Personalized service helps sweeten disclosure decision

Companies who want to convince consumers to voluntarily disclose personal information have more potential arrows in their quiver than they may realize, says a University of Calgary researcher.

 “There are really two kinds of rewards a firm can offer for somebody’s data,” says Dr. Barrie R. Nault, PhD, a professor at the Haskayne School of Business and director of its Informatics Research Centre. “One is some kind of price discount — whether it’s some kind of coupon, an amount of money, or a lower price, it all affects the same thing, which is basically the price — or the company can provide some kind of expertise.”

The finding is part of a study co-authored by Nault that was recently published in Decision Support Systems. It looked at how consumers make the tradeoff between maintaining their privacy and accepting company incentives to voluntarily disclose their personal information.

Things such as voluntary consumer surveys on company websites enable such firms to create customer profiles, helping guide the company’s decisions on everything from products and services to marketing. The collection of such personal data, exemplified by online platforms such as Amazon and Facebook, has become a multi-billion-dollar business, raising privacy concerns about how companies are using this information.

Older customers reluctant to share data

Researchers call the tradeoffs consumers make between privacy and disclosure the “privacy calculus,” says Nault. His study examined real-life customer data from a South Korean company that sells skin-care products.

It revealed that, for people ranging from ages 12 to 21, “monetary benefits had a big impact, so they were willing to share their personal information for a coupon or some kind of price reduction,” Nault says.

By contrast, people ages 22 to 54 wanted to maintain their privacy. “They really didn’t want to share their personal information, even if they were offered or sent a coupon,” he says. “The amount of coupon redemption among this older age group was much lower.”

But they were more willing to provide such information in return for personalized services such as product advice and recommendations, Nault says. “You might be willing to be profiled if you think that profile is going to be used in some way to guide your selection of a product that is better suited to you, rather than wasting your time searching around on a website for it.”  

Guidance more important for some customers

Companies, including staff such as marketers, have traditionally focused on offering price reductions rather than expertise or personalized service, says Nault.  

“The biggest takeaway, for me, from our study is that guidance is more important for some people than getting a small discount,” he says. He adds that the particular division of the two groups by age likely reflected the fact the data came from a skin products company; other industries or businesses may have different results.

“It’s been something like 25 years for the internet, and, as a consequence, there is an awful lot of the population that is comfortable with e-commerce, but some of them are getting older and they are concerned about their privacy. I think, if you are running a website and trying to gather data on your customers in order to help them in some way, then sometimes offering recommendations is going to be more valuable than offering a monetary inducement.”

Besides Nault, the study was co-authored by Dr. Byungwan Koh, PhD, from the Korea University Business School in Seoul, South Korea, and Dr. Srinivasan Raghunathan, PhD, Ashbel Smith Professor at the Naveen Jindal School of Management at the University of Texas at Dallas.