Frame of Reference
This chapter provides an overview of research in the areas of e-personalisation, e-privacy and consumer be-haviour and introduces different models which will be used for the analysis of empirical data later on. At the end of this chapter, a specification of the research questions will be presented.
The funnel approach is used in this section to narrow the theory down and have a consis-tent structure to the research. E-advertising and Personalised E-advertising are the core body of the frame of reference with E-privacy and Information use as complimentary sub-jects. Both funnel models influence the consumer buying behaviour and the purchase deci-sion (Figure 2.1). In other terms, this model explains the influence of companies’ efforts (E-advertising, Personalised E-advertising) and external privacy issues (E-privacy, Informa-tion Use) on the consumer buying behaviour.
For the Internet user side, this model shows that companies’ efforts help the customer to balance between the positive and negative side of personalised E-advertising by considering privacy concerns and information use in order to decide if they intend to purchase or not. The sections below follow this funnel approach and aim to help first of all the develop-ment of the research questions. Later on, they are used to fulfil the purpose as well as to answer the research questions by comparing the subsequent theories with the empirical findings.
The following paragraphs introduce E-advertising as an increasingly popular form of E-marketing or more precisely direct marketing. The common framework that is presented demonstrates the significance of both personalisation and privacy for the field of E-marketing and thus supports the purpose of this thesis. In the end of this part, different types of personalised advertisements are presented to demonstrate the diversity of person-alised online advertisements and to show where users can be faced with such online ads.
Indeed, the Internet with its diversity and ever developing technologies and services repre-sents a platform for a number of different ways to reach the user. One of them is E-Advertising, an E-Marketing tool which has been flourishing at the same time as the stan-dardisation and democratisation of the Internet. One of the biggest advantages of E-advertising is the possibility to target ads to a specific group of users. Well-targeted ads are a useful tool for companies since they have a greater potential to result in a purchase (Lau-don & Traver, 2007). The trend towards narrowly targeted marketing caused a shift from mass marketing to direct marketing. Customers are increasingly demanding interactive one-to-one relationships and more personal marketing approaches, which pressures companies to change their marketing orientation. As consumers spend more and more time online, companies spend increasing amounts of money on online advertising, a type of direct mar-keting. Direct marketing to individual customers accounted for 48% of total U.S. advertis-ing expenditures in 2007. Spending on online advertising is expected to rise to more than $22 billion by 2009, representing about 11% of direct marketing expenditures. This shows the increasingly important role of online marketing in the marketing mix of companies (Kotler & Armstrong, 2008).
Karlyanam and McIntyre (2002) created a common framework and vocabulary for E-marketing which shows the important role of personalisation and privacy within the field of E-marketing. The authors base their model on the concept of the traditional marketing mix and the 4 Ps introduced by McCarthy (1960). They retain the original 4Ps (Price, Prod-uct, Promotion, and Place) and adjoin six additional elements: Personalisation and Privacy (P²), Customer Service and Community (C²), Security and Site Design (S²). The resulting new E-marketing mix can be described using the formula 4Ps+P²C²S² (Figure 2.2).
It is argued that the 4Ps as well as Site Design, Customer Service and Community should be treated as separate macro-elements in the E-marketing mix. Personalisation and Privacy together with Security then form the foundation of the model, transcending all aspects of E-marketing. They build a policy base to integrate various elements of E-marketing that does not have a counterpart in the traditional offline marketing mix. The transcending na-ture of personalisation and privacy and their position in the foundation of the E-marketing mix shows clearly the significance and importance of these issues for E-marketing and more precisely for E-advertising (Karlyanam & McIntyre, 2002).
The following paragraphs aim to give the reader an overview of the most common types of online advertising as well as recently emerging services which can be subject to personalisa-tion. As stated in the delimitations above, technical issues will not be developed in detail since they are not relevant for this study.
