Unraveling the Personalization Paradox: The Effect of Information Collection and Trust-Building Strategies on Online Advertisement Effectiveness


We have most likely all had this thought once: how does this website know these things about me? Well, basically every website collects information on its users. However, users are not always aware because not every website informs its user on this data collection process.

Personalization is concerned with delivering the right content to the right person at the right time, which makes it a customer oriented marketing strategy. Data is needed to be able to provide this content delivery to the right person. When websites make a conscious effort to inform users on data collection, they engage in overt information collection (Sundarand Marathe 2010). It is assumed that users atomically agree on data collection after they have received such an information effort. However, when users experience ads that contain personal information without being informed that their data is collected by the website, this will lead to negative reactions and can harm businesses (Milne, Bahl and Rohm, 2008). This sense of vulnerability is more like to be accepted by users when the website is marked by trust (Urban, Amyx, and Lorenzon 2009).

The result is a personalization paradox , where personalization effectiveness depends on the context. It would be beneficial for online retailers to understand how they can prevent or minimize the negative effects of personalization. Practitioners claim it is more user friendly to not inform users because informing them would result in users to take longer in performing online tasks. Moreover, when users do not know their data is collected, they might act more naturally and thereby delivering richer data (Verhoef et al. 2010). For the customers themselves it is important that they feel conformable during website visits. Therefore, retailers need to make sure customers feel safe, while still being able to provide them with optimal personalization marketing to enhance customer experience.

The research includes three studie. Study 1 and 3 had the most interesting findings. In the first study, the personalization paradox is tested by comparing situations in which websites did and did not inform users on data collection, and how more personalized advertisements affected click-through rates. Facebook is used as the setting of the research because promotions through social media are important. Participants first had to review the advertisement. Hereafter, they could fill in their click-through intention and their perceived vulnerability on a 5-item scale. The results suggest that click-through rates after personalized advertisements increase when websites overtly collect data and decrease when websites covertly collect data due to the vulnerability it causes to users, meaning that vulnerability mediates the effect of personalization and information collection on click-through intentions ( see Figure 1). In the third study, the findings suggest that negative effects caused by collecting data covertly, can be mitigated by providing information and control to users at the moment that personalized advertisements are shown to them. Probably because this enhances reliability and trustworthiness.

 

 

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Figure 1

The paper convincingly addresses the personalization paradox and provides valuable ways in which negative effects of covertly data collection can be mitigated. The result is that retailers can make careful decisions as to what information should be used and how sensitive this information is to users. Furthermore, retailers need to be transparent on their data collection methods, which will benefit their business. Lastly, this will probably enhance customer satisfaction, since customers will feel like retailers act in the best interest of the customer.

Milne, George R., Shalini Bahl and Andrew Rohm (2008), “Toward a Frame-work for Assessing Covert Marketing Practices,” Journal of Public Policy& Marketing, 27 (1), 57–62.

Sundar, S. Shyam and Sampada S. Marathe (2010), “Personalization versus Cus-tomization: The Importance of Agency, Privacy, and Power Usage,” HumanCommunication Research, 36, 298–322.

Urban, Glen L., Cinda Amyx and Antonio Lorenzon (2009), “Online Trust: Stateof The Art, New Frontiers, and Research Potential,” Journal of InteractiveMarketing, 23 (2), 179–90.

Verhoef, Peter C., Rajkumar Venkatesan, Leigh McAlister, Edward C. Malt-house, Manfred Krafft and Shankar Ganesan (2010), “CRM in Data-RichMultichannel Retailing Environments: A Review and Future Research Direc-tions,” Journal of Interactive Marketing, 24, 121–37.

 

Crowdfunding, cascades and informed investors: How to make the most out of crowdfunding


Have you ever wondered why on crowdfunding platforms some great projects do not receive funding while bad projects do? Crowdfunding success depends on several factors, and this academic analysis will serve as an explanation.

