers assign to privacy concerns (type of information or amount of control). In effect, attitude toward direct marketing, desire for control over personal information, and willingness to surrender different types of information, enter the model exogenously. On the other hand, concern for privacy, intensity of catalog purchasing, and the weights assigned to privacy concerns, are formed within the model. Naturally this model provides only a partial view of the interrelationships among all the privacy variables since the R-squared is only This means there are either other variables that need to be entered into the model, or that some of the endogenous variables, such as intensity of catalog shopping experience, for example, may be partly determined outside the model having an inherently random component. Most likely, both of these possibilities are at work. Future research will need to investigate the role of variables that were not examined here. Even though the model provides only a partial view of all the interrelationships, the results clearly offer the evidence needed to answer the issues raised in this study. With regard to H1a and H1b, which relate to the antecedents of privacy concerns, the model in Figure 1 clearly illustrates that the more positive a consumer s attitude toward direct marketing is, the less he or she is concerned by matters of privacy. Similarly, the greater a consumer s desire for control over information is, the more he or she expresses privacy concerns. Thus, the findings support both H1a and H1b. H2 asked if privacy concerns are negatively related to purchase be- 11

11 JOURNAL OF INTERACTIVE MARKETING havior. The results show a significant negative relationship. In other words, people highly concerned about privacy exhibit lower recency, frequency, and monetary value of catalog purchases. H2 is supported. The research question asked whether privacyrelated factors indirectly affect the purchase decision-making process? Interestingly, the model shows that the consumers intensity of catalog shopping behavior, the amount of information control desired, and their willingness to provide different types of personal information influence the weight they assign to the direct factors when making purchase decisions in the conjoint tasks. Consumers with more catalog shopping experience (meaning higher RFM) assign more weight in general, but are four times more concerned with the type of information they surrender than with the amount of control they can exercise over that information once it is given to a marketer. It is also interesting to note that the effect of consumers willingness to surrender information on the weight assigned to the type of information required in a purchase situation differs markedly by the type of information. Type of personal information becomes less important as a factor in making purchasing decisions when consumers are unwilling to give up lifestyle and demographic information, but type of personal information becomes more important when consumers are unwilling to give up personal financial information. Thus, the more unwilling a consumer is to give up lifestyle and personal shopping information as well as demographic information, the less important is the weight consumers will assign to type of personal information when making purchase decisions in the conjoint tasks. On the other hand, the greater consumers unwillingness to give up personal financial information the greater will be the weight they will assign to type of personal information in the conjoint tasks. We interpret this as an indication of the importance consumers place on financial information. Thus, if a consumer is willing to give up certain types of information, then surrendering that type of information is of little concern in a purchase situation, and consequently the influence of that type of information as a factor in the conjoint task would be very minute. Conversely, if consumers are very unwilling to give up certain types of information, then in the purchase decision, surrendering that type of information becomes an important factor in deciding whether or not to make a purchase. Consumers are extremely unwilling to give up personal financial information, especially when compared to the two other information categories studied here. Thus, when deciding on the purchase, these consumers weigh this type of information as a factor in the conjoint tasks much higher than they would have if they had been willing to give up such information in the first place. It should also be noted that other researchers (e.g., Sheehan & Hoy, 2000) have discussed information sensitivity and have made the point that sensitivity relates not only to the type of information but also what that information suggests about the individual. Furthermore, just how sensitive a specific bit of information is perceived to be varies by person and by situation (Jones, 1991; Milne, 1997; Sheehan & Hoy 2000). DISCUSSION The present study provides useful insights into the interrelationships among antecedents and consequences of privacy concerns. For example, we found that consumers attitudes toward direct marketing and their desire for control over their personal information act as antecedents of privacy concerns. Although the antecedent role of desire for control had been found in previous research, Milne and Boza (1999) reported a nonsignificant relationship between attitude toward direct marketing and privacy concerns. Thus, there was some question concerning the generally held, but seldom tested, belief that a negative relationship existed. The results of the present study show that there is a negative relationship and that as one s attitude toward direct marketing becomes more favorable, one s privacy concerns diminish. This finding has an important practical implication for direct marketers. It suggests that one way to lessen privacy concerns is to influ- 12

