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«E-personalization and online privacy features: the case with travel websites Lee, JungKook Indiana University Purdue University Columbus Xinran Lehto ...»

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Journal of Management and Marketing Research

E-personalization and online privacy features: the case with

travel websites

Lee, JungKook

Indiana University Purdue University Columbus

Xinran Lehto

Purdue University

ABSTRACT

E-personalization is the process of tailoring preferences to individual traveler’s

characteristics or performance on travel websites. E-personalization is used to enhance

customer service or e-commerce sales. However, personalization also causes privacy concerns. Today’s technology provides multiple opportunities for extensive data gathering and invasion of privacy. Privacy issue has recently received enormous research attention.

This is mainly because of the advent of the web, and the trend of personalization. However, very limited research has been conducted to assess consumers’ perspectives with regard to e-personalization and privacy from the travelers’ perspective. The purpose of this study was to investigate consumers’ perceptions and attitudes towards e-personalization and privacy features on travel websites. Previous research has consistently utilized either e-personalization or privacy concern as marketing tools. Our results show a moderate and direct effect of e-personalization and privacy on consumer’s attitudes toward a company Website, which in turn has a strong effect on purchase intention, and also the importance of the privacy concern compared to personalization.

Keywords: E-Personalization, Privacy, manipulation. E-commerce E-personalization and online, Page 1 Journal of Management and Marketing Research

INTRODUCTION

The travel industry has undergone a process of disintermediation and re-intermediation where the traditional travel distribution channels composed of small travel agencies have been replaced by a new generation of giant virtual travel ventures based on innovative online business models and backed up by advanced information technology (Yeung & Law, 2004).

The increasingly sophisticated information technology has afford these business ventures to bring their tailored and personalized online services to an unprecedented new height.

E-personalization is the process of tailoring pages to individual users’ characteristics or performances on a website. Personalization is used to enhance e-commerce sales and consumer relationship management. Personalization is sometimes referred to as one-to-one marketing, because a website can be tailored to specifically target each individual consumer (Schiaffino & Amandi, 2004; Nelson, 2008). Many e-tailing companies have started to provide high degree of personalization to their customers. Personalization is identified as an important mediator of customer satisfaction and patronage behavior (Mittal & Lassar, 1996;

Riecken, 2000). While Customer satisfaction is the ultimate goal for the e-personalization and despite the fact that personalization is often cited as an essential component of online success, there have been very little empirical evidences for the effectiveness of this much hyped online marketing strategy.

On the other hand, personalization also causes privacy concern. Today’s technology allows multiple opportunities for extensive data gathering and invasion of privacy. Online privacy has been discussed a great deal in the past especially when it relates to provision of e-personalization. Privacy issues have received enormous attention during the past few years.

It has become a fact of life for online users to voluntarily and involuntarily subject themselves to the scrutiny and extensive data acquisition by businesses and organizations.

Since the demand for personalization continues to grow, the amount of personal data collected in customer marketing databases (Caudill & Murphy, 2000) also grow exponentially.

Recent studies have found that as many as eight in ten U.S. citizens are very or somewhat concerned about threats to their personal Privacy (Graeff & Harmon, 2002). For consumers, there is a trade-off between convenience and privacy protection. As a result, there is a need to examine the relationship between privacy concerns and desired degree of e-personalization.

Further, it is of great interest to the tourism industry to understand the interplay of these two factors and their influences on consumers’ purchase intention. Other factors such as prior online use experience and brand recognition could potentially influence privacy concern and personalization preferences. They need to be examined alongside privacy and e-personalization preferences. Therefore, three research questions are formulated in this study to shed light on consumer perspectives on their privacy concern and the personalization

preferences:

How e-personalization features provided by businesses influences the consumers’ • behavior in the travel industry?

How privacy concerns influence the consumers’ behavior in the online travel • industry?

Which one (privacy or personalization) is more important for consumers when they • are making decision?

These are some of the questions motivating our study. This paper is structured as follows: the second section describes the basic concepts, applications and functionalities of personalization. The third section defines and describes consumer privacy issues in the online environment. All the elements for the methodology in this study and results are described in the fourth section. Finally, conclusions and future research directions are outlined in the fifth section.





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E-COMMERCE IN TOURISM

Tourism is extensively transformed by the all encompassing e-commerce phenomenon.

The Internet has been, and is continuously, changing the ways in which the hospitality and tourism industry plans, controls, operates, and integrates a majority of its business activities, including its marketing activities (Kasavana, 1997). With the popularization of computers through the Internet, travel product suppliers such as airlines, car rental companies, and hotels have grasped the opportunity to revolutionize their traditional distribution methods by launching their products directly on the Internet (Kasavana, 1997; Montgomery, 1999;

Morrison et al., 1999). With the increasing number of independent travelers, airlines and hotels have also taken advantage of the do-it-yourself culture to reduce their administrative costs by allowing customers to make reservations via the Internet (Law & Leung, 2000).

Airline companies have established their own Websites directly selling services online (Law & Leung, 2000). Similarly, many hotels have implemented their own Websites where hotel rooms can be booked over the Internet (Morrison et al., 1999; O’Connor & Frew, 2000). In addition, a large amount of travel information is available on the Internet from regional and national tourism boards (Weeks & Crouch, 1999).