Introduction to Crowdfunding, Theory, and Value Co-Creation

According to Parker (2014), crowdfunding platforms allow the public to make small investments into entrepreneurial ventures. The very nature of crowdfunding insinuates that there are elements of consumer value co-creation incorporated into every aspect of the business model. Crowdfunding platforms are merely an intermediary for people to provide funding to businesses who in return create value for the investors and public. This particular study was unique as it focused on signals of project quality and how they can cause information cascades to form. The study shows that due to information asymmetry between informed and uninformed investors and information cascades, it is not always the best projects that receive funding. An information cascade occurs when a person observes the actions of others, and despite their own private information, engages in the same behaviour (Eftekhar, Ganjali & Koudas, 2013). This is especially true in crowdfunding, as suggested by Parker (2014), irrational herding occurs because people tend to fund the projects that already have the most funding. This creates an interesting paradigm and can end up having positive or negative outcomes, depending on the number of good projects and informed investors that are present in a pool.

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The Study

In a random order investors were asked to commit one dollar to one project of their choosing. Investors make a return if they commit to a good project and it reaches the funding threshold, but receive back their contribution if their project does not move forward. There are people present who know which projects are good, but are unable to signal to other investors directly which ones they are.

Important Findings

The model and simulation were created on the premise that logically, there are more uninformed than informed investors, and the uninformed tend to follow the few investors who predominantly back good projects (Parker, 2014). However, it was found that sometimes there are not enough informed investors to back projects. Without sufficient backing needed for the uninformed investors to create the information cascade, the projects will not get funded. It was also interestingly noted in the study that certain projects have higher funding thresholds than others and for that reason more of certain types of projects end up receiving funding. For example, 60% of arts projects reach the funding threshold compared to only 29% technology projects because arts projects are simply less expensive.

The study found that having more good projects in the pool was not necessarily associated with higher funding of good projects, and similarly it was found that having a higher number of informed investors does lead to better projects being funded. This is due to the crowding out effect whereby when too many good projects available, resources get spread too thinly and few projects receive funding (Burtch, Ghose & Wattal, 2013). It was also because uninformed investors are the most active promoters of information cascades, and without them the functionality of the crowdfunding platform decreases.

Real World Implications and Further Research

Overall, the most interesting aspect and practical application of this study is that it proves how equity crowdfunding platforms could have diminishing returns on efforts to improve the quality of projects and investors (Parker, 2014). For future research in this area it would be beneficial to determine the optimal balance between bad and good projects in order to get as many good projects funded as possible.

By Noa Zaifman

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Sources

Eftekhar, M., Ganjali, Y., & Koudas, N. (2013). Information Cascade at Group Scale. Association for Computing Machinery, 1, 401-409.

Burtch, G., Ghose, A., & Wattal, S. (2013). An Empirical Examination of the Antecedents and Consequences of Contribution Patterns in Crowd-Funded Markets. Information Systems Research, 24, 499-519.

Parker, S. (2014). Crowdfunding, cascades and informed investors. Economics Letters, 125, 432-435.

 

 

 

Consumer technology traits in determining mobile shopping adoption: A review


Introduction

In the new digital age, the cellphone has become a crucial transaction point for online retailers, constituting 7% of total e-commerce sales.  New convenient apps and shopping environments provide mobile users the flexibility to buy through their phones, and this is set to continue to expand in the near future.  Retailers, travel apps and other non-traditional ecommerce companies now accept payment via app, but is enough being done to ensure the convenience and user satisfaction of this process is being improved?

What was Studied?

In “Consumer technology traits in determining mobile shopping adoption:  An application of the extended theory of planned behavior” – researches look at the key characteristics of the online shopping environments to determine which ones drive the most significant value in terms of consumer adoption.  The researchers look at three key factors of shopping environments: technology self-efficacy (how much control is given to the user?), level of experience of use (how much experience do I need to perform well in the environment?), and consumer technology innovativeness (how savvy is it at making easy complex tasks?) through factor analysis to understand – which of these key characteristics drove adoption and consumer satisfaction.

Approach & Results

The method used in the analysis was a factor analysis of a Theory of Planned Behavior Model.  The model took measures of each of the three factors (from a 1 to 7 scale based on previous academic literature) to calculate the extent of which a given technology or platform would be used / adopted by an end user.    The data was then compiled to understand how each of the three key factors explain the adaptation curve.

Per the study, self-efficacy followed by innovativeness proved to be the main contributors of adoption – with customer experience having the least significant and impactful relationship.  Much of this is likely due to the expectations of the mobile shopper.  Convenience and expediency seem to be highly desired traits of mobile shopping platforms as it is probably being done on the go, on a small screen, with limited functionality and ease of use.