12 CONSUMER PRIVACY CONCERNS ence consumer attitudes toward direct marketing practices. Although an industry-wide campaign to improve consumer perceptions of direct marketing may be difficult to implement and finance, the Direct Marketing Association announced, at its annual convention (October 2000), that it is preparing to launch just such a campaign. Furthermore, if one moves beyond the present findings for a moment and assumes that a consumer s attitude toward a specific company influences the level of privacy concerns related to exchanges with that company, then the task becomes much smaller. Perhaps more importantly, it (increasing favorable attitudes) becomes a part of the normal business activity. Although increasing favorable attitudes is readily accepted as a normal business activity, reducing consumer privacy concerns has not yet reached that status among all direct marketers. From the consumer perspective, that is unfortunate. From a business perspective, it is a big mistake. The current study demonstrates that privacy concerns are related to consumer purchase behavior. As privacy concern increases, purchase behavior decreases. This is an important finding as the relationship between concern and purchase behavior has, in previous literature, been more of an a priori assumption than an empirical fact. Of course, it is important to remember that simply finding a negative relationship between privacy concerns and purchase behavior does not indicate the direction of the influence. In other words, privacy may influence purchase behavior but purchase behavior may also influence privacy concerns. For instance, if a person has had good experiences when purchasing from a catalog, they may not be as concerned about sharing personal information with that catalog company and that lessened concern may also be generalized to dealings with other firms. Conversely, if a person has had a negative experience with a firm s handling of personal information, their general level of concern is likely to be higher. Even if one assumes that, in the current research, it is concern over privacy that influences purchase behavior, such concern is still only one of a myriad of factors that may play a role in whether a person will make a purchase. Depending on the purchase situation, many of these factors are most likely more important determinants of purchase behavior than are privacy concerns. For example, the ability to obtain desired benefits from a product or service at an attractive price is undoubtedly influential. However, marketers should not overlook the impact that privacy concerns have on purchase behavior. This is especially true in situations involving commodity goods, where the brands are not differentiated and the prices are equivalent. Situations in which different marketers offer the very same products provide another example where privacy concerns may play a disproportionate role in influencing purchase behavior. For instance, the same book may be available at Amazon.com and Barnes&Noble.com at basically the same price. Our results suggest that the company with which consumers feel more comfortable sharing their information is the company that is going to sell this book. Coincidentally, Amazon.com recently (September 2000) announced changes to its privacy policy that will allow the company more leeway in selling and sharing the consumer information they collect. It will be interesting to see if these changes drive some of their current customers to other shopping outlets. Of course, the ideal test of the impact of this change would only come if all other factors influencing the purchase decision remain constant. Controlling the levels of factors thought to influence purchase behavior is something done more easily in the laboratory than in the field. The present study used conjoint analysis scenarios to measure the tradeoffs that consumers make among factors and levels of factors during the purchase decision process. The conjoint analysis identified both the type of information requested and the amount of information control offered to consumers as directly influencing purchase intentions. It is important to note that although that specific finding has been reported previously, the current study extends previous work by examining variables that may play an indirect role in the purchase decision process through their relationship with the fac- 13

13 JOURNAL OF INTERACTIVE MARKETING tors which directly influenced purchase intention. The results suggest that several factors indirectly play a role in the purchase decision process. Consumers previous catalog shopping behavior influences the weights consumer assign to both the type of information they surrender and the amount of information control they have when making a purchase decision. It is important to remember that the current study measured the RFM of respondents past catalog purchases. Thus, in this case, purchase experience precedes the purchase decision respondents faced in the conjoint task. Of course, if this research had been designed to follow consumers beyond purchase intention to actual purchase, the theory of reasoned action (Ajzen & Fishbein, 1980; Fishbein & Ajzen, 1975) suggests that the factors influencing purchase intention would also influence purchase behavior. In the current case, however, it is the consumer s prior purchase experience that is influencing the tradeoffs they are making in the purchase scenario they encountered. This makes sense as one s experience often, if not always, plays a role in current decisions. Interestingly, consumers with more catalog shopping experience are more concerned with the type of information they surrender than with the amount of control they can exercise over that information once it is given to a marketer. We interpret this finding to indicate that consumers with more experience have developed a certain comfort level with the fact that catalog firms they do business with have collected and use personal information. This interpretation relates well to Culnan and Armstrong s (1999) finding that those with experience may develop a degree of trust in the process and should be more willing to have their personal information used. However, this comfort level does not apply to all types of information. A marketer who requests personal information that is more sensitive or perceived as inappropriate to the purchase situation will decrease the purchase intention of these more seasoned catalog buyers. If this interpretation is correct, then catalog companies need to pay attention as this finding reflects the reactions of their best customers. Although we had anticipated that privacy concerns would