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Enhancing Privacy Protection & Empowering Digital Marketing Security using Blockchain

Digital marketing and blockchain technology

Enhancing Privacy Protection

Privacy is a complex issue that potentially amplifies individuals’ anxiety about using an online technology service. Research has repeatedly shown that customers worry about their transaction anonymity and confidentiality.These concerns are caused by the increased risk of improperly obtaining, misusing, and divulging their Personally identifiable information (PII). Privacy issues have increased since website cookies capture personal information and store them in information systems (McParland and Connolly, 2007). Moreover, vast improvements in data collection technologies coupled with new data mining techniques enable brands to more easily identify, track, collect and process consumer information. This creates new problems of intrusiveness in the privacy of online shoppers. To counteract these threats, consumers express a strong desire to control their personal information. This is confirmed by a survey which found that 87% of respondents decided to protect their privacy by requesting that companies remove their PII from their databases (Harris Poll, 2004). Additionally, consumers sometimes chose to purposely supply false information on a web site, in order to block online-ad targeting techniques or to disable cookies (Culnan and Milne, 2001). While the need for heightened online privacy protection is rising, blockchain technology can alleviate many issues impeding consumers from shopping online. For example, consumers can entrust their PII on a blockchain platform since transactions are not bound to real identities once they are routed to a random set of points in the network. Online privacy of consumers can be adequately engineered to control the access of network members to the information contained in the blocks.

Transactions can be entirely private, but at the same time, they are verified by a consensus of participants in the shared network. Moreover, the blockchain platform can be an effective privacy enhancing or privacy-by-design technology as it appeals to the technological savviness of online consumers by allowing them to encrypt their credentials resiliently (e.g., users’ IDs, passwords, electronic IDs cards). Consequently, consumers can gain more control over their PII in digital marketing because their PII cannot easily be commoditized. Consumers can rely on the blockchain’s transactional history to generate more robust analytics and precise forecasting regarding their expectations, tastes, and brand perceptions. Additionally, there are new opportunities for consumers to securely and effectively trade their PII with brands.

Empowering Digital Marketing Security

A security threat as a “circumstance, condition, or event with the potential to cause economic hardship to data or network resources in the form of destruction, disclosure, modification of data, denial of service and/or fraud, waste and abuse”. Information security can be viewed as the heart of information systems, both at the technological and organizational levels. This implies that ensuring a high level of preventative measures and transaction security is a crucial differentiator for many businesses. In the digital world, the delivery of products and services with well-communicated and adequate security is a crucial success factor for brand trust. Similarly, information security is turning into a must-have feature as brands become the stewards of consumers’ PII. This development is referred to by Greenlow as “Marketing security” which is the real-time control and management of consumers’ PII to prevent data leakages and abuses. Previous research has shown that information security concerns are a significant barrier to online marketing. This is because online shopping and ecommerce are based on individuals’ credentials and sensitive information such as home address and credit card details (collectively PII), much of which consumers are very reluctant to provide. The reason for this negative perception is the multitude of potential online threats, which involves data loss or theft, identity theft, credit card information theft, content manipulation, unauthorized account access, database attacks, patent and copyright violations.

In the online marketing context, Internet banking still faces security threats through data transaction and transmission attacks or unauthorized uses of bank cards enabled through false authentication. Moreover, the application of behavioral targeting requires the need for
cookies that are susceptible to cloning or misappropriation by a malicious party. A cookies-based approach and weblog records for tracking shoppers online activities might compromise consumers’privacy.

Prior to incorporating information security into the marketing narrative, brands have to establish a robust technological infrastructure that addresses existing security loopholes and enhances consumers’ confidence in the digital marketing environment. In this respect, the emergence of blockchain technology can benefit both brands and consumers, ensuring an unprecedented level of security. The power of blockchain security is based on its distributed and decentralized storage of data. Besides, the usage of several security mechanisms such as asymmetric encryption, digital signatures and access control can secure the appropriate storage, transmission, and retrieval of large amounts of consumer information. The technology aligns well with the factors for implementing a resilient information security management system: integration of information, information availability, information reliability, and accountability. Not only does the technology entail a new way of decentralizing and self-organizing the business ecosystem of brands, it can help to
synchronize and integrate marketing-related information across the members of the network. This includes pricing policies,product listings, advertisements, outputs of market research and analysis, discounts and promotional benefits, and marketing plans.

