Privacy: a Paranoid’S View

Citation:

Daniel R. Horne and David A. Horne (1997) ,"Privacy: a Paranoid’S View", in NA - Advances in Consumer Research Volume 24, eds. Merrie Brucks and Deborah J. MacInnis, Provo, UT : Association for Consumer Research, Pages: 351-354.

Advances in Consumer Research Volume 24, 1997      Pages 351-354

PRIVACY: A PARANOID’S VIEW

Daniel R. Horne, Providence College

David A. Horne, California State University-Long Beach

INTRODUCTION

Some perspectives suggest that we are all part of it, pawns in the great scheme to catalog, categorize, analyze, and eventually control every living soul on the planet. From the innocent newborn whose parents are strongly encouraged to complete a social security application, to the individuals who have their purchases scanned at the checkout counter and then pay with their credit cards, to the unwary motorist passing through an automated tollway’s transponder tracking device, portions of their behavior can be monitored for future reference. The technology to accomplish these particular observations and billions more is certainly available and the current hodgepodge of federal, state, and municipal statutes seem to offer little solace for those concerned with this present reality.

Many aspects of our financial, educational, vocational, and personal lives have been routinely recorded for centuries. Church documents dutifully recorded births, baptisms, weddings, and eventually deaths of their parishioners. Private and public school systems record every grade, teacher, and even non-academic behavior from elementary through higher education. Every county seat documents property transactions, births, marriages, divorces, and deaths. The collection of data is certainly not new, so what is all the fuss about?

Two principal features about the "old" mechanism for record-keeping provided a great deal of individual security and probably kept general concerns about such matter to a minimum. Frst, access to such records was not exactly wide open. Though they may have been kept in public or quasi-public places, the mechanics of actually going to a "hall of records" and searching through rustic files was often an onerous and time-consuming task. Second, the likelihood of a complete altering of an individual’s records was negligible. There were too many documents in too many inaccessible places to make wholesale changes possible. These old safeguards are now quaint memories in the era of interconnected database management.

Public perception of the intricate web of personal, corporate, and government data ceaselessly churning around the globe is based on a mix of fact and fiction offered up via news accounts (Phelps, Gozenbach and Johnson 1994), and mainstream entertainment. News stories highlight the gathering and use of personal data (e.g., USA Today, 1995). Popular television programs, movies, and books tell stories of the hapless protagonist caught in a surreal existence where they do not exist according to the "records" or if they do exist, every pertinent fact about them has been altered in some detrimental fashion (e.g., THE NET, Columbia Pictures release 1995). The "obvious" widespread vulnerability of the entire, computer-based information collection, storage, and retrieval system has become an area of general agreement across geo-demographic segments (Harris/Equifax 1994).

The point of this rather paranoid introduction is that many commercial activities associated with consumer behavior have the potential to be classified as intrusions into an individual’s private affairs. Indeed, ordinary consumers are reporting increasing levels of concern with matters of privacy and control of personal data (Equifax/Harris 1994, 1993, 1991). The 1994 Equifax/Harris survey of consumer privacy found that over half (51%) of those interviewed were "very concerned" about threats to their personal privacy. Only 15% of those studied were "not very concerned" or "not at all concerned." This contrasts sharply with the 1978 study in which 36% of respondents showed this lack of concern (Harris 1978). However, whether from increased media exposure or dissatisfaction with their own experiences, consumers’ concerns about privacy continue to escalate. If, as this increase suggests, consumers begin to collectively seek relief, then marketers need to make adjustments before governments step in and dictate more restrictive policies (Dentino 1994; Schultz 1988). At the extreme, a recently introduced bill in the California legislature proposes that:

"No person or corporation may use or distribute for profit any personal information concerning a person without that person’s written consent. Such information includes, but is not limited to, an individual’s credit history, finances, medical history, purchases, and travel patterns." (Personal Rights Privacy-California Senate Bill, S.B. 1659).

The possibility of individual action through the use of mail and telephone preference lists is also a concern to the marketers using direct marketing techniques. More worrisome, however, is the threat posed by individual or class action lawsuits such as the case recently filed in Virginia where a man asked to share in the revenue generated when U. S. News & World Report sold other firms a list containing his name (Gearan 1996).

