Unraveling the Personalization Paradox: The Effect of Information Collection and Trust-Building Strategies on Online Advertisement Effectiveness

Abstract

Wetzels, M. (2015).Unraveling the personalization paradox: The effect of information collection and trustbuilding strategies on online advertisement effectiveness. Journal of Retailing, 91(1), pp. 34-49. doi: 10.1016/j.jretai.2014.09.005 This is the accepted version of the paper.This version of the publication may differ from the final published version. Permanent ABSTRACTRetailers 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.2

Online Behavioral Advertising: A Literature Review and Research Agenda

“…Negative responses to higher levels of personalization correspond to choice theory, psychological ownership theory, and psychological reactance theory (Aguirre et al 2015;Bleier and Eisenbeiss 2015;Tucker 2014). These theories propose that people want to restore their freedom of choice, control, and ownership when they feel they are threatened.…”

“…Tucker (2014) found that Facebook ads targeting a person's interests (e.g., a celebrity of whom a person is a fan) led to higher click-through rates than ads targeting background characteristics (i.e., the college a person is attending). In addition, Aguirre et al (2015) showed that moderately personalized Facebook ads (based on interest in a subject) increased click-through rates compared to nonpersonalized ads, whereas highly personalized ads (based on interest in a subject, age, gender, and location) decreased click-through rates. Bleier and Eisenbeiss (2015) found that highly personalized banner ads (showing items consumers placed in their virtual shopping cart during a recent shopping session) increased click-through rates compared to ads with a lower level of personalization (showing items that consumers viewed during a shopping session).…”

“…Several studies compared different levels of personalization in OBA. The types of information used included age, gender, location (Aguirre et al 2015), education level (Tucker 2014), interests (Aguirre et al 2015;Tucker 2014), online shopping behavior (Bleier and Eisenbeiss 2015), and search history (Van Doorn and Hoekstra 2013). The researchers created various levels of personalization by combining one or more types of information.…”

“…The researchers created various levels of personalization by combining one or more types of information. Their findings suggest that the level of personalization influences consumer-related factors, such as feelings of intrusiveness (Van Doorn and Hoekstra 2013), feelings of vulnerability (Aguirre et al 2015), the ad's perceived usefulness, reactance, and privacy concerns (Bleier and Eisenbeiss 2015). The level of personalization also influences OBA outcomes, such as click-through intentions and rates (Aguirre et al 2015;Bleier and Eisenbeiss 2015;Tucker 2014).…”

“…When firms do not openly state that they use personal data to personalize ads and then present highly personalized ads, consumers feel more vulnerable (Aguirre et al 2015). However, when companies are open about data collection, it does not affect perceived vulnerability.…”