The first type of Internet advertisement that was available online was the banner ad. Ban-ner ads resemble traditional print advertisements and can appear anywhere on a user’s screen, in chat rooms, search engines, blogs and on commercial or private websites. De-spite their similarity, banner ads have a number of advantages over print ads such as the in-cluded link to a company’s own website and their dynamic nature. Another form of display ads are pop-ups that appear in a new window on the screen or underneath the browser’s own window (pop-up ad/pop-under ad) without the user requesting them. Research has shown that pop-up ads are more effective than normal banner ads although they are dis-liked by most Internet users and often blocked by toolbars. The last type of display ads are interstitials and superstitials. They are placed between the websites the user accesses and open when the user clicks to another website. Rich media ads are more stimulating and in-teractive types of online advertising that use video, sound, and/or animation. Newer ap-proaches to Internet advertising include search-related ads, search engine optimization, paid search engine inclusion and placement. Search-related advertising accounts for 41% of the total online advertising expenditures, more than any other type of online advertising (Turban et al., 2006, Laudon & Traver, 2007).
The following online marketing strategies are becoming more and more popular. Compa-nies have the possibility to cooperate in their marketing efforts and promote each other, which is known as affiliate marketing. In content sponsorship, companies can display ads on the Internet by sponsoring special content such as news or special topics on a website. Viral marketing is the Internet version of word-of-mouth and is an effective and inexpen-sive form of online advertising. Another popular type of online advertising is direct e-mail marketing using increasingly “enriched”, animated, interactive and personalised messages. Currently companies spend about $1.1 billion a year on direct e-mails to users. This strat-egy has high response rates but the receivers’ approval of the use of their e-mail address is a necessary prerequisite. The explosion of spam, unwanted commercial e-mail messages, frustrates many users and has to be kept in mind when dealing with direct e-mail market-ing. Recently emerging features such as video ads, podcasts, personal weblogs (blogs) as well as virtual communities like FaceBook or Myspace open up a number of new opportu-nities and platforms for online advertising and personalisation. (Laudon & Traver, 2007; Kotler & Armstrong, 2008).
This part dealt with the increasing success of e-advertising and the trend towards narrowly targeted markets and one-to-one marketing. In order to help companies implement e-advertising, Karlyanam and McIntyre created an e-marketing model based on the 4p’s and extra elements such as Personalisation, Privacy, etc. Finally, we provided an overview over several types of E-advertisements that could be seen online and subject to personalisation which is explained in more detail in the following section.
“I know you. You tell me what you want. I make it. I remember next time”
(Don Peppers and Martha Rogers, 1997)1
In this section, the key concepts of E-Personalisation are discussed. The first part gives an overview of several contemporary theoretical definitions permitting to distinguish the term Personalisation from Customisation. In the second part an outline of diverse types of Per-sonalisation systems is given. Then, we describe the process of personalisation and the benefits and values for customers and companies in the end.
Personalisation vs. Customisation
Some theorists associate the term ‘Personalisation’ with ‘Customisation’ without differenti-ating the two terms. However, they do not refer to the same strategy and should be clearly defined.
It appears first, important to elucidate what is hidden behind the term “Personalisation”. Personalisation is a specialised form of product differentiation, in which a solution is tailored for a specific individual (Hanson, 2000). In other terms, E-personalisation refers to an adapta-tion of online advertisements to meet customer needs. Amazon.com usually uses this prac-tice when it sends for instance, emails following the e customers’ purchases (books, com-pact disks, etc.) with recommendations for their next purchase. The Personalisation Con-sortium (2005) also defines it as the use of technology and customer information to tailor electronic commerce interactions between a business and each individual customer. Using information either previously obtained or provided in real-time about the customer, the ex-change between the parties is altered to fit the customer’s stated needs as well as needs per-ceived by the business based on the available customer information (Vesanen, 2007). Hence, through e-personalisation, a website can serve as a matchmaker that discovers and delivers personal information to the e-customer. Other theorists have come up with spe-cific definitions of the term “Personalisation” in the last decade. Here is a sample of these definitions:
- Don Peppers and Martha Rogers, 1997, cited in Paschelke & Roselieb, 2002
- Roberts (2003) “The process of preparing an individualised communication for a specific person based on stated or implied preferences”.
