Consumer Tracking: Risks
When advertisers track consumers, they run the risks of consumer backlash, litigation, reduced ad effectiveness, and intrusion. To minimize these risks, advertisers need to strike a balance between personalization and privacy, and they need to understand the types of personalization that consumers find delightful or intrusive.
Risk of Consumer Backlash
- While increased access to consumer data and ad targeting have been shown to improve ad performance, there is evidence that tracking consumers to sell products or services may result in consumer backlash.
- This risk is more pronounced now that data breaches, fake news, and creepy ads have increased consumers' awareness of web cookies tracking their every move online.
- A case in point is Target whose targeted coupons for pregnancy-related products drew ire from consumers. For one of its promotions, Target sent these coupons to women it believed to be pregnant. The targeting became controversial because a father inadvertently learned through this coupon that his teenage daughter was expecting.
- Consumers who learn they have been targeted by a brand in unacceptable ways are less likely to trust that brand or engage with that brand.
Risk of Litigation
- Advertisers that track consumers run the risk of litigation as well. Advertisers can land in court and lose money in the process if they are not careful about handling consumer data.
- Toysmart.com, an online toy retailer that is now bankrupt, was sued by the Federal Trade Commission when it planned to sell off consumer data to the top bidder.
- Advertising network DoubleClick, which monitors Internet users anonymously, was sued as well for planning to match its real-world mailing list with its database of anonymous Internet users.
Risk of Reduced Ad Effectiveness
- Consumers' heightened awareness of tracking by advertisers could lead to reduced ad performance if it brings about privacy concerns.
- Three researchers from Harvard Business School recently discovered that when consumers learn companies are making inferences about them based on their activity on third-party websites, they feel "intruded upon." Ad effectiveness, in turn, declines.
- According to these researchers, these findings mirror social truths. For consumers, tracking them across websites and making inferences based on this collected data is akin to talking behind their back. If talking behind people's backs is socially unacceptable, then making inferences about people based on their activity on third-party websites is unacceptable as well.
- Ads that disclose to consumers that they have been targeted because of their activity on third-party websites were found to be 24% less effective than ads that disclose to consumers that they have been targeted because of the products they have selected in the past.
- Ads that disclose to consumers that they have been targeted because of inferences were found to be 17% less effective than ads that disclose to consumers that they have been targeted because of information they willingly provided.
Risk of Intrusion
- Advertisers need to strike the right balance between privacy and personalization if they do not want to run the risk of intrusion. As far as ad personalization is concerned, there is a thin line between delightful and creepy.
- More than 60% of consumers find the following advertising actions acceptable: product recommendations that were based on their purchase history, birthday emails, and reminders about items left in their online shopping cart.
- In contrast, less than 50% of consumers find the following instances acceptable: receiving an email with a coupon while browsing at a store, and receiving an ad for a recently discussed product.
- Consumers who feel intruded upon can turn off personalized ads or use ad blockers. According to a survey, 34.1% of millennials, 29.2% of Gen Xers, and 22.3% of Boomers have successfully switched off personalized ads. Also, this survey indicates that 64.4% of male consumers and 52.6% use ad blockers.
- It appears that the things that distinguish delightful personalization from creepy personalization are as follows: (a) whether information was obtained within or outside the website where the ad appears, and (b) whether information was willingly provided by the consumer or inferred by the advertiser.
Though we could not locate any source that readily lists the risks that advertisers face when tracking consumers, we were able to identify the aforementioned risks by reading through sources that cover the risks, dangers, implications, or disadvantages of ad targeting or personalization. We know that advertisers track consumers mainly to improve ad targeting or personalization, so we looked for sources discussing this topic, and noted insights that touch on consumer tracking and privacy concerns. While we were able to list four risks above, these four risks all boil down to the risk of turning off consumers or infringing on the rights of consumers.