A market-oriented approach to responsibly managing information privacy concerns in direct marketing.

One of the main objectives of integrated marketing communication (IMC) is to influence consumers' value perceptions and affect their behavior through directed communication. The increasing power of information-processing technology has changed the environment for communication strategy, emphasizing the need to adjust objectives and strategies to changing marketing and communication situations. Communications appealing to the mass market are on the decrease and are being replaced by more direct and highly targeted promotional activities using, among other tools, direct marketing (DM). Computer-based systems have made it easy and affordable for direct marketers to collect, store, use, and share information with others. More marketers rely on consumer databases for day-to-day direct marketing communications when targeting individual customers. In this respect, DM (one of the elements in the IMC mix) has the ability to become more intrusive, raising issues of privacy invasion. Businesses that want to positively promote future growth in the DM industry will have to pay attention to the privacy issue, which is becoming more urgent as more consumers are involved in DM transactions.

A number of studies have investigated consumer privacy concerns, offering recommendations on how involved stakeholders could contribute to protecting consumers from privacy violations. The main emphasis of this stream of research was on understanding consumer privacy concerns and monitoring changes over time. Suggestions on preventing consumer privacy violations that have been both recommended and implemented in the past focus strongly on regulations, laws, and privacy policies. Only rarely has the use of market-driven mechanisms been proposed to support the development of responsible DM.

Consequently, the main aim of this paper is to (1) investigate the usefulness of including market-driven approaches in the portfolio of measures to address consumers' privacy concerns. More specifically, a segmentation-based approach is suggested in which consumers are grouped according to their privacy concerns. Such a grouping enables companies to target each of those groups in the most appropriate manner by taking their segment-specific privacy concerns into consideration. Furthermore, the study contributes to the existing DM (and IMC) knowledge by (2) investigating South African and Australian consumer views regarding DM activities, information privacy concerns, and responsibilities of key stakeholders in preventing privacy violations (geographical extension of knowledge on consumer-information privacy issues), and (3) investigating the association between consumer privacy concerns and consumer behavior that jeopardizes DM activities, such as refusal to pass on information or boycotting risky purchasing channels (reinvestigation of this association using new variables).

If the level of concern about privacy is found to be high, and if concerned consumers alter their consumer behavior in a way that is detrimental to DM effectiveness, responsible DM becomes "more than an ethical issue" for the company; it becomes an economically rational managerial decision that companies are typically quick to adopt and that does not require the high levels of enforcement cost that laws and regulations cause. The proposed segmentation-based approach offers another avenue for companies to follow in an attempt to improve the way they implement responsible DM to benefit themselves as well as consumers.

It should be noted at this point that we make two assumptions throughout the paper: (1) that the organization has ethical reasons to maintain a positive relationship with customers; and (2) that both communication with customers and actions taken by consumers who perceive that their privacy has been violated (such as complaints, lawsuits, negative word-of-mouth) have associated costs. This is a very reasonable assumption in most cases. In a few instances, however, an organization may not care about the relationship with customers (e.g., spammers) or there may be only marginal cost associated with DM (e.g., bulk e-mail messages). In such cases, the incentive to adopt the demand-driven approach we propose is limited; these cases are therefore beyond the field of application for this study.

LITERATURE REVIEW

DM and the Value of Information