- Cöner (2003) “Personalisation is performed by the company and is based on a match of categorized content to profiled users”.
- Rangaswamy (2001) “Personalisation can be initiated by the customer (e.g. cus-tomising the look and contents of a web page) or by the firm (e.g. individual-ized offering, greeting customer by name etc.)”.
- Imhoff et al. (2001) “Personalisation is the ability of a company to recognize and treat its customers as individuals through personal messaging, targeted banner ads, special offers on bills, or other personal transactions”.
- Allen et al. (2001) “Company-driven individualization of customer web experi-ence”.
- Peppers et al. (1999) “Customising some feature of a product or service so that the customer enjoys more convenience, lower cost, or some other benefit”.
Customisation on the other hand, is relatively close to the term Personalisation, but does not exactly refer to the same strategy. Indeed, Customisation is the way to create a product or a service according to the buyer’s specifications (Hanson, 2000). It aims at adapting the product and not the promotion strategy, to the customer’s needs. Even though some economists do not think those two terms should be differentiated, such as Peppers et al. (1999), others have come up with different definitions such as Hanson (2000), Allen et al. (2001), Imhoff et al. (2001), Wind and Rangaswamy (2001), Cöner (2003) or, Roberts (2003). Instead of providing you an inventory of those definitions, it seems more relevant to combine them to provide a complete definition of Customisation that can be used to show the disparity between both terms. First, the user performs customisation as the concept in-cludes individualisation of features such as web contents and so on, by customers. In other terms, regarding to the company’s point of view, it is the process of producing a product, service, or communication to the exact specifications, desires of the purchaser or recipient. Therefore, marketers could use customisation as a business strategy to recast the com-pany’s marketing and customer interfaces to be buyer-centric (Wind & Rangaswamy, 2001).
Thus, the theoretical study has demonstrated that Personalisation and Customisation, even if they are interdependent terms, have some peculiarities showing that the two terms do not refer exactly to the same strategy. It appears though that customisation is a form of personalisation done by the customer that features more in depth individualisation than personalisation (Cöner 2003; Roberts 2003).
Highlights on different personalisation approaches
This part is dealing with the descriptive aspects of E-personalisation such as ways or strate-gies that companies generally use to personalise and advertise at the same time their web-sites. The aim of this section is to give the readers an overview and idea of what is person-alisation and its approaches related to theorists. Therefore, this part will not be compared with the empirical findings.
Many authors, such as W. Hanson (2000) and further, J. Vesanen (2007), have been trying to classify personalisation into different marketing strategies. Personalisation can be cata-logued into several approaches such as Adaptive, Cosmetic, Transparent Personalisation or even Collaborative Customisation. Each strategy has a different position along the axis of product design and representation implications. The most common type of personalisation used online is the adaptive personalisation which consists of offering the same basic product and representation to everyone but letting users filter out most of the possibilities (Hanson, 2000). Yahoo.com is a relevant example concerning this strategy as it lets customers choose from different options such as colour of the homepage’s wallpaper, and so forth.
1.2 Problem discussion
2 Frame of Reference
2.4 Gathering and using personal information
2.5 Online consumer behaviour
2.6 Research Questions
3.1 Research approach
3.2 Research strategy: quantitative vs. qualitative
3.3 Survey design
3.4 Pilot Study
3.5 Presentation of the empirical data and analysis
3.7 Validity and Reliability
4 Results and analysis
4.2 Research question 1: How do different aspects of personalised advertising influence the customer’s concerns for privacy?
4.3 Research question 2: How can customers’ awareness of data collection influence the purchasing decision?
4.4 Research question 3: To what extent are personalised e-ads perceived as helpful for the purchasing decision?
6.1 Managerial implications
6.2 Limitations and suggestions for further research
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Is E-personalisation a danger for the customer’s privacy? A study on JIBS students