Personalization versus Privacy: An Empirical Examination of the Online Consumer's Dilemma

Personalization refers to the tailoring of products and purchase experience to the tastes of individual consumers based upon their personal and preference information. Recent advances in information acquisition and processing technologies have allowed online vendors to offer varieties of web-based personalization that not only increases switching costs, but also serves as important means of acquiring valuable customer information. However, investments in online personalization may be severely undermined if consumers do not use these services due to privacy concerns. In the absence of any empirical evidence that seeks to understand this consumer dilemma, our research develops a parsimonious model to predict consumers’ usage of online personalization as a result of the tradeoff between their value for personalization and concern for privacy. In addition to this tradeoff, we find that a consumer’s intent to use personalization services is positively influenced by her trust in the vendor. Our findings suggest that: 1. online vendors can improve their abilities to acquire and use customer information through trust building activities; 2. it is of critical importance that vendors understand and evaluate the different values consumers may place in enjoying various types of personalization.