Consumer satisfaction as a Function of Consumer Privacy Concerns

Consumer privacy concerns according to Culnan (1993) is the right and or mandate of consumer privacy concerning the storing, reusing, availability to third parties and sharing of consumer information for the purpose of doing business. Charters (2002: 247) defined consumer privacy ―As a right of an individual to determine to what extent, if at all, information about him or herself will be revealed to others.‖

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The definition by Charters (2002) appears to be transformational in nature and brings to the fore the current realities of consumer privacy expectations in view of the fact that the world has become a global village through information technology, hence consumers are becoming more curious about their data as the rates of online fraud increase. Gillin (2001) cited in Rapp et al. (2009) opined that consumer privacy concerns borders on three key areas and they include (a) transparency of usage when consumer personal data are collected, stored and disseminated (b) security and assurance in place to guarantee that consumer information is protected from external and internal intruders (c) guarantee trust by ensuring that customers feel secured and less vulnerable when they transact business. However, several studies have illustrated that consumer privacy concerns impact on consumer consumption experience (Flavian and Guinaliu, 2006; Rapp et al, 2009; Okazaki, Li and Hirose, 2009; Yang, 2012; Beitelspacher et al. 2012; Goldfarband Tucker, 2013; Riquelme and Roman, 2014).

Yang (2012) found that negative perception of consumer online privacy concerns increased their dissatisfaction with telecommunications services. This could be attributed to firms‘ insensitivity towards seeking consumers‘ permission before reusing or sending messages to them for the purpose of advertising or selling their products and services. Therefore, consumers are bound to be unhappy when their privacy concerns are not handled with respect and needed secrecy. The findings of Yang (2012) support Smith et al. (1996) which found that consumers were concerned about how firms used their stored data for secondary business purpose other than the primary purpose for which the data were taken without due authorisation. Also, other studies supported that unauthorised use of consumer data for secondary purposes impacts negatively on consumer satisfaction and that authorised usage of consumer data for primary purpose had positive impact on their satisfaction experiences (Janda and Fair, 2004; Rose, 2006; Shin, 2010).

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Flavian and Guinaliu (2006) found consumer privacy had a significant effect on consumer satisfaction and their intention to buy of firms‘ products and services. This implies that consumer satisfaction was improved when firms handle consumer private data responsibly because it helps to protect consumer from online hawkers. However it is the responsibility of regulatory institutions and the firms to ensure that consumer data are kept private and that due authorisation is solicited before using them for secondary purposes.

This supports the argument of Rapp et al (2009) who reported in their study that it is the responsibility of the regulatory environment to develop policies and practical guidelines for protecting consumer from the assault of operators and online fraudsters. For example, there are circumstances where telecommunications consumer in Nigeria had received fake emails and messages from online hawkers and the messages were sent on the behalf of firm A ―that you have won a trip to Dubai for a holiday. Please kindly send us your account details and address so that we can process your benefits‖. Consumers in good faith would quickly oblige without understanding that the message emerged from fraudsters who want to gain access into their private bank account so as to dupe them. These circumstances arise more often in Nigeria because MT firms do not take consumer privacy concerns seriously. Instead they use consumer data for all sorts of secondary use without due authorisation.

Additionally, based on the Nigeria example and according to Charters (2002) that there is need for government regulatory institutions to develop a practical control mechanism for monitoring direct and indirect electronic messages using consumer data and that consumer should have the option of accepting or rejecting whether their data should be used publicly or not. Dolnicar and Jordaan (2007) found that firms which adequately handled their consumer privacy concerns influenced their consumer satisfaction and had fewer sanctions from regulatory institutions.

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Also, Okazaki, Li and Hirose (2009) found that adequate management of consumer privacy enhanced consumer perceived trust. Also their study showed significant impact on satisfaction of some Japanese mobile phone consumers. Whilst dissatisfied consumers attributed their experiences to firms insensitivity towards handling their privacy concerns. Beitelspacher et al (2012) found that firms which met expectations of privacy concerns influenced consumers feeling of trust and security and in turn impacted on their satisfaction. Goldfarb and Tucker, (2013) found that the management of consumer privacy created positive satisfaction experience, reduced compliance cost and brought along new opportunities for firms. This implied that when firms managed their consumer privacy issues properly they were able to improve upon consumer satisfaction thereby leading to a reduction of compliance or penalty cost on firms for failure to adhere to privacy policy. However, how firms managed consumer privacy issues could be an opportunity. This is because when users feel positive about the way their data are used they would say positive things about those firms to others who perhaps were not customers. This in turn might influence those potential customers to buy services of these firms. Alternatively, when consumers have negative feelings about how firms used their private data, they were more prone to say negative things about those firms, thereby posing a threat for their services.

For example, in Nigeria the leading telecommunications firm ―MTN‖ was fined One Trillion and five hundred Billions (N1.5Trillion) for failure to comply with the regulators‘ policy that prohibited MT firms from sending lottery messages to consumer without due authorisation. The NCC law specifically provides that airing operators‘ are liable to pay two hundred thousand naira (N200, 000) for each single calling line which suffers from these unpleasant practices. Riquelme and Roman (2014) found that privacy helped in building consumer trust as per firms‘ ability to provide requisite transaction security, thereby leading to a positive consumption satisfaction experience. Furthermore, their study showed that the influence of privacy on satisfaction was

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stronger for male than female consumer and on educated than less educated consumer. This implied that the impact of privacy issues on consumer satisfaction was dependent on types of consumer in terms of their sex, culture, level of awareness and the nature of service they consumed. In support of this explanation previous findings as in Bart et al. (2005) found that consumer perception with the management of their privacy issues had a stronger influence on highly educated consumer and weaker for less educated consumer, whereas Yang et al. (2009) reported that privacy issues had a stronger influence on less educated consumer and weaker influence on more educated consumer. Overall, previous literature illustrates that institutional forces influenced consumer privacy concerns which in turn influenced consumer consumption experiences.

2.2.2 Consumer Retention

The meaning of consumer retention varies from one organisation to another and there seems to be no consensus definition in literature. However, literature sources appeared to have unanimously agreed to the economic benefits of retaining existing consumer (Gronroos, 1997; Ang and Buttle, 2006b cited Drucker, 1973: 229). Moreover, Dawkins and Reichheld (1990) reported that a five per-cent increase in service quality led to 50% consumer retention rate and was capable of generating an increase in consumer net present value of about twenty five per cent and ninety five per cent for an organisation. This implied that retained consumers were more profitable and less expensive to manage than new consumer (Buttle, 2004). Ang and Buttle (2006b) supported that as quality increased consumer tenure lengthened and the volume of product purchased by the consumer grew. The source further opined that referrals increased and the firm‘s relationship maintenance costs decreased as both consumer and suppliers had learnt more about each other. However, they concluded that retained consumer had a high propensity to pay higher prices than newly acquired consumer and were less expectant in receiving discounted offers that were used as

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inducements to acquire consumer. Overall, I define consumer retention as firm effort targeted at winning existing consumer confidence and loyalty by making them more satisfied than they were.