Journal of Undergraduate Research
Volume 3, Issue 1 - September 2001

The Internet's Wary Consumers

Sasha Bloch

INTRODUCTION

The interactivity of the Internet enables companies to personalize the presentation of information, products, and services to meet the needs of specific customers. However, to accomplish this personalization, Internet marketers need to collect information from consumers. The simplest technique for online businesses to collect information is through tracking customer behavior as they navigate a web site.

However, consumers are concerned with violations of their privacy. A study (Fox 2000) suggests that 54% of American consumers believe that online tracking is more hurtful than helpful. Also, there are no laws or regulations controlling the Internet or limiting the actions online companies can take to obtain personal information from consumers (Wildstrom 2000). This threatens a consumers' privacy.

Another issue concerning consumers is that Internet sites are not providing them with a feeling of security. Therefore, consumers are not completely comfortable disclosing their personal information over the Internet. (Junnarkar 1999) However, many consumers will give up some of their personal information and privacy to be able to take part in the new e-commerce society (Phelps 2000).

The objective of this research project is to determine what affects consumers' willingness to disclose personal information to online companies and what makes an online company appear secure to a consumer? These issues are examined by using a survey to relate consumer characteristics with their privacy concerns and assess their reactions to different web sites features.

HYPOTHESES

General Concern

Concern for privacy exists with or without the Internet. Many consumers have innate concern for their privacy and safety. This anxiety exists within 59% of the population (Fox 2000). These consumers are worried that someone might get hold of their credit card number, financial statements, address, etc (Fox 2000). Their privacy concerns are rarely lessened, only magnified by the media's negative publicity about invasion of privacy (Junnarkar 1999). On this basis, the subsequent formal hypothesis is formulated.

H1: Innate privacy concerns relate negatively to the willingness to disclose personal information to Internet companies.

Personality

The "Big Five Factor Structure" utilizes five dimensions to describe an individual's personality. The dimensions are extroversion, agreeableness, dependability, emotional stability, and intellect (Goldberg 1992). An individual's personality affects what they do and think. Therefore, a consumer's personality has an effect on how much they are involved in the Internet world.

H2: Consumers that are more extrovert, agreeable, dependable, emotionally stable, and intellectual are more willing to disclose information to online companies.

Past Experience

If a consumer has had their privacy invaded by the Internet, he or she will be less trusting of the Internet and online companies. For example, if a consumer has had their credit card number stolen from an online source, the individual feels violated. On the other hand, if a consumer has used online companies and has had great success, they will keep utilizing the Internet to make purchases. Also, their attitude toward online shopping will be much more positive than the attitude of their counterparts, who have encountered a bad experience with online companies.

H3: Consumers who have encountered negative past experiences with computers and the Internet will be less willing to disclose personal information to Internet companies.

Knowledge of Consumers

Many consumers who are just entering the information age (novices) are less willing to reveal personal information to an online retailer than long-term Internet users (veterans). The Associated Press's (2000) study revealed that 62% of consumers with less than 6 months experience with the Internet are very concerned for their privacy. This study also suggested that the nervousness experienced by novice consumers with the Internet might be present from a "fear of the unknown," instead of a tremendous distrust of Internet companies.

H4: Consumers that are familiar and knowledgeable with computers and the Internet will be more incline to disclose personal information to online companies.

Familiarity with Internet Company

With trust comes information. If a consumer trusts an Internet company, he or she will disclose the personal information requested by the site (Hofaker 80). "Sites that have branded themselves strongly, such as Amazon.com, and some that have roots in the brick and mortar world, are likely to garner a greater degree of trust …" (Junnarkar 1999). This implies that the more familiar a site is to a consumer the more the individual trusts the site.

H5: Consumers that are more familiar with an online business are more willing to disclose personal information to that site.

Privacy Policy

Privacy policies let consumers know how an Internet company is going to protect their privacy. It also clarifies the extent of privacy protection the site will offer consumers. This is important to consumers because no individual wants his or her privacy invaded. A detailed privacy policy should make a consumer feel secure enough to reveal any information an Internet site requests.

