Unraveling the Personalization Paradox: The Effect of Information Collection and Trust-Building Strategies on Online Advertisement Effectiveness |
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| Institution: | 1. Department of Marketing and Supply Chain Management, Maastricht University, Tongersestraat 53, 6211 LM Maastricht, The Netherlands;2. Toyota Chair in E-Commerce and Electronic Business, Department of Marketing, Babson College, 213 Malloy Hall, Babson Park, MA 02457, United States;1. Owen Graduate School of Management, Vanderbilt University, Nashville, TN 37203, United States;2. Jindal School of Management, The University of Texas at Dallas, Richardson, TX 75080, United States;3. School of Business, Renmin University of China, Beijing, China;1. The Charles H. Sandage Department of Advertising, College of Media, University of Illinois at Urbana-Champaign, 330Gregory Hall, MC-462, 810 S. Wright St., Urbana, IL, 61801, USA;2. The Charles H. Sandage Department of Advertising, College of Media, University of Illinois at Urbana-Champaign, 323Gregory Hall, MC-462, 810 S. Wright St., Urbana, 61801, USA;1. Department of Information Management, National Taiwan University of Science and Technology, Taiwan, ROC;2. Institute of Marketing Communication, National Sun Yat-sen University, Taiwan, ROC;1. Department of Advertising and Public Relations, Grady College of Journalism and Mass Communication, The University of Georgia, GA, 30602, USA;2. Grady College of Journalism and Mass Communication, The University of Georgia Athens, GA, 30602, USA |
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| Abstract: | Retailers gather data about customers’ online behavior to develop personalized service offers. Greater personalization typically increases service relevance and customer adoption, but paradoxically, it also may increase customers’ sense of vulnerability and lower adoption rates. To demonstrate this contradiction, an exploratory field study on Facebook and secondary data about a personalized advertising campaign indicate sharp drops in click-through rates when customers realize their personal information has been collected without their consent. To investigate the personalization paradox, this study uses three experiments that confirm a firm's strategy for collecting information from social media websites is a crucial determinant of how customers react to online personalized advertising. When firms engage in overt information collection, participants exhibit greater click-through intentions in response to more personalized advertisements, in contrast with their reactions when firms collect information covertly. This effect reflects the feelings of vulnerability that consumers experience when firms undertake covert information collection strategies. Trust-building marketing strategies that transfer trust from another website or signal trust with informational cues can offset this negative effect. These studies help unravel the personalization paradox by explicating the role of information collection and its impact on vulnerability and click-through rates. |
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| Keywords: | Personalization paradox Information collection Trust-building strategies Vulnerability Psychological ownership |
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