Read the original UCalgary News article here

January 25, 2021 by Doug Ferguson, for the Haskayne School of Business

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.”

Barrie R. Nault explores why customers decide to provide their data.

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.

Read the original UCalgary News article here

2019 - by Doug Ferguson, for the Haskayne School of Business

If Jeff Bezos could start Amazon by selling books online out of his garage and go on to become one of the richest people in the world, why can’t other retailers cash in on the Internet gold rush?

“What we find is that it isn’t necessarily going to be profitable for retailers to expand their online presence, even though it might seem logical for them to do so,” says Dr. Barrie R. Nault, PhD, distinguished research professor and director of the Informatics Research Centre at the Haskayne School of Business. “It isn’t always clear whether they should just stay with their physical, brick-and-mortar store.”

Some of the complexities facing retailers in the current digital age were outlined in a recent study published in the journal Production and Operations Management. Besides Nault, it was co-authored by ex-Haskayne associate professor Dr. Mohammad Rahman, PhD, of the Krannert School of Management at Purdue University.

Will shopping malls be next?

Until people could download music online, record stores could be found in nearly every shopping mall in North America; now, only a relative handful of brick-and-mortar niche retailers remain. Not only is this true for information goods such as music, books and movies, but many physical goods such as electronics, kitchen items and clothing can also now be purchased online via electronic retailers, or e-tailers.

As the reach and power of online shopping continues to grow, will even entire brick-and-mortar shopping malls such as Chinook Centre eventually go out of business, a victim of consumers’ ability to buy anything they want at the convenient click of a button?

While Nault’s study examines only some aspects of such broader questions, he says the current retail situation is best outlined by the trade-off between distance and online disutility costs. The latter describes the consequences of buying online that causes someone dissatisfaction, uncertainty or discomfort, he says.

“The discomfort people feel about buying things online has gone down over time, but there are still many products you need to touch or feel in person, and if you buy online, you might not be able to go to someone for support about any questions or concerns you might have,” he says. “You might have more trouble with returns, too.”

Nault’s study used a mathematical model to examine how online disutility costs might be affected when a retailer also has a brick-and-mortar store. On the one hand, it means the retailer can better satisfy its online customers, who can bring in any concerns as well as sample merchandise in person, he says.

Such retailers tend to do better online when their physical store is within close proximity to online customers, he says, pointing to examples such as the Chapters chain of book stores that are within easy driving distance of most Calgarians. But going online can also intensify competition with other businesses, says Nault.

'Cannibalizing' own market

Besides dealing with other brick-and-mortar stores in their area, they will now face e-tailers anywhere in the world, “and they will be cannibalizing some of their own market of customers,” he says. “For example, if Walmart goes head to head with Amazon, it may actually have to reduce the online price of most of the products it sells, and that will also force it to lower the prices inside its physical stores, so it will not only create competition with Amazon, it will cannibalize its own profits.”

Circumstances have changed since 1994, when Amazon started in Bezos’s garage. An important factor is Amazon, itself, which went from being a simple e-tailer to capturing the online marketplace as one of the world’s pre-eminent platforms for consumers, much like Twitter and Facebook are now the go-to platforms for many social media users, he says.

The result is that retailers need to do some careful thinking about their strategy, says Nault, adding that large shopping malls such as Chinook Centre are likely safe from the ravages of online retailing for the foreseeable future — if for nothing else due to their role as important social hubs. “I think it makes small strip malls less viable, but larger malls more viable.”