H6: Consumers are more willing to provide personal information to Internet companies that provide a more detailed privacy policy.

Benefits Offered by Internet Companies

Since consumers are not forthcoming in releasing personal information about themselves, Internet companies have started offering benefits for information. Phelps, Nowak, & Ferrell (2000) found that consumers are more willing to make trade offs and provide specific forms of information, provided there are benefits for doing so and that proper controls are in place (Milne 2000). A study conducted by Sheehan and Hoy (1999) illustrated that a consumer's level of privacy concern changes with the benefits offered by an Internet site. When an Internet site demands registration from a consumer in order to be able to use the site (benefit), only 10% of consumers do not fulfill the registration requirement of the Internet site. (Sheehan 1999).

H7: Consumers are more willing to disclose personal information to an Internet sites that offers them benefits for their information.

RESEARCH METHOD

To examine these eight hypotheses, a questionnaire was used.

Subjects

One-hundred and thirteen undergraduate students from a large Southeastern University participated voluntarily in exchange for one extra credit point towards introductory marketing classes.

Procedure

First students received a brief overview of what the questionnaire was intending to measure and what impact their answers would have on the study. Students then were invited to complete the questionnaire. The students remained totally anonymous throughout the study.

The questionnaire consisted of two parts. The first part measured eight variables that may have an effect on a consumer's willingness to disclose personal information over the Internet. This part of the questionnaire included a total of ninety-eight questions.

General concern for privacy was measured using a published 30 item, seven point scale consisting of statements anchored by strongly agree- strongly disagree. A principal component factor analysis was conducted on the general concern variable and yielded two factors. The first factor described consumer's innate general concern about privacy and the second factor described a consumer's carefulness when revealing personal information. Thus, two dependent variables were used to test the hypotheses.

Consumer's personality characteristics were assessed using the big five measures (Goldberg 1992). The measure consisted of ten items using a nine point Likert-Type scale.

Consumer experience with the Internet and e-commerce was assessed in three parts of the questionnaire. The measure assessed how frequent the respondent engaged in Internet purchases. For example, respondents were asked, "How frequently do you use your credit card to buy something on the Internet?" This was measured on a one to seven scale, which was anchored with frequently and infrequently. Secondly, the measure asked the respondent to indicate, yes or no, to questions about his or her past encounters with the Internet. The third part asked the background of the subject regarding computers. It asked them to indicate their answers with a quantitative answer. For example: How long have you owned a computer?

Consumer knowledge of computers and the Internet was measured on the questionnaire by a multiple-choice quiz. The quiz consisted of eight questions asking for the definition of commonly used computer terminology. (For example: What is a URL?). The correct definition of the computer term was provided to the respondents with three wrong definitions. The respondents were invited to select the definition that they thought was correct.

In the second part of the questionnaire a simulation of eight web sites was presented to consumers. The design was a two (Brand: familiar vs. unfamiliar) by two, (Policy: short vs. long), by two, (Benefit: offered vs. not offered) repeated measures study. Respondents were invited to indicate the degree in which they were concerned with the information requested by the website concerning the (variables) familiarity of the site, privacy policy length, and benefits offered. As, each of the variables differed between the various websites. The respondents designated their concern on a scale from one to seven, respectively, not very concerned to very concerned. The information requested by all the simulated web sites was name, social security number, telephone number, e-mail address, preferences, interests and hobbies.

The questionnaire measured how much of an effect each variable had on a subject's willingness to reveal the information requested.

RESULTS

To evaluate the hypotheses a repeated measure analysis of variance test was conducted using SAS 6.12.

