Personalization versus Privacy in the Sharing Economy

How personalization of products and services will help us to make decisions in this world full of possibilities to choose from? ...

Written by Johanna Jaakkola

There are millions of songs, books, films, blog post and tweets (just to mention some) in the world we live in right now – that can be reached any time of the day. More and more content like this is being created all the time. It is up to us as consumers to decide how to share our attention and time between these different possibilities.

I want to you think about this for a while: Total number of songs recorded in the world is around 180 million. In MP3 format, this would mean that all that music would fit into one 20-terabyte hard drive. At the moment having one would cost around 2000 dollars, but five years from now the price is expected to be 60 dollars. So with that kind of investment you could carry all the music ever made in your pocket (Kelly, 2016). That’s pretty impressive, right?

Would it make sense though, to own a hard drive with 180 million songs in it? No, not really. In case you are using one of the music streaming services you already carry millions of songs with you wherever you go. To be exact, in case you are using Spotify, you have access to over 30 million songs at the moment (Spotify, 2017).

(Picture 1)

To make a decision on what to listen to from that amount of songs can be challenging. In this blog post I will be describe how personalization of products and services can help us with this kind of decision-making – and what kind of downsides it can have. I will briefly introduce how our consuming habits have shifted from possession to sharing – and what kind of effect that has had to the bond that we create with the products and services we use. After this I will describe what is meant with personalization and how it can be seen in our everyday lives. In the end of this blog post I will discuss what kind of negative sides and future challenges personalization might have for companies – and what are the possible negative sides of personalization from consumer point of view.

From possession to sharing – the way consumption has changed

It has been argued that we are what we own (Belk, 1988). However, we now have many other ways to express our identity without ownership; a change which has happened with digitalization and especially with the usage of social media (Belk, 2013).

Observers have noted during the last decade that besides ownership, alternative modes of consumption have been developed. Consumers want an access to goods and services instead of buying and owning things. Examples of these access or sharing models are car- or bike-sharing programs or already mentioned Spotify for music and Netflix for movies and series. The digital marketplace gives a good platform for these kinds of services to grow (Bardhi & Eckhardt, 2012).

(Picture 2)

In this model of consumption, no change of ownership takes place. Consumer is willing to pay a specific price for a certain time with the item or service. Consumers can gain an access to objects or networks that they would not otherwise afford to own or choose not to own. Reasons for the latter can be for example space constraints or environmental concerns (Bardhi & Eckhardt, 2012).

While using the music streaming services, we only have an access to the songs that we are listening. This is also the case when using car-sharing, Netflix or while renting an apartment from Airbnb. So maybe instead of what we own, it is nowadays what we can access that defines us (Belk, 2013).

Personalization helps us in decision-making

In this world full of different products and services, we have to be able to filter – in order to make decisions between different options. As mentioned before, Spotify provides us with 30 million songs from where to choose from. We all have our own preferences with music, but it is also convenient to get some help while choosing what to listen to.

Spotify’s Discover Weekly is a unique playlist that the company creates to its users every Monday (Trendwatching, 2017). This is one example of how Spotify wants to be ahead of its competitors when it comes to personalization. For Spotify, the data for this service is built on algorithms based on what their customers listen to, what kind of playlists they have and which artists they follow (Pasick, 2015).

(Picture 3)

In case you are interested, read how Spotify’s Discover Weekly works by Pasick (2015) 

Gathering personal data of their consumers is a way for companies to improve their business and services. Marketers collect data such as email-addresses, demographics, locations and other personal information. This data is then used for personalization of services and products. This way companies are able to target their consumer’s needs and interests better than ever before (Karwatzki et al 2017).

It seems that consumers are willing to give this information in order to get more personalized services. A research made by Accenture Interactive (2016) shows that 56 % of consumers were more likely to purchase if the store recognized them by their name. The same research shows that 65 % of the consumers are more likely to shop in a store that already knows their purchase history and 58 % are more likely to purchase if the store gives recommended options based on their preferences or purchase history.

While trying to find a reason for the desire of personalized experiences, two key factors can be presented. The first one is the “desire for control” and the other one is the “information overload”. The first one can be explained in a way that when something is tailored only for us, it gives an impression that we are more in control and gets us this way more engaged. The second one means that personalization helps us to survive from the overload of information. This again makes us more engaged, when we know that the information presented is exactly what we are looking for – since it is tailored only for us (Bright, 2008).

With the help of personalization companies can target their marketing and services better, while we as consumers can enjoy the benefits of their actions while listening to songs that are targeted just for us. Or get recommendations based on our purchase history while we are choosing the next pair of jeans. So in a way, personalization sounds like a win-win situation for companies and their customers, right?