be related to the weights consumers assign to the factors directly related to purchase intention, the relationship was different than we expected. The findings suggest consumers concern for privacy is related, but only via its connection with their level of catalog purchasing experience. Another way of stating this idea is to observe that consumers catalog purchasing experience mediates their level of concern for privacy on purchase intentions. The higher the level of concern, the lower the level of catalog purchase experience; and the lower the level of catalog purchasing experience the lower, the purchase intentions. One explanation for why we did not find a stronger and less circuitous relationship with privacy concerns in the purchase decision process revolves around the measures used. This study measured consumers general concern regarding marketers use of personal information. It may be that the best way to examine this relationship is to measure the level of concern that a consumer feels with regard to a specific company and then assessing what happens when that consumer is faced with a purchase decision involving this company. As anticipated, consumers attitude to direct marketing indirectly affects purchase decisions through their level of concern for privacy. In effect, the level of concern for privacy mediates the effect of attitudes to direct marketing, and as noted earlier purchase experience mediates the effect of concern for privacy. The more positive the attitude to direct marketing, the less the concern for privacy; the less the concern for privacy the greater the catalog shopping experience, the greater the purchase intentions. Similarly, the amount of control consumers desire is related to purchase intentions through the level of privacy concern. In this case, however, the greater amount of control desired by consumers, the higher the concern for privacy, the higher the concern, the less catalog shopping experience, the lower the purchase intention. More interestingly, is that consumers desire for control also is directly related to the 14

14 CONSUMER PRIVACY CONCERNS weight they assign to amount of information control given during the purchase decision task. Although this finding was expected, it is important nonetheless because it suggests that general measures of desire for information control (such as the ones used in this study) are related to the importance that consumers attach to the level of control provided in a given purchase decision situation. Obviously, this was not a perfect relationship and other factors, such as purchase experience, also influence the importance consumers place on the amount of information control they have when purchasing an item. Finally, consumers general willingness to provide different types of information is clearly related to the weight they assign to requests for different types of information during the purchase decision. The details regarding this finding have already been presented in the results section. However, just as with desire for information control, the most interesting aspect of this finding may be the indication that the use of measures that tap general willingness to provide information actually do relate to consumer reactions in a specific purchase decision situation. LIMITATIONS AND FUTURE RESEARCH As with any study, there are limitations that must be considered when interpreting the results. For example, the conjoint analysis (and the resulting model) may have produced different results had price been included as a factor. It is possible that price would have overwhelmed the privacy-related factors. In other words, consumers may have been willing to trade their privacy-related concerns for a great deal on the product in question. Future research testing additional factors, such as price, is essential to provide a more comprehensive understanding of the purchase decision process. Additional product categories also need to be tested as the willingness of consumers to provide different types of information may vary greatly depending on the purchase situation. Thus, the indirect effect of different types of information on purchase intentions is likely to vary as well. Future research should also examine whether the findings of the present study can be generalized to the online marketing environment. Although an increasing amount of research is investigating online privacy concerns, the question of whether privacy concerns exert a larger or smaller influence on purchase behavior in the electronic marketing environment than the traditional marketing environment remains unanswered. Surveys, such as the one conducted by Yankelovich Partners, can provide insights into consumer beliefs and perceptions regarding the importance of privacy online. As was noted earlier, that study reported that 90% of the respondents felt that privacy was the most pressing concern when shopping online, rating it more important than prices and return policies. However, within the context of a realistic purchase situation, research that examines the actual tradeoffs consumers make among factors such as price, return policies and privacy is needed to better understand the purchase decision process. Assessing such tradeoffs is a major strength of conjoint analysis. Perhaps future research could use simulated web pages that attractively display the conjoint scenario information necessary instead of using the paperand-pencil method used in the present study. This would not only simulate an Internet shopping experience, it would also better reflect the real world advertising format which with consumers obtain much of their product information. Another limitation of the study is the use of a single-item measure to assess privacy concern. Unfortunately, we did not discover Smith, Milberg, and Burke s (1996) 15-item scale for measuring information privacy concerns, until after the data was collected. There may also be a problem with unintended double-barreled questions. For example, two of the items used to measure desire for information control asked about the level of control over catalogs and advertising mail. Some research (e.g., Pasadeos, 1994) suggests that consumers view catalogs more favorably than they view other types of direct mail. This distinction suggests that it 15