To investigate some consumers’ reactions to one such familiar activity, direct marketing, an exploratory study was undertaken to investigate attitudes toward this daily interface. A framework to suggest a segmentation basis for this and other privacy concerns will be offered and discussed, and descriptive findings presented. Finally, the implications of the findings and potential future research questions will be presented.

BACKGROUND

Among all of the uproar, the direct marketing industry is growing and more mainstream marketers have begun to borrow extensively the concepts and technologies of direct marketing (Business Week 1994; Perreault and McCarthy 1996). Consequentially, one key group to consider consists of those consumers who utilize the services of direct marketers. Is this group different in their attitudes toward privacy than the population as a whole? If this is the case, then several steps are available to the industry, to both strengthen positive attitudes of the one group and help allay the fears of the other. A second question involves the dimensions or characteristics by which this group differs from other segments.

An ever-increasing number of U.S. households use direct marketing services such as mail order, and there is some evidence of loyalty and continued purchase from these sources (Gordon 1994; Schultz 1992). The distinction between those that use these service and those who do not might be a relevant factor to examine. The degree of familiarity may be an important differentiating characteristic. Those with a higher number of product experiences, whether due to greater numbers of marketer originated communications or actual purchase behavior, have more expertise than those who have had few, if any encounters (Alba and Hutchinson 1987). Clearly, repeat customers are associated with a positive valence towards the product offered. In general, we might reasonably expect that those with a high degree of expertise would be most accurate in their interpretation and evaluation of risks involved in the commerce of their personal information. Accuracy, however, may not be a valid term to describe these potential or hypothetical risks. Further, this situation may be complicated by differences between objective and subjective levels of knowledge (Park, Mothersbaugh and Feick 1994). A likely scenario is that those with higher levels of familiarity will feel less threatened by the use of this personal information.

A study by Nowak and Phelps (1992) examined the level of overall concern with privacy, but went further in trying to establish the presence of underlying causes of this concern. Their work makes a distinction between what they term "ignorance-based consumer concerns" and "knowledge-driven" concerns. This may be readily related to the consequences of familiarity discussed above. The former would result from consumers fearing what they do not understand and possibly making inaccurate inferences about likely characteristics or outcomes. The latter group, differences between objective and subjective knowledge aside, would be based on "accurate" assessments of how disparate data can be collected, combined, analyzed, and segmented and its impact. The significant presence of the latter group, with more expertise, would prove to be much more problematic for marketers because of the difficulties in changing more assuredly held beliefs.

One finding presented by Nowak and Phelps (1992) is that age is significantly related to concerns about privacy, with older consumers expressing higher level of concerns. There may be several reasons for this, for example younger people have grown up with increasingly sophisticated levels of technology and are more likely to be comfortable with its benefits. It may also be that younger consumers are simply used to direct marketing having utilized its services more often. Nowak and Phelps collected data on the respondents home shopping behavior, but other than stating overall usage rates for the sample, no analysis was presented on any relationship between prior behavior and age or concerns with privacy.

A study by Wang and Petrison (1993), investigated how varying levels of concern for personal privacy might depend on personal and situational factors. They too found that negative reactions to certain situations, which included privacy issues, increased with age. More importantly, they found that reactions to situations dealing with privacy depended on their familiarity with the firm and their own personal needs.

Given the empirical evidence cited above, it is posible that previous usage might directly impact concern for privacy. Familiarity might underlie Nowak and Phelps’ (1992) finding about age differences. Those who are younger may have more often employed the services of direct marketers because they have been available for a larger percentage of their lives and they feel more comfortable about utilizing the phone and the mail to transact business. This is not implausible when we consider that a two generations ago, phones (and especially long distance phone service) were used solely by the well-to-do or for near emergency situations. Only 20 years ago mechanical rotary phones were still the norm. It is also possible to consider whether prior usage led to the results reported by Wang and Petrison (1993). We might easily imply that firms with which the consumer is most familiar are the firms with which the consumer does business. Further, marketing theory would suggest that the firms with which consumers continue to do business are those that best satisfy their needs.

