When and how consumers are willing to exchange data with retailers: An exploratory segmentation

Highlights

• Consumers differ in perceived benefits and costs of data exchange with retailers.

• Six segments exist within three categories: Indifferent, Protectors, and Advocates.

• Segments are driven by privacy, trust, engagement and technology readiness.

• Segments differ in appeal of uses of data by brands including personalization.

Abstract

Consumer data is a crucial resource for retailers. Yet accessing this data increasingly requires consumers to willingly participate in data exchange. This paper draws on social exchange theory and privacy calculus to investigate differences in consumer willingness to exchange data with retailers. Consumers are also profiled on their perceptions of retailer's use and abuse of data, along with the antecedents and outcomes of these perceptions. We employ a cross-sectional quantitative survey and collect data from a sample of 463 US consumers. For statistical analysis, we employ a latent class segmentation and identify six consumer segments which differ in their perceptions of the consumer-retailer data exchange. The key drivers of these segment differences include privacy concerns, technology readiness, and general trust of, and engagement with, retail brands. The segments also differ in their subsequent views towards the use and abuse of their data by retailers, including willingness to exchange data. Hence, when accessing and utilizing consumer data, it is important that brands identify different segments, and adapt their approach accordingly.

Introduction

It is common for retailers to acquire, store, and use customer data to generate insights and produce market intelligence (Campbell et al., 2020; Plangger and Montecchi, 2020; Plangger and Watson, 2015). While there is regulation pertaining to the collection and use of the personal information of consumers, the customer data retailers acquire transcends personal information. For instance, consumer data comprises information that can be collected from a wide variety of sources, including an individuals’ personal information, financial information, online and social media activity, and shopping behavior to name a few (Bradlow et al., 2017). For retailers, consumer data is a crucial resource and has been identified as a driving force for the future of retail (Grewal et al., 2017; Martin et al., 2020). The benefits of consumer data – such as the ability to personalize products, services, and communications – are increasingly expected by consumers (Rust, 2020; Shanahan et al., 2019). In fact, customer experience management now relies on retailers having a detailed view of who consumers are, their preferences, and their behavior (Holmlund et al., 2020). Recent technological advances provide these insights through unprecedented access to consumer data (Xiang, 2018) that can be collected from consumers across multiple channels and is fundamentally changing consumer-brand interactions (Moe and Ratchford, 2018).

Retailers rely on consumers participating in consumer-retailer data exchange; a symbiotic relationship between consumers and brands seeking mutual benefit. By exchanging data, consumers benefit from enhanced personalization (Rust, 2020) while retailers benefit through better customer intelligence (Grewal et al., 2017). Yet, data exchange also poses risks as evidenced by the increase in companies abusing consumer data (Walter, 2019). Two-thirds of consumers are unlikely to do business with a firm that has mismanaged consumer data, highlighting the importance of managing these risks (Gemalto, 2019).

Further, consumers find some forms of personalization unwelcome (Hayes et al., 2021). For instance, two-thirds of consumers have unfavorable views of personalization due to concerns related to privacy (Tran, 2017; Smith, 2014). For a consumer, privacy relates to their ability to “control the use, release, collection, storage, and access to their personal data” (Plangger and Montecchi, 2020, p.33). Privacy concerns lead some consumers to actively avoid marketers’ messages (Baek and Morimoto, 2012), even using technology to block online and mobile ads and tracking (Brinson et al., 2018). This contradiction between consumers' desire for personalized experiences and intentions to protect their privacy online is called the personalization-privacy paradox (Norberg et al., 2007).

The relative opportunities and risks of data exchange have led to heightened focus by academic researchers, social critics, and regulators (Martin and Murphy, 2017). Yet, questions remain regarding how consumers value consumer-retailer data exchange (Martin et al., 2020), and how different segments react to their private information being used, and potentially abused, by retailers (Plangger and Montecchi, 2020). Further research is required to explore how consumers trade off these potential benefits and risks (Rust, 2020). In this light, this research aims to provide insights on heterogeneity among consumer views towards retailer use and abuse of consumer data. We address two questions. First, what consumer segments exist among views towards consumer-retailer data exchange, and what are the antecedents of these segments? Second, how do consumer segments differ in their responses to the use and abuse of data by retailers?

Our findings contribute a better understanding of consumer-retailer data exchange from the perspective of consumers and advance knowledge in three ways. First, we draw on data collected from a cross-sectional quantitative survey, sampling 463 US consumers from an online panel provider. For statistical analysis we employ Latent Class Analysis, a segmentation approach that allows us to identify six consumer segments which differ in their perceptions of the consumer-retailer data exchange. Second, we identify the factors that explain consumer segment membership including personal views on privacy and technology as well as trust and engagement with retailers. Third, we demonstrate how the segments differ in response to retailer use and abuse of data, including willingness to exchange data, comfort with personalization and responses to data abuses. Taken together, these insights provide retailers an awareness of how consumers differ in terms of their view on data exchange, thereby informing the implementation and communication of appropriate data-exchange policies and practices.