Timothy R. Graeff on Collecting Customers’ Data

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By 2002, the technology already existed to collect enormous amounts of personal information with or without the explicit consent of consumers. Graeff and Harmon (2002) define the context for primary research by pointing out that:

No less than 80 percent of Americans were at least “somewhat concerned” about their privacy being violated;
A Gallup poll had found that half the population gave no credence to the time-worn claim of the Bureau of the Census that information gathered about the family would never be shared, even with other government agencies;
Citing a Harvard Law Review article by Warren and Brandeis, the authors show that the right of the public against breach of privacy is a long-established precedent; and,
Without the benefit of explicit consent from individuals, retailers continuously collect shopping information and match these against personal data recorded when consumers applied for loyalty or credit cards in order to segment the market and arrive at strategies for enhancing their share of dollars spent. Since it can be done, retailers and those who operate retail audit databases (e.g. Nielsen, MRI) have no qualms about selling information to manufacturers keen on strengthening marketing strategy and to direct marketers desirous of sending targeted, because personalized, direct mail and email “blasts” in the millions.

Against this backdrop, Graeff and Harmon contend, there are large information gaps about consumer awareness of the means used to gather purchase information, degree of concern if aware, and effect on purchase behaviour if concerned. In addition, the researchers find the literature distinctly sparse when it comes to understanding the above dependent variables according to consumer demographics, type of retailer or degree of intrusiveness experienced.

The Graeff and Harmon methodology represented a good start, given that the study was a first step at relating the independent and dependent variables of concern and since e-commerce was neither as prevalent nor as intrusive in 2000 as experienced today. Hence, the research team could perhaps be forgiven for:

Targeting a three-county area in a southern state without acknowledging the need for including a sizeable metropolitan market. After all, the initial literature search had provided clues that higher education and income predicated greater concern about privacy. And where else does one find concentrations of these desirable consumers if not in cities?
Opting exclusively for a telephone survey, regardless of the computer-aided format, since there is very likely a strong affective component to concern about privacy and face-to-face interviewing might have accessed the non-verbal and verbatim manifestations of depth of feeling (Yang and Miller, 2007). To be fair, however, the authors had conducted a pre-test enabled formulation of pre-coded response categories when a verbatim response was solicited over the phone.

One might also view askance the formulation of, and filtering for, the privacy concern question. Absent information in the article about whether this was asked of all 480 consumers or merely those who recognized the true rationale for obtaining personal data, we may have here a case of justified or ‘false’, baseless concern. That is, consumers expressed concern or satisfaction about matters they professed to know nothing about.

Assessment

That is a crucial point because, much more often than not, the respondents believed that the supermarkets that handed out usage cards did so merely to attract new patrons or induce greater repeat purchase rates. While this is certainly true if the information stays with the retailer alone, that belief in fairly innocuous use does give pause when interpreting the data about privacy concern.

For what it is worth, younger and lower-middle income consumers were less likely to believe shopper cards were merely a form of store promotion. Both segments seemed more cognizant of the uses that personal information were put to in targeted promotions.

Coming to the heart of the study, one finds that there is distinct concern about what retailers or manufacturers do with the information they collect from cardholders. At the very least, consumers request some form of informed consent before companies make use of the information, especially when it comes to selling databases to third parties. Online selling, consumers believe, has made it easier to cull personal data about them. Such unease extends to making use of their credit cards on the Internet. Just 7 percent “strongly agreed” that they were very comfortable giving away their credit card data when buying things on the Web whilst a further 18 percent were comfortable enough to select the next lower agreement item on the scale. On the other hand, no fewer than 53 percent were apprehensive, saying they either ‘disagreed’ or ‘strongly disagreed’ with the statement.

Developments since then may have contributed to easing concern. At the time the study was conducted, Amazon was virtually the only well-known ‘e-retailer’ and the success of the Dell ‘mass customisation’ business model was not yet assured (United States Department of Commerce, 2002). Post-2001, e-commerce staged a remarkable resurgence, suggesting that more consumers delighted in the convenience of online shopping. The shift in buying habits may have triggered more amiable attitudes about security of credit card information on the Internet (Olsson, 2002). As well, online security was doubtless enhanced by the involvement of the Better Business Bureau and the emergence of brands like VeriSign that boasted they could encrypt personal data while in transit over the Web.

Owing partly to the fact that a significant number of consumers just do not know what database collectors do with consumer records, the link with reported credit card behaviour is weak. Consumer inertia and habituation are manifested in continued confidence about using credit cards in-store or when dining out. No less than 29 percent ‘strongly agreed’ about the security of using credit cards when patronizing ‘bricks and mortar’ stores; a further 56% expressed agreement for an overwhelming total positive proportion of 85 percent. Nor were comfort levels meaningfully lower when it came to employing credit cards in restaurants: more than one-fourth (28 percent) of consumers seemed supremely confident and the total positive proportion amounted to three-fourths of the sample.

Scrutinizing the findings by consumer demographic segments, the researchers find some distinctions across gender, income levels, and age cohorts. Based on chi-square results alone, it would seem that women are more concerned about security of personal information. However, significance analysis should not mask the fact that confidence about buying items on the Internet came to less than half of both males and females, that both genders are overwhelmingly agreed about wanting to be informed what companies do with personal information, and that less than one-sixth of both men and women were amenable to having database compilers sell their personal information to third parties.

Bibliography

Graeff, T. R., & Harmon, S. (2002) Collecting and using personal data: Consumers’ awareness and concerns. Journal of Consumer Marketing, 19 (4/5), pp. 302–318.
Olsson, O. (2002) Trust in eCommerce: The ontological status of trust. In: 2nd International Interdisciplinary Conference on Electronic Commerce (ECOM-02), 2002, Gdansk, Poland.
United States Department of Commerce (2002) Ecommerce 2000. Washing, DC: Economics and Statistics Administration, U.S. Census Bureau.
Yang, K. & Miller, G. (2007) Handbook of research methods in public administration. 2^nd ed. Boca Raton, FL: CRC Press.

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Timothy R. Graeff on Collecting Customers’ Data

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