STUDY

A convenience sample of subjects was drawn from the professional, administrative, and clerical staffs at a medium-sized, private college in New England. Potential subjects were approached and recruited individually and in-person by a student assistant who utilized a campus directory to identify prospects. Because of the possibly sensitive nature of part of the experiment, the entire data gathering process was explained to potential subjects before they were asked to participate. As an incentive, respondents were entered in a lottery, conducted at the completion of the project, for three gift certificates to local restaurants. Approximately 90 individuals were approached about the study and 74 subjects agreed to participate. In all, 70 subjects completing both phases of the study as two subjects did not remember to collect the mail everyday and two withdrew for unspecified reasons after Phase 2 began.

Phase 1 of the study involved a questionnaire which the subjects received directly from the research assistant. Subjects were asked to complete the short questionnaire about direct mail usage and attitudes toward direct marketing and privacy. Subjects were given three days to return the questionnaire to the principle investigator. All questionnaires were returned before Phase 2 was begun.

In Phase 2 of the study, subjects were given a heavy plastic bag with a drawstring and instructed to save all the direct mail pieces which they received for a period of one week. To help control for cyclicality in mailings, all subjects collected mail over the same one week period. Subjects were assured that unopened mail would not be opened and that opened mail would not be examined. After the collection period the mail was classified, counted, and weighed. It was then returned to the subjects.

Phase 2 of the study warrants further comment. It is certainly an imperfect measure as there was a likelihood that people would either forget to place mail in the bag, take and use the mail elsewhere (e.g., a catalog taken to work), or consciously not place potentially sensitive mailings in the bag (e.g., only one subject turned in a Victoria’s Secret catalog). We tried to control the first situation by calling or leaving messages for each subject on the second day of collection and we felt that the second situation would be minimized by the promise of an immediate return of the mail. The third factor was largely out of our control, but it was hoped that it occurred randomly across the individuals and therefore, did not bias the results. Then too, we were not interested in measuring the actual amount of mail received, but rather use this measure as a proxy for the amount of usage/contact these individuals have with direct marketers.

RESULTS

Because this was a pilot study and only a convenience sample was utilized, generalizability of these results might prove problematic. The demographic makeup of the sample was more upscale than the population as a whole. Two out of three subjects had graduated from college with 29% holding post graduate degrees. Income also reflected this in that nearly half the sample had household incomes of over $50,000 and less than a quarter of the sample had incomes under $25,000. Age of respondents showed little representation of those over 65 (3%) or under 25 (8%). Analysis showed that the demographic variables were not significantly related to any of the questions which addressed privacy concerns.

Four measures were taken of subjects’ concern for privacy. These included two questions taken directly from the Equifax/Harris surveys: "How concerned are you about threats to your personal privacy in America today?" (modal response "somewhat concerned") and a question asking if the situation would get better (21%) or worse (64%) by the year 2000. Two Likert-type items utilizing 10-point scales anchored by "strongly disagree" and "strongly agree" were also asked. These were: "Direct marketing is an invasion of my personal privacy." (hereafter, INVASION), and "I think the direct marketing industry should be regulated more stringently." (REGULATION). The means on these questions were 6.1 for INVASION and 7.1 for REGULATION, showing some level of agreement on average.

TABLE 1

TABLE 2

Three measures were used to evaluate usage. The first was a self-reported measure of how frequently the subjects used or considered the information they received from direct marketers. The categories on the 4-point scale were "Never," "Rarely," "Occasionally," and "Frequently." These classifications had 9%, 30%, 28% and 33% of the responses, respectively. Analysis was performed by classifying the two highest and the two lowest into groupings of "heavy" and "light" users. ANOVA analyses using the privacy measures discussed above as the dependent variables were performed. The level of usage, so measured, accounted for a significant amount of the variance in responses about concern for privacy today (F=3.88, p=.053). That is, people who were classified as heavy users of direct marketing information were less concerned about privacy. On the other hand, no such relationship was found between self-reported usage and predictions about the privacy situation in the year 2000. The relationship here was also significant for INVASION (F=12.06, p=.001) and for REGULATION (F=14.53, p=.000), with the heavier user being less likely to feel that direct marketing is an invasion of privacy or that stronger regulation is necessary.