Hensdill (1998) described the Web as, “A perfect medium for selling travel.” The Internet is now widely used as a marketing tool and electronic distribution channel that is able to provide multiple pages of text and graphical information with the same amount of detail at a much lower cost than traditional advertising and distribution channels (O’ Connor & Frew, 2000). According to Martin (2004), the Internet fits the marketing principles for travel and tourism because it: (a) allows travel suppliers to establish a direct link with customers; (b) gets rid of the unequal barriers for customers and suppliers; (c) facilitates equal competition; and (d) decreases price discrimination opportunities. Consequently, the Internet not only serves to deliver information (Walle, 1996) and act as a public relations tool (Connolly, & Sigala, 2001), it also becomes a promotional and advertising tool (Countryman, 1999).

Several tourism researchers have attempted to clarify the nature of the tourism product.

Martin (2004) suggested three characteristics of travel products; those are intangibility, perishability and heterogeneity. The notion that products are intangible means that one cannot grasp a travel product with any of the five senses. That is one can’t taste, feel, see, smell, or hear a service, and one can’t grasp it conceptually. In other words, travel products are experienced, rather than possessed. The second primary characteristic of the product is perishability. It has often said that there is nothing as perishable as an airline seat or a hotel room. If not sold on a particular flight or for a particular night, that opportunity to sell it is gone forever (Martin, 2004). The third characteristic of the product is the heterogeneity. The product entails the involvement of a mixture of heterogeneous business services such as transport, accommodation, restaurant and retailing. These characteristics of the tourism product have profound implications for customers, and thus for marketers. For the characteristics, tourism marketers need to showcase and convince consumers of the higher quality of their intangible product, strategically optimize profit through yield management as a result of the perishable nature of their products, and coordinate with various business partners across industry sectors to provide a seamless “total tourism product”. In addition, tourism marketers need to stay competitive by providing unique and personalized products.

The Internet has presented great opportunities for personalized tourism product. However, creating customer personalization online is not an easy task, as the experiences tend to be complex and intangible in e-commerce. For Web-based travel companies, they need to define of what constitutes good travel products and services. Law and Leung (2000) stated that meeting customer needs is the most important factor for hospitality and tourism Websites to

–  –  –

succeed. As customers become more proficient in their use of the Web and are exposed to a wider range of experiences, they will become ever more demanding.

E-PERSONALIZATION

The growth of interest in one-to-one marketing over the past ten years (Peppers & Rogers, 1993; Nelson, 2008) has brought the topic of personalization of products, services, and communications to an increasingly prominent position in marketing theory and practice.

E-personalization is the process of tailoring pages and services to individual users’ characteristics or performances on a Website. Personalization is used to enhance customer service or e-commerce sales. Personalization is sometimes referred to as one-to-one marketing, because the Webpage is tailored to specifically target each individual consumer.

Personalization involves a process of gathering user-information during interaction with the user, which is then used to provide appropriate assistance or services, tailor-made to the user’s needs (Bonett, 2001; Germanakos et al., 2008). If we have bought a book from Amazon.com, for example, the next time we visit they will greet us by name and tell us about products in stock that they think we might be interested in like a friendly sales clerk. Bonnett (2001) insists that the aim of the personalization is to improve the user’s experience of a service. Personalization is motivated by the recognition that a user has needs, and meeting them successfully is likely to lead to a satisfying relationship with him (Riecken, 2000).

According to the Personalization Consortium (www.personalization.org), the purposes of applying information technology to provide personalization in a marketing environment are as follows;

Better serve the customer by anticipating needs;

• Make the interaction efficient and satisfying for both parties;

• Build a relationship that encourages the customer to return for subsequent purchases.

• The essence of personalization is to provide only and exactly what each customer wants at the right time (Pine & Gilmore, 1999). Von Hippel (1998) stresses the importance of the customer’s involvement in designing products for mass customization, since the customer has the very best understanding of his/her own needs, and can relay the information to the manufacturer. They also emphasize the understanding and categorization of customers as necessary requirements in order for product/service providers to be able to customize their offerings. To avoid the sacrifice of customer goodwill and maintain high customer satisfaction, one of the key issues lies in how to understand customers better, that is, to explore how the customers interact with the product/service providers. Therefore, it is necessary to investigate customer preferences in order to have a better support for the business model of personalization. While personalization is an often confused marketing term and initiatives and definitions widely vary, the true benefits are often very simple and commonly defined. They include permission-based marketing, targeted messages, and convenience for consumer shopping or information searches, and customizing offers to consumer-driven preferences. The most common approach to personalization is learning about a user’s preferences or interests (Schiaffino & Amandi, 2004). Personalization is also described differently from other perspectives. Riecken (2000) states that personalization is to build customer loyalty by building a meaningful one-to-one relationship. Bonett (2001) suggests that personalization involves a process of gathering user-information during interaction with the user, which is then used to provide appropriate assistance or services, tailor-made to the user needs. The aim is to improve the user’s experience of a service. In summary, personalization is a means of meeting the customer’s needs more effectively and

–  –  –

efficiently, making interactions faster and easier and increasing customer satisfaction and the likelihood of repeat visits.

THE ROLE OF PERSONALIZATION IN THE ONLINE TRAVEL INDUSTRY

The Internet is expected to change the role of travel industry as information providers.



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