Decentralization can help to ensure that every party is economically better off and more secure. For instance, consumers will have a single version of the truth and precise insights about a brand’s values and traits. They would also maintain more control over their PII. Besides, the decentralized approach of blockchain technology allows brands to remove a single point of failure, thus achieving a high level of resistance against Denial of Services (DoS) attacks and ensuring network availability. In case of errors and misappropriation, information ubiquity and availability enabled by blockchain technology increases accountability and provides more accurate monitoring and evaluation. This means that the technology can provide consumers and brands with some redress and counteract measures in worst-case scenarios.

Enabling Creative Loyalty Programs

In an increasingly competitive market environment, brands strive to ensure consumers remain loyal to their products and services. To enhance consumer retention, brands have been systematically collecting and storing their customer data, primarily through loyalty programs. These tools serve to increase brand loyalty, reduce price sensitivity, cencourage word of mouth, and enlarge their customer base. Moreover, customer loyalty programs may significantly benefit brands as they can generate higher sales and profits. Increasingly, marketers have implemented loyalty programs in a wide variety of industries. They continuously seek to understand which tactics are ideal for reaching consumers and which reward schemes serve them effectively.

Technological advancement has facilitated the collection of consumers’ data and the tailoring of effective loyalty programs. For example, the use of database management software has paved the way for a new era in loyalty marketing by allowing sophisticated and personalized tracking of customers. The same is true for mobile marketing, which develops a customer-centric paradigm where loyalty programs are instantly communicated to prospective members. Similarly, the Internet has been a conducive environment for the growth of customer loyalty programs. The emergence of these technologies has intensified consumers’ interest and access to information regarding loyalty rewards information, although gaining loyal customers is still a challenge for brands.Furthermore, discussions in Internet forums have long revealed that participating members are often frustrated with some loyalty programs. Even though loyalty programs shift from an aggregate level to an individual level, they are still very limited in terms of program components. Instead of diversifying reward program features to appeal to new potential members, many firms are adopting loyalty programs aimed at retaining their existing member base.

Customers appreciate being involved in attractive and flexible loyalty programs. However, some brands tend to lock in their customers and exert monopoly power on them. The situation is exacerbated if loyalty points are unused or unredeemed. For instance, a report by Bond Brand Loyalty indicated that more than 25% of the participants in loyalty programs never redeem their reward points. The low redemption rates result from stringent, time-based procedures to redeem rewards. This strategy might invoke a state of significant frustration among loyal members, especially when a potential reward expires. The lack of integration of loyalty programs between brands is also a common problem as many loyalty programs are still fragmented and unable to generate information about members attitudes toward the programs themselves. For the reasons mentioned above, several scholars in marketing have started questioning the effectiveness of loyalty programs in customer retention.

Blockchain technology has the potential to reform how loyalty programs are designed, tracked, and communicated to consumers. In a blockchain-based marketing ecosystem, loyalty programs are fully integrated. All participating parties in such programs such as loyalty programs operators, marketers, consumers, information system managers, call centers, sales offices, and other organizations will be efficiently integrated and interlinked. Instead of being fragmented, loyalty program partners could work synergistically to improve the members’ experience and to attract different consumer segments. For example, blockchain technology can help to address the problem of incompatibility in many loyalty programs systems, resulting in increased channel harmony and consistent experience among brands. Different partners of loyalty programs can exploit the interactive
features of the technology to leverage operations like the joint development and design of loyalty programs, the interconvertibility of reward points, and exchange transactions. More precisely, blockchain technology can create a more secure, and interoperable environment that is unattainable with centralized loyalty databases. The technology appeals for both B2B and B2C loyalty programs as auditability of critical transactions and data is necessary to curb fraudulent activities and support customer advocacy.

Through real-time access to the blockchain platform, marketers can gain visibility over members’ profiles, points, purchase patterns, payment history, and promotion responses, which will help them to craft more attractive, valuable, and customized loyalty programs. Besides, the decentralized nature of blockchain technology also allows members to track their loyalty and reward points, freeing them and marketers from the physical possession of coupons. Additionally, the technology can help to create more value for members by enabling them to trade and exchange their loyalty points.

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