The second measure of usage dealt with the weight of the mail received by subjects over the collection period. The mean weight for the six days of "junk mail" was 1.5 pounds and the range was from .3 pounds to 6.3 pounds. Because this was an interval variable, correlation analysis was performed by looking at the bi-variate relationship between weight and the privacy questions. The resulting Pearson correlations are presented in Table 1.

The data showed no relationship between the two Harris survey questions and the volume of direct mail received. However, a significant negative correlation was found for INVASION and REGULATION. That is, the more mail that the subject received, the less likely they were to believe that direct marketing is an invasion of privacy and should be more closely regulated. This is not to suggest that if direct marketers send out more mail, then people will be less likely to demand governmental regulation. Here, mail received is a proxy for usage as it is assumed that people receive more mail because of their past usage history and not their utilizing methods, such as the mail preference service, to have their names removed from lists.

The final usage measure was one that dealt with the respondent’s overall level of satisfaction with products and services purchased from direct marketers. Work in customer satisfaction theory (cf., Yi 199) would suggest that highly satisfied customers show increased likelihood of repurchase behavior. Our position here is not to argue causal mechanisms or the antecedents to satisfaction, but rather to simply imply that if customers are happy then their usage will be higher than those who are not. Clearly there are numerous alternatives available for those who are dissatisfied. The general satisfaction level was measured on a 10-point scale and a correlation analysis was performed to examine the relationship between this variable and privacy concerns. The results are shown in Table 2.

This analysis shows general satisfaction with purchases to be related to all privacy questions except that dealing with predictions of the privacy situation in the future. The negative correlations indicate that those expressing higher levels of satisfaction had lower levels of concern for privacy issues.

DISCUSSION

The clear difference between users and non-users bears further consideration. While Alba and Hutchinson (1987) proposed that familiarity would result in better, i.e., more accurate, inferences, our findings based on the present data do not allow us to go so far as to make that assertion. Here, it appears that familiarity leads to differences in the level of felt risk. Following early work by Bauer (1960), we might find one of two explanations for lower levels of concern among this group, neither of which has to do with "accuracy." In the first place, these individuals may rate the probability of some negative outcome as being extremely low. In the second case, they may rate the negative consequences, although plausible or even likely as being of little importance. Whether objectively "accurate" or not, if either or both of these conditions are present, then the outcome will be a lack of concern similar to that found in the data. This might indicate a case of "knowledge-based unconcern."

That "lack of concern" shows a similar pattern of results as those dealing with feelings of invasions of privacy and need for further regulation, is not surprising. However, there are conceptual differences which lead to differing conclusions. The items INVASION and REGULATION deal specifically with the direct marketing industry. Those that actively participate in the use of this industry’s products would intuitively be thought to hold more favorable views. Yet, they are also in a position to spot problems and abuses. Actually, an increase in the amount of personal information available to marketers might be seen as a benefit to this group. More information, leading to better segmentation schemes, increases the likelihood of relevant information reaching these users while at the same time decreasing the amount of unwanted or useless communications (Schultz 1994).

This information leads us to believe that privacy issues are quite complex and contain at least two very different dimensions. Under the privacy umbrella are issues dealing with the bother of unsolicited mail, phone, and personal contacts. People who utilize or directly benefit from these factors will be unlikely to cry out vociferously. However, a second privacy issue, that of the collection and transfer of personal data, occurs, if not surreptitiously then with little acknowledgment. It may be this, more Orwellian, invasion of privacy that drives overall levels of concern. Yet, the evidence showing less concern among heavy users may be the result of either lack of knowledge of the use of information by direct marketers or a willingness to accept the trade-off of information for better service. As one subject noted when she agreed to take part in the study, "Sure, why not? I’ve got nothing to hide." This seems to indicate some knowledge of the potentially sensitive nature of personal information while at the same time agreeing that in the immediate case at least, the probability of negative consequences from knowing this informatin was small.

