An Ethical Approach to Personalized Ads
Graphic Credit: Nadya Khan
The year is 1983; McDonald’s has just released commercial advertising their new Mcnuggets. The commercial reached millions of consumers during a time when many used television as their main means for entertainment. Fast forward to the 21st century, U.S. cable providers have lost over two million users (Leichtman Research Group, 2020, para. 3). Evidently, people are spending less time watching traditional television. Thus, many brands are switching to digital marketing because of the endless opportunities to create a more engaging experience for consumers. As stated by Marinucci (2019), “traditional advertising and marketing don’t seem to be delivering the results they once did, which appears to be due to the increased attention that consumers are giving to digital platforms” (para. 1).
Digital marketing is quite complex: algorithms can track consumer behavior, and marketers have the tools to target an audience and personalize ads to appeal to that consumer (Marinucci, 2019, para. 9). Yet, this personalization tactic is not a one-way ticket to success. The use of consumer data to provide relevant ad content can heighten customers’ feeling that a firm has “manipulative intent” (Aguirre et al., 2016, p. 99). It would be problematic if a company abused consumer data and established no boundaries. So, despite the fact that online personalization provides consumers with more relevant ads, brands should prioritize the establishment of an ethical consumer-brand relationship.
In order to create a strong foundation for a natural consumer-brand relationship, brands should first examine how to improve their business model. Rather than focusing their mission on sales, the priority should be what they can do for the consumer, and what makes their product or service better than their competitors.
Consequently, this business model ensures that personalized marketing efforts will look more appealing. For example, the clothing brand Reformation focuses its mission on creating sustainably sourced and trendy clothing pieces, while also promoting inclusivity. In comparison to their competitors, Reformation informs its consumers about the negative impacts of non-recyclable materials. Their practices, such as utilizing nontoxic dyes in their clothing which “saves 1,468 gallons of water” per pair, reflect these values (Prant, 2017, para. 3).
Reformation’s business model and eco-friendly practices align with the values of their shoppers; hence, as the demand for sustainability increases, more consumers will be inclined to engage in their marketing efforts. Moreover, brands that display a genuine mission to cater to their consumer’s needs will have an easier time accomplishing their marketing goals. Dahl and Fridh’s (2019) experiment showcases this through their participant interviews. One participant claims that when a company is not working towards her best interests, it will be reflected in their marketing message as she will perceive it with a lack of genuineness and feel they solely want to sell a product (Dahl, Fridh, 2019, p. 37).
However, while a genuine business model framework enhances brand marketing, companies must go an extra step to maintain an ethical consumer-brand relationship, which will in turn improve the effectiveness of personalized ads. Brands must establish and maintain trust. Tailored ads utilize online behavioral targeting methods known as OBA; OBA most commonly uses third-party cookies. Basically, third parties have the ability to track a person’s online behavior by working with a popular digital platform (first-party), which would then drop a third-party cookie on the hard drive of a consumer’s electronic device without their permission (Ham, 2017, p. 634).
As a result, companies collect data in a covert manner, which negatively impacts consumer trust. In the marketing realm, trust is very crucial. According to the Internet Consumer Trust Model, developed by Jarvenpaa and Tractinsky (1999), trust entices consumers to engage with online marketing campaigns because it reduces their risk perception. However, privacy concerns are raised when consumer data is harvested without their knowledge. Thus, these concerns can prompt negative reactions, such as spreading false information to reduce engagement with an advertisement (Aguirre et al., 2016, p. 99). This is supported by Miyazaki’s (2008) experiment where he studies consumer interaction with a simulated website that discloses cookie usage compared to one that does not. The results prove how non-cookie disclosure elicited distrust from the participants. Miyazaki (2008) concluded that consumers perceived the non-disclosure as a breach of corporate responsibility to protect consumer data (p. 25), damaging their relationship as participant recommendation and usage of the website decreased.
Hence, brands must address the concerns that come with digital marketing through honesty, which could be achieved through the disclosure of data collection. Trust also plays a definitive role in the perception of personalized marketing. A brand’s previous way of handling consumer data can either enhance or diminish trust. If a company has a history of handling data with caution and using personalized ads based on consumer satisfaction, then future confidence in a company can increase. This is further supported by Dahl and Fridh’s (2019) research on how online tailored ads impact consumer decision-making. One of the interviewees stated that they have a positive attitude towards Nike’s personalized offers because of their history of honesty; in fact, the participant even debated on paying extra (Dahl and Fridh, 2019, p. 50).
Trust is not the only component of effective personalized marketing. Giving consumers greater control can also improve their response to tailored ads, and sustain the ethical relationship brands have with consumers. Since personalization depends on consumer data, it leaves consumers fearing that they have no control over their own information, resulting in ad avoidance (Ham, 2017, p. 640). Target’s pregnancy scandal demonstrates how tactless personalization contributes to decreased control. Target analyzed the purchasing data from women who signed up for their baby registries. This behavioral tracking technology allowed Target to send maternity product coupons to a teenage girl before her family knew about her pregnancy.
This revelation infuriated her father (Hill, 2012, para. 3). Incidents such as this can push people to evade tailored offers; however, advertisers that try to educate consumers on the process of data collection can alleviate such evasions (“Invasion”, 2020, para. 8). Thus, OBA knowledge would grant consumers more control, and Ham’s (2017) experiment supports this. In this experiment, Ham (2017) uses the Persuasion Knowledge Model (PKM). PKM is a framework that examines how persuasion knowledge (or OBA knowledge) impacts reactions towards online persuasion attempts (Ham, 2017, p. 640).
The results found a correlation between increased persuasion knowledge and positive appraisal of a personalized ad. Instead, of installing ad blockers out of fear of the unknown, consumers with OBA knowledge have the ability to analyze the purpose of personalized ads and to make the decision to pursue the potential benefits (Ham, 2017, p. 650). Brands who use this method will also demonstrate to their consumers that they are willing to put in the effort to inform them.
Some companies claim that their practice of collecting only non-personally identifiable information (non-PII) prevents unethical personalization. This is simply not true. Firstly, PII protection legislation at the federal level does not exist. Only 24 states have enacted regulations protecting consumer PII so far (Bridge Corporation, 2019, para. 6). Therefore, companies have the ability to take advantage of such opportunities even if they say they don’t.
For example, in Facebook’s Cambridge Analytica scandal, a third party harvested 87 million Facebook users’ data (PII) without their permission. Facebook allowed Cambridge Analytica to mine and broker user data for targeted political advertising. This not only violated Facebook’s responsibility to protect such sensitive information but also allowed Cambridge Analytica to manipulate user opinion on the election. This Facebook scandal demonstrates unethical personalization. For the states that have PII regulations enacted, companies can still trace individuals through linkable information. Linkable information is acquired by combining non-PII data (Bridge Corporation, 2019, para. 8).
Ethical stratification is needed, regardless of data being PII or not, since personalization can still feel like a violation of one’s privacy. Personalization poses as an effective marketing tactic to brands who primarily focus on improving their business model and enacting practices that reflect their goal ofto an ethical consumer-brand relationship. Companies that enforce practices such as establishing trust through disclosure, and enhancing consumer control of their data through opt-out options and OBA knowledge, will show customers that they prioritize transparency and honesty. Since concerns for privacy are correlated to tailored ads, these approaches will demonstrate that brands are aware of consumer needs, thus, strengthening the consumer-brand relationship. The main objective should revolve around creating a positive experience for the user. Subsequently, a strong and ethical relationship will make personalized ads more enticing.