Page 625 - Encyclopedia of Business and Finance

eobf_P 7/5/06 3:18 PM Page 602

Privacy and Security

Volume pricing is also useful for building customer loy- PRIVACY AND
alty. For example, Stacks and Stacks HomeWares often SECURITY
provides volume discounts to customers ordering $1,000
The use of computers by business, industry, health care,
worth of any one item.
education, and government enhances their ability to col-
lect, analyze, and communicate information quickly and
DYNAMIC PRICING efficiently. The availability and access of this information,
The strategy where price is negotiated between buyers and however, significantly affects individual privacy and secu-
sellers, dynamic pricing, has been used throughout his- rity. Personal information is transmitted and stored every
tory, but its use waned when fixed pricing became popu- time a credit card is used, a telephone call is made, or an
lar during the later part of the nineteenth century. electronic mail (e-mail) message is sent or received. Per-
Dynamic pricing is a strategy where price is set based on sonal information regarding health care, insurance, and
the individual customer and situations. Social Security records is digitized, stored, and maintained
in easily accessible computer files. Although computer
Advances in technology such as the Internet have
technology makes data easier to compile, combine, and
made modern dynamic pricing possible. Companies sell-
circulate, it dramatically increases potential violations of
ing via the Internet can mine databases to determine cus-
personal privacy and security.
tomer characteristics and adapt products to match buying
Privacy is an individual’s ability to be anonymous. It
behavior and set prices accordingly. Companies selling via
is not a constitutional right; unsanctioned intrusion of
the Internet can also adjust pricing based on customer
privacy, however, is legislated against at various federal
demand and product supply. The speed with which
and state levels. Once personal information is shared—
changes can be made on the Internet allows sellers to
whether in electronic, written, or oral form—the individ-
make pricing changes on a daily or even hourly basis. Buy-
ual’s privacy cannot be assured. Security implies
ers can even negotiate prices with sellers via the Internet.
confidentiality, integrity, and the assurance that personal
For example, buyers can negotiate prices on products such
information will remain private. In the information age of
as hotel rooms and rental cars at the Web site the twenty-first century, privacy and security are difficult
Priceline.com (http://tickets.priceline.com).
to maintain. Identity theft is a continuous threat.
SEE ALSO Marketing; Marketing Mix; Supply and
Demand IDENTITY THEFT
During 2004 more than 9.3 million Americans were vic-
BIBLIOGRAPHY tims of identity theft. This activity resulted in $52.6 bil-
Boone, Louis E., and Kurtz, David L. (2005). Contemporary lion in damages. On average, victims of identity theft
marketing 2006 (12th ed.). Eagan, MN: Thomson South- spent 600 hours repairing their credit. As victims of iden-
Western. tity theft, individuals reported a temporary loss of credit
Churchill, Gilbert A., Jr., and Peter, Paul J. (1998). Marketing: as well as significant mental anguish. Although personal
Creating value for customers (2nd ed.). New York: Irwin identities may be stolen by computerized methods, the
McGraw-Hill. majority (62.8%) of identity theft occurred by more tra-
Farese, Lois, Kimbrell, Grady, and Woloszyk, Carl (2002). Mar- ditional means (stolen wallets, mail removed from house-
keting essentials (3rd ed.). Mission Hills, CA: hold mailboxes, dumpster diving, and employee theft).
Glencoe/McGraw-Hill.
Employee theft occurs in places such as medical
Kotler, Philip, and Armstrong, Gary (2006). Principles of market- offices and human resource departments where confiden-
ing (11th ed.). Upper Saddle River, NJ: Pearson Prentice-
tial personal information is routinely recorded and distrib-
Hall.
uted. Although many people are more comfortable
Pride, William M., and Ferrell, O. C. (2006). Marketing concepts providing their credit cards in face-to-face transactions
and strategies. New York: Houghton Mifflin.
(e.g., at stores or restaurants) rather than electronically
Semenik, Richard J., and Bamossy, Gary J. (1995). Principles of (e.g., online shopping), a level of personal trust is assumed
marketing: A global perspective (2nd ed.). Cincinnati: South- in both cases. Online transactions, however, are often
Western.
processed without human intervention. The potential risk
is the security of the database of customer information
Allen D. Truell stored online. Security engineering attempts to protect
Michael Milbier customer information from corporate hacking.

602 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION