The Price of Privacy - An Evaluation of the Economic Value of Collecting Clickstream Data

The analysis of clickstream data facilitates the understanding and prediction of customer behavior in e-commerce. Companies can leverage such data to increase revenue. For customers and website users, on the other hand, the collection of behavioral data entails privacy invasion. The objective of the paper is to shed light on the trade-off between privacy and the business value of cus- tomer information. To that end, the authors review approaches to convert clickstream data into behavioral traits, which we call clickstream features, and propose a categorization of these features according to the potential threat they pose to user privacy. The authors then examine the extent to which different categories of clickstream features facilitate predictions of online user shopping pat- terns and approximate the marginal utility of using more privacy adverse information in behavioral prediction models. Thus, the paper links the literature on user privacy to that on e-commerce analytics and takes a step toward an economic analysis of privacy costs and benefits. In par- ticular, the results of empirical experimentation with large real-world e-commerce data suggest that the inclusion of short-term customer behavior based on session-related information leads to large gains in predictive accuracy and business performance, while storing and aggregating usage behavior over longer horizons has comparably less value

Data Mining in Electronic Commerce

Modern business is rushing toward e-commerce. If the transition is done properly, it enables better management, new services, lower transaction costs and better customer relations. Success depends on skilled information technologists, among whom are statisticians. This paper focuses on some of the contributions that statisticians are making to help change the business world, especially through the development and application of data mining methods. This is a very large area, and the topics we cover are chosen to avoid overlap with other papers in this special issue, as well as to respect the limitations of our expertise. Inevitably, electronic commerce has raised and is raising fresh research problems in a very wide range of statistical areas, and we try to emphasize those challenges.Comment: Published at http://dx.doi.org/10.1214/088342306000000204 in the Statistical Science (http://www.imstat.org/sts/) by the Institute of Mathematical Statistics (http://www.imstat.org

The Role of the Mangement Sciences in Research on Personalization

We present a review of research studies that deal with personalization. We synthesize current knowledge about these areas, and identify issues that we envision will be of interest to researchers working in the management sciences. We take an interdisciplinary approach that spans the areas of economics, marketing, information technology, and operations. We present an overarching framework for personalization that allows us to identify key players in the personalization process, as well as, the key stages of personalization. The framework enables us to examine the strategic role of personalization in the interactions between a firm and other key players in the firm's value system. We review extant literature in the strategic behavior of firms, and discuss opportunities for analytical and empirical research in this regard. Next, we examine how a firm can learn a customer's preferences, which is one of the key components of the personalization process. We use a utility-based approach to formalize such preference functions, and to understand how these preference functions could be learnt based on a customer's interactions with a firm. We identify well-established techniques in management sciences that can be gainfully employed in future research on personalization.CRM, Persoanlization, Marketing, e-commerce,

Online advertising: analysis of privacy threats and protection approaches

Online advertising, the pillar of the “free” content on the Web, has revolutionized the marketing business in recent years by creating a myriad of new opportunities for advertisers to reach potential customers. The current advertising model builds upon an intricate infrastructure composed of a variety of intermediary entities and technologies whose main aim is to deliver personalized ads. For this purpose, a wealth of user data is collected, aggregated, processed and traded behind the scenes at an unprecedented rate. Despite the enormous value of online advertising, however, the intrusiveness and ubiquity of these practices prompt serious privacy concerns. This article surveys the online advertising infrastructure and its supporting technologies, and presents a thorough overview of the underlying privacy risks and the solutions that may mitigate them. We first analyze the threats and potential privacy attackers in this scenario of online advertising. In particular, we examine the main components of the advertising infrastructure in terms of tracking capabilities, data collection, aggregation level and privacy risk, and overview the tracking and data-sharing technologies employed by these components. Then, we conduct a comprehensive survey of the most relevant privacy mechanisms, and classify and compare them on the basis of their privacy guarantees and impact on the Web.Peer ReviewedPostprint (author's final draft

Empowering email marketing

The purpose of this dissertation is to explore an empowering email marketing strategy that marketers can use for effective, modern email marketing. It describes the strategic transformation of email marketing from one-way persuasive communication to customized two-way interaction using Pettigrew´s (1987) context, content, process (CCP) framework. Consumer empowerment is used as the specific context in which email marketing takes place, and the content and process of email marketing are examined in relation to it. Changes in the business environment, accelerated by the Internet, have shifted the power dynamic between consumers and organizations, transforming their relationship from reactive transaction to proactive collaboration. This has created a need to move beyond persuasive marketing to more interactive and tailored communication. Compared to other interactive marketing practices, such as social media or mobile apps, email seems to be stuck in old, inefficient ways of implementation. Consumers view marketing emails as annoying and irrelevant, even though marketers have better opportunities than ever before to use consumer data to tailor and target messages according to consumer expectations. The research consists of three sub-studies: a systematic literature review using inductive qualitative analysis, and two online controlled experiments using different deductive quantitative analysis methods. It evaluates real-world consumer behavior and seeks to answer the main research question: What are the implications of an organization’s adoption of an empowering email marketing strategy? The dissertation proposes that adopting an empowering email marketing strategy requires advanced first-party data management that enables interaction. Email marketing should be based on permission, and the contents of emails should be tailored to the preferences of the individual recipients, but by directly asking about their preferences rather than inferring them from observed data. According to the study’s empirical findings, content matters: relevant content and active engagement improve behavioral email marketing results (open rates, click-to-open rates, and conversion rates). The study also recommends testing email content in the marketer's own operational environment.Voimaannuttava sähköpostimarkkinointi Väitöskirjassa tutkitaan voimaannuttavan sähköpostimarkkinoinnin strategiaa, jota markkinoijat voivat käyttää tehokkaaseen, nykyaikaiseen markkinointiviestintään. Tutkimus kuvaa sähköpostimarkkinoinnin muutosta yksisuuntaisesta massaviestinnästä räätälöidyksi kaksisuuntaiseksi vuorovaikutukseksi käyttäen viitekehyksenä Pettigrew'n (1987) organisaatiomuutoksen kontekstia, sisältöä ja prosessia kuvaavaa mallia. Kontekstina on kuluttajien voimaantuminen, jonka puitteissa tarkastellaan sähköpostimarkkinoinnin sisältöä ja prosessia. Internetin kiihdyttämät muutokset liiketoimintaympäristössä ovat muuttaneet kuluttajien ja organisaatioiden välisiä valtasuhteita ja tehneet reaktiivisesta vaihdannasta aktiivista yhteistyötä. Muutoksen myötä on tullut tarve siirtyä suostuttelevasta massamarkkinoinnista vuorovaikutteisempaan ja räätälöidympään viestintään. Muihin interaktiivisen markkinoinnin muotoihin, kuten sosiaaliseen mediaan tai mobiilisovelluksiin verrattuna, sähköposti näyttää kuitenkin juuttuneen vanhoihin, tehottomiin toteutustapoihin. Kuluttajat pitävät markkinointisähköposteja ärsyttävinä ja turhina, vaikka markkinoijilla olisi aiempaa paremmat mahdollisuudet käyttää kuluttajatietoja viestien räätälöimiseen ja kohdistamiseen. Tutkimus etenee kolmen osatutkimuksen kautta. Systemaattisessa kirjallisuuskatsauksessa käytetään induktiivista kvalitatiivista analyysiä ja kahdessa koeasetelmassa käytetään deduktiivisia kvantitatiivisia analyysimenetelmiä. Työ arvioi kuluttajien käyttäytymistä todellisessa päätöksentekotilanteessa ja etsii vastausta kysymykseen: Millaisia vaikutuksia voimaannuttavan sähköpostimarkkinointistrategian omaksumisesta on organisaatioille? Väitöskirja esittää, että voimaannuttavan sähköpostimarkkinointistrategian omaksuminen edellyttää kehittynyttä, vuorovaikutuksen mahdollistavaa ensimmäisen osapuolen tiedonhallintaa. Sähköpostimarkkinoinnin tulee perustua lupaan ja sisältöön, joka on räätälöity yksittäisten vastaanottajien mieltymysten mukaan kysymällä suoraan heidän mieltymyksistään havaitun datan hyödyntämisen sijaan. Empiiristen tulosten mukaan uutiskirjeen sisällöllä on väliä: relevantti sisältö ja vuorovaikutus parantavat käyttäytymiseen perustuvia sähköpostimarkkinoinnin tuloksia (avauksia, klikkauksia ja konversioita). Tutkimus suosittelee sähköpostin sisällön testaamista markkinoijan omassa toimintaympäristössä

Business Model Development in IT Startups - The Role of Scarcity and Personalization in Generating User Feedback

Despite the widely recognized importance of continuous business model development for achieving product market fit, very little remains understood about efficient methods that may support this process in the context of nascent IT ventures. Contributions for supporting value proposition development, especially in the popular field of open innovation, have largely focused on well established firms and more traditional approaches such as the lead user method. More recent findings suggest novel ways of virtual user integration, like the collection of user feedback via promotional campaigns, which is particularly prevalent among IT startups. However, these contributions have remained conspicuously theoretical. Therefore, by drawing on an experimental study in the context of the artificially created online fashion startup StyleCrowd, we investigate the role of scarcity and personalization, two classical promotional cues that have become ubiquitous on the web yet have been overlooked by research, in enhancing the virality of nascent ventures’ online promotional campaigns to enhance user feedback. Our analysis reveals that while scarcity cues affect social sharing regardless of whether a campaign is personalized or not, personalization cues are particularly effective when scarcity is absent, yet are cancelled out when scarcity is prevalent. We discuss implications for research and practice

When Big Brother Privatizes: Commercial Surveillance, the Privacy Act of 1974, and the Future of RFID

RFID is a powerful new technology that has the potential to allow commercial retailers to undermine individual control over private information. Despite the potential of RFID to undermine personal control over such information, the federal government has not enacted a set of practicable standards to ensure that personal data does not become widely misused by commercial entities. Although some potential privacy abuses could be addressed by modifying RFID technology, this iBrief argues that it would be wise to amend the Privacy Act of 1974 so that corporations would have a statutory obligation to preserve individual anonymity and respect the privacy preferences of consumers

How Much Tracking Is Necessary? - The Learning Curve in Bayesian User Journey Analysis

Extracting value from big data is one of today’s business challenges. In online marketing, for instance, advertisers use high volume clickstream data to increase the efficiency of their campaigns. To prevent collecting, storing, and processing of irrelevant data, it is crucial to determine how much data to analyze to achieve acceptable model performance. We propose a general procedure that employs the learning curve sampling method to determine the optimal sample size with respect to cost/benefit considerations. Applied in two case studies, we model the users\u27 click behavior based on clickstream data and offline channel data. We observe saturation effects of the predictive accuracy when the sample size is increased and, thus, demonstrate that advertisers only have to analyze a very small subset of the full dataset to obtain an acceptable predictive accuracy and to optimize profits from advertising activities. In both case studies we observe that a random intercept logistic model outperforms a non-hierarchical model in terms of predictive accuracy. Given the high infrastructure costs and the users\u27 growing awareness for tracking activities, our results have managerial implications for companies in the online marketing field

Sifting customers from the clickstream : behavior pattern discovery in a virtual shopping environment

While shopping online, customers\u27 needs and goals may change dynamically, based on a variety of factors such as product information and characteristics, time pressure and perceived risk. While these changes create emergent information needs, decisions about what information to present to customers are typically made before customers have visited a web site, using data such as purchase histories and logs of web pages visited. Better understanding of customer cognition and behavior as a function of various factors is needed in order to enable the right information to be presented at the right time. One approach to achieving this understanding is to develop predictions about what information to present based on inferences made from cognitively-grounded models of the customer, calibrated according to an analysis of what behaviors can be observed during the online shopping experience (e.g., clickstream produced by mouse clicks and typing). As a step in achieving this objective, this research tests hypotheses about how differences in product involvement, time pressure, and uncertainty and riskiness of choice may impact a customer\u27s search and decision strategies, time on task, and perceived risk while shopping online. It draws upon the results of prior research, as well as two pilot studies, to motivate the design of a study involving human participants making purchasing decisions in an online shopping environment. The main data sources are the think-aloud protocols and clickstreams of the participants, as well as pre- and post-experiment questionnaires. This work is expected to improve understanding of how contextual, personal and product-related factors help shape online shopping behavior, and to generate insights into the cognitive processes that inform this behavior. Future work beyond the thesis is likely to involve more formal modeling of human cognition in online shopping environments

The Relationship between E-Marketing Strategy and Performance: A Conceptual Framework in a Web Context

While building on the contingency theory, this paper proposes a conceptual framework that links five factors: a) internal forces, b) external forces, c) past web and firm performance, d) current web and firm performance, and e) e-marketing strategy in terms of the strategy defined for the 4Ws (Web-Design, Web-Promotion, Web-Price, and Web-CRM). Future research is encouraged to build on this framework to test how internal and external forces of the firm, along with its past performance, influence the determination of e-marketing strategy and how in turn, e-marketing strategy impacts on performance at the web and firm levels.