Variables Affecting General Concern Variable: First Four Hypotheses

Hypothesis 1 received empirical support: A consumer with innate general concerns about privacy was less likely to disclose information. (t98=2.595, p=.01)

The factor carefulness, which appeared in the initial measurement for general concern achieved statistical significance in the study. Carefulness relates negatively to a consumer's willingness to disclose information.(t98=4.429, p= .0001)

The study provided partial empirical support for Hypothesis 2. The intelligence variable of the Big Five Factor structure that measured personality had a marginal affect on the consumer's willingness to disclose information. A person with high intelligence was more likely to disclose information to online companies. (t98=-1.778, p=.0795) The empirical data did not provide support for the remaining hypotheses as the other four variables within the Big Five-personality structure did not receive statistical support.

The regression analysis furnished support for Hypothesis 4: A consumer with a high level of knowledge, regarding the Internet and computers, was more inclined to disclose personal information to Internet Companies. (t98=-2.676, p=.0087)

None of the other hypotheses, in this section, received empirical support.

Situational Hypotheses 5, 6, and 7 Tested with Simulation

Familiarity of Internet Companies: (Brand of an Internet Company). Hypothesis 5 suggested that a consumer was more willing to provide information to a well-known online company than to an unfamiliar online company. The results support the hypothesis. The subjects were more prone to disclose personal information to a familiar Internet company. (F106=17.1097, p=.0001, Xunfamiliar company: 3.77, Xfamiliar company 3.51)

Privacy Policy Length. Hypothesis 6 received empirical support: A consumer was less willing to disclose personal information when a company provided a short, not very informative privacy policy (X=3.83) than when a company provided an extensive, detailed privacy policy (X=3.44). (F106=24.697, p=.0001)

Offering Benefits for a consumer's personal information. The study did not provide empirical support for Hypothesis 7: A consumer was less willing to disclose personal information to Internet companies that provided benefits for consumer information. The study reveled that consumers were less inclined to provide information to Internet companies that offered a benefit. (F106=3.8002, Pvalue=0.05, Xbenefit=3.68, Xno benefit=3.60)

CONCLUSION

Consumers' willingness to disclose information to an Internet company is effected by the consumer's innate privacy concern, how careful they are with their personal information, their level of intelligence, and how knowledgeable they are regarding computers and the Internet. Consequently, an Internet company has no control of the characteristics of its' consumers. However, they do have control of their online company. Consumers will be most willing to provide information to an online company that is familiar to them, posts an extensive privacy policy, and does not offer any benefits in exchange for the consumer's personal information. Therefore, online retailers do have some control over the success of their company.

REFERENCES

Associated Press (2000), "Study Finds Web Surfers mixed on privacy concern," CNET News.com. (August 20th) [Internet WWW], http://news.cnet.com/new/0-1005-200-2572324.html.

Fox, Susannah (2000) "Trust and Privacy Online: Why Americans want to rewrite the rules. (August 20th) [Internet WWW], http://www.pewinternet.org/.

Goldberg, Lewis R. (1992) "The development of Markers for the Big Five Factor Structure," Psychological Assessment, 4 (No.1), 26-42.

Hofacker, Charles F. Internet Marketing: Dripping Springs : Digital Springs, Incorporated, 1999.

Junnarkar, Sundeep (1999), "Half of Net users mistrust sites," CNET News.com. (August 17th ) [Internet WWW], http://news.cnet.com/news/0-1007-200-346152.html.

Milne, George R. (2000), "Privacy and Ethical Issues in Database/Interactive Marketing and Public Policy: A Research Framework and Overview of the Special Issue," Journal of Public Policy and Marketing, 19 (Spring) 1-6.

Phleps, Joseph, Glen Nowak, and Elizabeth Ferelll (2000), "Privacy Concerns and Consumer Willingness to Provide Personal Information," Journal of Public Policy and Marketing, 19 (Spring), 27-41.

Sheehan, Kim B. and Mariea Grubbs Hoy (1999), "Flaming, Complaining, Abstaining: How Online Users Respond to Privacy Concerns," Journal of Advertising, 28 (Fall) 37-51.

Wildstrom, Stephen H. (2000), "On the Web It's 1984," Business Week, Technology and You, (January 10th), 28.

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