Balancing between personalization and privacy

The negative side of personalization is that not all customers are willing to share all this information because of their concerns for privacy. This is why gathering the personal information can change positive perceptions that customers have to negative towards the company. This lack of trust over information transaction online can be seen as an obstacle for the growth in E-commerce (Priyadharshini & Mathew, 2016). To keep their privacy safe, more and more customers are using VPNs (virtual private networks), ad blockers or tracking blockers (Chamorro-Premuzic & Nahai, 2017).

Other downsides are the concerns about where the information is stored by websites. This fear can lead the customers to remove their information and spread negative feedback about the company that is gathering the data. Concerns about privacy can also affect the validity and reliability of the information customers share with the company which can lead to false targeting and wasted effort (Lee et al. 2015).

(Picture 4)

Together with these concerns rising from the customers, companies are facing new challenges next year, when the data protection laws are going to change. The new GDPR (General Data Protection Regulation) starts on May 25, 2018. GDPR is new framework for data protection laws in Europe and it will replace the previous data protection directive from 1995. The new regulation will give more rights for people to access their personal information that companies are holding, obligations for businesses to do better data management and a new regime of fines if companies don’t comply with the new regulation (Burgess, 2017). This will have an effect on designing and implementing personalized services, but it remains to be seen how companies will overcome these challenges to develop their practices in this context.

More about GDPR by Burgess (2017)

As a conclusion, personalization seems rather inevitable practice for companies in the future and the privacy protection is an issue that needs to take seriously, now especially with the upcoming new regulation. In general it seems that personalization helps us to filter and choose in this overload of information, products and services. It will be interesting to see how quickly the personalization practices will develop – and what it will require from us as customers. How much are we willing to give in exchange for personalized products and services in the future?

References:

Accenture Interactive (2016). Personalization Pulse Check. Available online: https://www.accenture.com/us-en/service-propelling-growth-through-personalization [Accessed 21 November 2017]

Bardhi, F., Eckhardt, G. (2012). Access-Based Consumption: The Case of Car Sharing. Journal of Consumer Research, Vol. 39, Issue 4, pp. 881-898. Available online: https://www.cass.city.ac.uk/__data/assets/pdf_file/0011/203789/Access-Based-Consumption.pdf [Accessed 18 November 2017]

Belk, R. (1988). Possessions and the Extended Self. Journal of Consumer Research, Vol 15, Issue 2, pp. 139-168.

Belk, R. (2013). You are what you can access: Sharing and collaborative consumption online. Journal of Business Research, Vol 67, Issue 8, pp. 1595-1600

Bright, L. (2008). Consumer Control and Customization in Online Environments: An Investigation into the Psychology of Consumer Choice and its Impact on Media Enjoyment, Attitude, and Behavioral Intention. University of Texas Electronic Theses and Dissertations. Available online: http://hdl.handle.net/2152/18054 [Accessed 21 November 2017]

Burgess, M. (2017). GDPR will change data protection – here’s what you need to know. Wired. Available online: http://www.wired.co.uk/article/what-is-gdpr-uk-eu-legislation-compliance-summary-fines-2018 [Accessed 19 November 2017]

Chamorro-Premuzic, T & Nahai, N. (2017). Why We’re So Hypocritical About Online Privacy. Harvard Business Review. Available online: https://hbr.org/2017/05/why-were-so-hypocritical-about-online-privacy [Accessed 21 November 2017]

Karwatzki, S., Dytynko, O., Trenz, M., Veit, D. (2017). Beyonde the Personalization-Privacy Paradox: Privacy Valuation, Transparency Features, and Service Personalization. Journal of Management Information Systems, Vol. 34, No. 2, pp. 369-400

Kelly. K. (2016). The Inevitable: Understanding the 12 Techonogical Forces That Will Shape Our Future

Lee, S., Lee, Y., Lee, J. (2015). Personalized E-services: Consumer Privacy Concern and Information Sharing. Social Behaviour and Personality, Vol 43, pp. 729-740. Available online: https://hbr.org/2017/05/why-were-so-hypocritical-about-online-privacy [Accessed 18 November 2017]

Pasick, A. (2015). The Magic that makes Spotify’s Discover Weekly Playlists so damn good, web blog post available at: https://qz.com/571007/the-magic-that-makes-spotifys-discover-weekly-playlists-so-damn-good/ [Accessed 16 November 2017]

Priyadharshini, K & Mathew, S. (2016). The Impact of Individual Privacy and Personalization on Online Buying Behaviour: An Experimental Study. Management of Innovation and Techology (ICMIT)

Spotify (2017). About Spotify. Available online: https://press.spotify.com/us/about/ [Accessed 16 November 2017]

Trend Watching (2017). 5 Consumer Trends for 2017. Available online: http://trendwatching.com/trends/5-trends-for-2017/ [Accessed 15 November 2017]

Like this post? You'll find more marketing insights in my new book: International Brand Strategy: A guide to achieving global brand growth, now available from booksellers globally. Order your copy here.

Order Your Copy