Implications & Conclusion

When considering the possible implications of this research, clearly, providing users with the ability to do what they intend to do via your platform is crucial.  This means aligning the technology and the environment so that expectations are in line with actual functionality.  Furthermore, focusing on ease of use, simplicity and speediness, without sacrificing productivity will also enhance the overall user experience and interest in the shopping platform.   To conclude, robust verification and regular examination of shopping platforms will bring about significant innovation and spur on future growth in mobile sales as the users, providers and platforms that connect them become more sophisticated and adept at making a deal.

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Reference: Yang, Kiseol. (2012) ” Consumer technology traits in determining mobile shopping adoption: An application of the extended theory of planned behavior,” Journal of Retailing and Consumer Services, Volume 19, Issue 5, September 2012, Pages 484–491.

Say hi. Say bye. Hey ho!


Are you also familiar with the feeling that you want to buy something which you don’t really need? Me neither. Nevertheless there is a new online platform called ‘Letgo’ which raised 175 million dollars from investors (Emerce, 2017). And last month they entered the Dutch market, you might have seen their annoying (yet catchy) advertisements on TV or on billboards. Letgo is basically a platform where people can buy and sell second hand stuff.

Sounds promising, how does it work?

Letgo is a free app for Android and iOS where you can find deals for second hand products (AndroidWorld, 2017). It is possible to create a personal profile where you can tell something about yourself. In addition you can link your profile with your Facebook account. Users can place advertisements, chat with others or extend their network by inviting others via Facebook. The app shows a map of the neighborhood of your current location and shows the products which are for sale. Furthermore you can see what your friends are selling. When you click on one of the ads, you get the possibility to place a bid, share the ad or chat with the seller.

letgo-profile

But aren’t there a billion websites doing the same thing?

No, there are only a few thousand websites doing the same thing. But Letgo is slightly different:

  • By including Facebook, Letgo becomes more ‘social’ compared to other platforms like Marktplaats or eBay. Furthermore it is not necessary to send emails or make phone calls to make a deal as you can chat via the app.
  • It’s much fancier than other platforms (hipster alert!). I think that it’s a bit like Tinder, but instead of selling yourself you can sell your stuff (and meet new people).
  • Another part of their unique proposition is its focus on local as you can only see ads near your current location.

letgo-screenshot

How would you evaluate this fantastic business model?

When looking at the joint profitability, they meet this requirement as there are strong network effects. More sellers lead to an increase in (potential) buyers (and the other way around), which enables Letgo to gather more users and data. It’s a bit shady, but it’s likely that Letgo earns money by selling data. Letgo also satisfies the feasibility as there are many similar platforms. The judiciary and polity requirements are less relevant for this case, but the social norms dimension is met as Letgo is already popular in the US, which establishes trust. The achievability criteria is also met as used products are increasing in popularity (AD, 2017).

So, Letgo has a bright future

Not sure about that… This platform is useless if you are looking for a particular product. Furthermore there are already numerous Facebook groups which provide the same ‘social’ and ‘local’ experience. On the other hand, Letgo is focused on mobile devices, which makes it easier, faster and more fun to buy and sell. You could argue that there are tons of dating sites, but Tinder remains a popular app for the exact same reasons. Hence, I believe that Letgo can become a successful platform, especially among young people.

http://www.letgo.nl/#Letgo

https://androidworld.nl/apps/letgo-nieuwe-speler-markt/

http://www.emerce.nl/nieuws/175-miljoen-dollar-lokale-marktplaats-letgo

http://www.ad.nl/lifestyle/kringloopwinkel-weer-helemaal-in-trek~a7f4da48/

Skillshare: The Future Belongs to the Curious


This start-up built an alternative education system that’s poised to have a major impact on the learning landscape” (Tracy, 2017).