LIMITATIONS

Several factors must be noted that do limit the applicability of these findings across wider consumer segments. First, the sample, though real consumers, was quite narrow in both its location and diversity. A broader group of consumers might have different beliefs. Second, in order to maintain respondent cooperation, the questionnaire was brief and did not allow for multiple measures of the important constructs. For instance, privacy appears to be a multidimensional construct. Third, the measures of direct mail material were based on the respondents’ households cooperation which may have been uneven.

FUTURE RESEARCH

The purpose of this pilot study was to offer a framework for understanding and segmenting consumer groups on their concern for marketing-driven intrusions into their personal privacy. While we found that the notion of expertise might be one such framework there are issues, such as the veridicality of self-assessed knowledge, which must be addressed in order to confidently stand on that foundation. Further, the idea of including a perceived risk perspective to this topic should be an avenue for subsequent studies.

Our small investigation raised many more questions than it answered. For instance, exactly how is privacy, with its multiple facets and high variability across individuals best measured and assessed. Secondly, different marketing activities might have different impacts. Things like Internet promotions and advertising may be viewed more ominously since they come up live, literally in one’s face. Conversely, because promotions on the Internet, at least in their current form, are largely based on personally provided information, less concern may be generated. Finally and in retrospect, one question that could have been fairly easily examined was not. That is, how much of the mail we collected was opened and how much of it was thrown unopened into our bag as though it were just the waste basket under the sink? This is certainly something that those who are spending money on direct mail campaigns would like to know.

BIBLIOGRAPHY

Alba, Joseph W. and J. Wesley Hutchinson (1987), "Dimensions of Consumer Expertise," Journal of Consumer Research, 13 (March), 411-454.

Bauer, R.A. (1960), "Consumer behavior as risk taking," in R.S. Hancock (Ed.), Dynamic marketing for a changing world, (pp. 389-398), Chicago: American Marketing Association.

Business Week (1994), "Database Marketing," September 5, 56-63.

Dentino, Karl (1994), "Taking Privacy into Our Own Hands," Direct Marketing, (September), 38-42.

Gearan, Anne (1996), "Man Sues Over Sales of His Name," Associated Press Release, February 5.

Gordon, Dinny Starr (1994), "Note on the Mail Order Industry," 9-595-014, Boston, Harvard Business School Publishing.

Harris (1978), Dimensions of Privacy, Louis Harris and Associates.

Harris-Equifax Consumer Privacy Survey (1991), Atlanta: Equifax.

Harris-Equifax Consumer Privacy Survey (1993), Atlanta: Equifax.

Harris-Equifax Consumer Privacy Survey (1994), Atlanta: Equifax.

Nowak, Glen J. and Joseph Phelps (1992), "UnderstandingPrivacy Concerns," Journal of Direct Marketing, 6 (Autumn), 28-39.

Park, C. Whan, David L. Mothersbaugh and Lawrence Feick (1994), "Consumer Knowledge Assessment," Journal of Consumer Research, 21 (June), 71-82.

Perreault, William D., Jr. and E. Jerome McCarthy (1996), Basic Marketing, 12 edition, Chicago: Irwin.

Phelps, Joseph, William Gozenbach, and Edward Johnson (1994), "Press Coverage and Public Perception of Direct Marketing and Consumer Privacy," Journal of Direct Marketing, 8 (Spring), 9-22.

Schultz, Don E. (1988), "On Merging, Purging, and Privacy," Journal of Direct Marketing, 2 (Winter), 4-5.

Schultz, Don E. (1992), "The Direct/Database Marketing Challenge to Fixed-Location Retailers," in The Future of U.S. Retailing, (ed.) Robert A. Peterson, New York: Quorum Books, 165-184.

Schultz, Don E. (1994), "Some Comments on the Absolute Value of the Database," Journal of Direct Marketing, 8 (Autumn), 4-5.

USA Today (1995), December 19, Sections A & B.

Wang, Paul and Lisa A. Petrison (1993), "Direct marketing activities and personal privacy-A personal survey," Journal of Direct Marketing, 7 (Winter), 7-19.

Yi, Youjae (1990), "A Critical Review of Consumer Satisfaction," in Review of Marketing 1990, ed. Zeithaml, Chicago: American Marketing Association, 68-123.

----------------------------------------