Willing to pay for quality personalization? Trade-off between quality and privacy

Abstract

Online personalization presents recommendations of products and services based on customers’ past online purchases or browsing behavior. Personalization applications reduce information overload and provide value-added services. However, their adoption is hindered by customers’ concerns about information privacy. This paper reports on research undertaken to determine whether a high-quality recommendation service will encourage customers to use online personalization. We collected data through a series of online experiments to examine the impacts of privacy and quality on personalization usage and on users’ willingness to pay and to disclose information when using news and financial services. Our findings suggest that under certain circumstances, perceived personalization quality can outweigh the impact of privacy concerns. This implies that service providers can improve the perceived quality of personalization services being offered in order to offset customer privacy concerns. Nevertheless, the impact of perceived quality on personalization usage is weaker for customers who have experienced privacy invasion in the past. The results show that customers who are likely to use online personalization are also likely to pay for the service. This finding suggests that, despite privacy concerns, there is an opportunity for businesses to monetize high-quality personalization.

Keywords:

• e-commerce
• information disclosure
• personalization
• privacy
• quality
• willingness to pay

Additional information

Notes on contributors

Ting Li

About the authors

Ting Li is an Assistant Professor of Decision and Information Systems at the Rotterdam School of Management, Erasmus University in the Netherlands. She was a Visiting Scholar at the W.P. Carey School of Business, Arizona State University. She obtained her Ph.D. in Management Science at the Erasmus University and M.Sc. in Computational Science at the University of Amsterdam. Before joining academic, she worked for General Electric and IBM. Her research interests include strategic and economic impacts of IT, consumer decision making in the online and mobile channels, pricing and revenue management, and business networks. Her work has been published in the Decision Support Systems, International Journal of Electronic Commerce, European Journal of Information Systems, and in several edited books. Her research is supported by the Dutch National Science Foundation (NWO). She was the runner-up for both the 2010 Accenture-PIM Marketing Science Dissertation Award and the 2011 Professor Aart Bosman Dissertation Award. She also was nominated for a best research paper award at the Hawaii International Conference on Systems Science in 2009.

Till Unger

Till Unger obtained a Master Degree in Business Information Management at the Rotterdam School of Management, Erasmus University. Before his master study, he received a B.Sc. Degree in International Business Economics from the University of Maastricht. During his studies he gained work experience at eBay and Siemens. At the moment he works as a Project Manager for E-Commerce solutions at a subsidiary of the media company Bertelsmann.