Use the PRICAL Index to Predict when Consumers will Accept or Reject Personal Data Collection
Updated: Mar 9
What would you want for your browsing data: $50 a month in cash or complimentary access to five streaming platforms? Read on to know about the hottest new measurement tool that will shape data collection.
Imagine your car insurer offers to lower your premiums if you let them record your driving. Would you accept or reject the offer? On the one hand, you might be thinking that this offer invades your privacy. On the other hand, the lower premiums can help you save and buy that thing you’ve been eyeing.
Although most people say they worry about privacy online, many also accept cookies and/ or fill in personal data for even mundane perks. This discrepancy between what people say and do regarding personal data collection is widely known as the privacy paradox. And what can help accurately predict what people might actually do is understanding the privacy calculus.
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The Privacy Calculus (PRICAL) Index
So, how can a firm know whether or not collecting personal information would be acceptable? Published in the March 2022 issue of IJRM (Volume 39, Issue 1), the paper led by Frank T. Beke of the digital agency De Nieuwe Zaak with Felix Eggers, Peter C. Verhoef, and Jaap E. Wieringa of the University of Groningen, presented the world the Privacy Calculus (PRICAL) index.
The PRICAL index is a unique measurement tool because it tries to tease out the consumers’ internal privacy trade-off: how they consider both the positive and negative consequences of personal data collection and the probability these will affect them. I got to interview Frank T. Beke to hear about the Privacy Calculus (PRICAL) index straight from the source!
“If I as a firm can know you better, should I try to know everything?”
How did the PRICAL index come into reality? Let’s rewind by about a decade. The year is 2013. Frank T. Beke started his Ph.D. at the University of Groningen in the Netherlands. It was a time when the debate around consumer privacy had just started to brew, and Frank wondered, “If I, as a firm can know you better, should I try to know everything?”.
To answer that, Frank needed to understand when and why consumers accept or reject a firm’s data collection attempt. Together with his advisors, he set out to create the Privacy Calculus (PRICAL) index.
Figure 1: Conceptual framework of the research.
The PRICAL index combines financial, performance, psychological, security, social, and time-related risks
The PRICAL index is a self-administered questionnaire that goes beyond the widely held view that people want privacy no matter what. Rather, it makes us rethink people’s thought processes regarding their data privacy. How? The PRICAL index combines financial, performance, psychological, security, social, and time-related risks that consumers may perceive for both accepting or rejecting information collection.
For example, responses to statements like “I can find the right product or service faster” and “[Your Firm] makes me feel special” tap into the benefits of accepting, while statements like “family and friends become aware which products or services I am interested in” and “it feels like [Your Firm] follows my behavior” raise the specter of the consequences of foregoing privacy. This balanced approach that measures both the perceived costs and benefits regarding data privacy is what sets the PRICAL index apart.
The authors tested the robustness of this measure across multiple contexts and found that PRICAL indeed reliably predicted people’s intentions to share personal information. “I think the reviewers made valid remarks, asking for replications across contexts,” Frank recalls, “and replications push science towards greater generalizability.”
“Managers can use PRICAL to gauge the extent consumers may accept products and services that require collecting substantial personal data.”
The paper presents an interesting “use case” of the PRICAL index. The authors collaborated with a Dutch insurance company to test if the PRICAL index can distinguish between customers who were willing to buy a policy that would collect information about their driving behavior. “Managers can use PRICAL to gauge the extent consumers may accept products and services that require collecting substantial personal data,” says Frank.
Many innovative products at present and even more so in the future will require collecting personal information. The PRICAL index can clearly inform managers if consumers will accept or reject information collection. I think this will bring make proponents of the rational choice theory smile: a new world phenomenon explained by the good old costs vs. benefits calculus.
Cite this paper: Beke, Frank T., Felix Eggers, Peter C. Verhoef, and Jaap E. Wieringa. "Consumers’ privacy calculus: The PRICAL index development and validation." International Journal of Research in Marketing 39, no. 1 (2022): 20-41.
Read this paper: Click here for the full paper!
Meet Frank T. Beke
Digital Strategist at De Nieuwe Zaak, the Netherlands
What prediction(s) would you make about the future of data privacy?
Not too distant in the future, you will have the power to completely choose to share or share your data and with whom. Also, privacy regulations in the USA and China will follow from ones in the EU.
If you were not a marketing researcher, what would you be?
A history documentary maker. I’m really fond of historic events, read lots of books, and watch lots of documentaries. If becoming a history documentary maker is too ambitious, then a history quiz maker!
What drives you to do the work you do?
I enjoy making complicated stuff simple. I think companies that really care about consumers should strive. I want to help them make better decisions by leveraging data science.
This article was written by
Jareef Bin Martuza
Ph.D. Candidate at the Norwegian School of Economics