Do people ultimately care about their privacy? This article aims to investigate under which circumstances users do not behave in consistency with their beliefs towards the issue of privacy when they seek information or purchase products or services online. The discrepancy between actual or intended privacy-related behavior and online privacy concerns is known as the privacy paradox. Does the existence and the deep understanding of a privacy-related message by the consumer, as well as the offer of a reward to the consumer, significantly influence his behavior?
Every day 47 billion emails are sent and 30 million pieces of content are uploaded on Facebook (Kokolakis, 2015). Nowadays, the internet is considered a vital part of our everyday lives. In fact, the internet has changed and improved the way we communicate and access information. However, the state of online privacy in today’s digital age is a major issue.
Companies use the growing amount of data worldwide to capture information about their customers and partners. By combining a wide variety of information, they can build very detailed profiles about their customers. While, in the past, it was relatively easy to protect one’s privacy and remain anonymous, nowadays there are many threats to customers in terms of privacy, due to the fact that our life is continuously digitized. Internet users are concerned about releasing their private data on the internet when visiting a site or when making a transaction (such as purchasing products or services, or finding information). This fact, combined with the expansion of the Internet into large proportions of the population, places the issue of privacy on the Internet and the protection of internet users’ data at the forefront of current events.
As these concerns seem to influence consumer’s behavior in online activities, companies try to address such concerns by posting privacy policies. However, such policies do not seem comprehensive to most people and very few people invest time in reading them. Online privacy is complicated, since it is difficult to find out whom the information reaches and to control it once it is shared online. The existence of social media contributes to this ambiguity and is the reason why there is a grey area of distinction between private and public spaces. In particular, users create profiles on social media, whereby they share personal information of their own volition. Even when they choose to share personal information to a specific group of recipients, third parties collect this information as well (Christiansen, 2011). Besides, the online movement of users is tracked in many cases without their awareness.
At this point, it is important to note that in May 2018 the Data Protection Act (DPA) was replaced by the EU’s General Data Protection Regulation (GDPR). This article examines the privacy paradox after the strengthening and expansion of EU data protection law. The punishments are tougher for the companies that fail to comply with the new rules concerning the storage and use of personal data. The reason for this is that, over the years, cybercrime has increased, with criminals having access to names, birth dates and addresses and even social security information. In fact, in 2016, companies in the UK lost more than £1 billion to cybercrime (Wilson, 2017). Thus, GDPR requires small and medium-sized enterprises (SMEs) to know exactly what personal data they hold and where it is located (whether on PCs, on servers, or in the Cloud) and have procedures in place to ensure its complete removal when a request to do so is made. When somebody does withdraw their information, their details must be permanently erased, and not just deleted from a mailing list.
Many studies have shown that when there are small rewards, people tend to overlook their inhibitions about sharing information online and they easily accept a compromise between privacy and cash benefits (Acquisti & Grossklags, 2005). This behavior is of no surprise, though. Users usually register on websites that provide them with useful data. However, this apparent behavior contradicts the high levels of users’ privacy concerns. This is called the privacy paradox. While many users show interest in their privacy and are positive towards privacy-protection behavior, they rarely behave accordingly and often engage in risky behaviors online (Joinson, Ulf-Dietrich, Buchanan & Paine Schofield, 2010).
When rewards or personalized services are offered, users tend to disclose their private information to reap the benefits (Acquisti & Grossklags, 2005). Another study discovered that a certain level of digital literacy is required to understand online privacy issues (Hargittai, 2008). People who are not familiar with technical terms, such as cookies and data-mining, will not probably be able to form well founded opinions regarding online privacy. Given that people often do not really engage in thinking about online privacy and many who do may not have the relevant experience, the privacy paradox can be regarded as a logical outcome. A privacy-related message that would trigger them to think more about online privacy could reduce the privacy paradox problem.
Now that the background of privacy paradox has been described, it is also important to highlight why this article is relevant in terms of managerial relevance. The impact of rewards on customer loyalty is fundamental nowadays, since the target consumers are becoming more and more price-oriented and the competition is high (De Pelsmacker et al., 2007). On top of that, in an attempt to deal with financial crisis and sustain customers’ loyalty, many companies, especially in the fast moving consumer goods industry, focus on providing discounts and promotions.
Although previous research showed that it is more common and effective for companies in the FMCG industry to use a financial incentive to attract new customers (Jenkins et al., 1998), more recent studies did not prove the effect of a discount on the disclosure of personal information. More recent research found that personalization is the key to getting individuals engaged nowadays. Such benefits can outweigh consumers’ privacy concerns and users may choose to reveal their personal data to reap the benefits of a tailored shopping experience (Lee & Cranage, 2011).
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