Skillshare, launched in April 2011 by Michael Karnjanaprakorn (Joyner, 2017), is an online learning platform where the world’s best experts teach world’s best skills. With Skillshare it is possible to learn and practice a skill by doing. You can learn a skill together with their community of over 2 million students and teachers and network with them. Classes and skills are taught by expert practitioners, which makes it possible for everybody to get unlimited access to over 14,000 classes in different categories, such as design, technology, entrepreneurship and many more (Skillshare, 2017). This start-up  uses the benefits from crowdsourcing. The crowd is used to teach other interested individuals a new skill, that are traditionally performed by a designated agent (Howe, 2006)

how-it-works

Learning should be as easy as listening to music at Spotify or watching your favorite movie on Netflix. Skillshare is really about learning by doing and every class is project-based as well. Students can create projects, alter them to the website and can get feedback from students all around the world (Skillshare, 2017). Thus, unlike other educational online platforms, you don’t need to have a Ph.D. to teach something valuable. And on the other hand, learning skills is for everyone universal accessible and relatively inexpensive. It is for everyone easy to become a lifelong learner.The mission of Skillshare is to close the professional skill gap and provide universal access to high-quality learning (Skillshare, 2017). They believe that there is a huge difference between education and learning. Skillshare empowers people to take a leap in their careers, improve their lives and pursue the work they love, by teaching skills online that are needed in tomorrow’s world. This mission directly shows the major strength of Skillshare and how they differentiate themselves from competitive education platforms. Skillshare allows everyone to sign up and teach a class. By doing this they want to provide universal access to high-quality learning.

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How it works

For the lifelong learner, Skillshare makes it possible to get universal access to high-quality learning and to learn anything they want to. They offer the possibility to watch classes, online and offline, on your own schedule, anytime and anywhere. Thus they make it possible to learn at your own pace. Furthermore, the classes are taught by an expert with experience in the field. These classes include video lessons that are relatively short with most lessons under one hour, written text. And with the project-based environment you really learn by doing and are able to share your project in the class to get feedback and collaborate with a large community (Skillshare Help, 2017). They offer their members the possibility to create projects and build a portfolio of their work. On the other hand, Skillshare makes it possible for everyone to share their knowledge in a particular field, as long as the class follows certain guidelines. The company has proven adept at acquiring experts to teach on their website (Bromwich, 2015).

Skillshare has a freemium model which allows users to access free classes, create projects and discussions within them. However, this model includes videos with advertisements. A premium model offers their users to get unlimited access to over 14,000 classes, watch them offline and ad-free (Skillshare Premium, 2017).

Efficiency criteria:

Skillshare is one of the leading educational platforms that offers everyone universal access to learn a new skill at an affordable price. The platform maximizes the joint profitability of both of the players involved (Carson et al., 1999). On one side, it is for individuals easy to reach a large audience and teach them a skill of their experience. They are not bounded by a physical location anymore and therefore can have a more efficient personal schedule. Additionally, they can earn a little to a lot.

On the other side, many individuals can learn and practice a new skill at an affordable price. At the same time, they can collaborate with a large community and get feedback from them, so that the wisdom of the crowd can be used.

Evaluating the institutional environment, the largest threat for Skillshare is that there are too many new teachers who don’t add value to the platform. However, because there are guidelines and requirements that should be met before a class can be created, this threat is limited.

Concluded, Skillshare is an online platform that offers universal access to high-quality learning at an affordable price.

References:

Bromwich, J. (2015) ‘Anyone Can Be a Teacher at Skillshare, an Online School, The New York Times, available online from: https://www.nytimes.com/2015/03/20/education/anyone-can-be-a-teacher-in-this-online-school.html?_r=0 [28 February 2017].

Carson, S. J., Devinney, T. M., Dowling, G. R., & John, G. (1999) ‘Understanding institutional designs within marketing value systems’, Journal of Marketing, 115-130.

Howe, J. (2006) ‘The rise of crowdsourcing’, Wired, 14 (6).

Joyner, A. (2017) Skillshare Takes On the Education Gap, available online from: http://www.inc.com/best-industries-2013/april-joyner/skillshare-education-gap.html [28 February 2017].

Tracy, A. (2017) Skillshare: Redesigning  Education for the Masses, available online from: http://www.inc.com/abigail-tracy/35-under-35-skillshare-online-education-platform.html [28 February 2017].

Skillshare (2017) Unlimited access to over 14,000 classes, available online from: https://www.skillshare.com/ [28 February 2017].

Skillshare Help (2017) How does Skillshare work?, available online from: https://help.skillshare.com/hc/en-us/articles/205208147-How-does-Skillshare-work- [28 February 2017].

Skillshare Premium (2017) Why Premium?, available online from: https://www.skillshare.com/premium [28 February 2017].