Capitalizing on Privacy Practices - Study Indicates Consumers Will Pay for Privacy
Consumers are more likely to purchase products from online retailers who are protective of consumer privacy, according to researchers at Carnegie Mellon University. The study, entitled “The Effect of Online Privacy Information on Purchasing Behavior: An Experimental Study” found that the availability and accessibility of information regarding online retailers’ privacy practices can affect consumers’ decisions to purchase products online. Interestingly, in contrast to the commonly held view that consumers are unlikely to pay for privacy, the study indicates that “when privacy information is made more salient and accessible, some consumers are willing to pay a premium to purchase from privacy protective websites.” The study is consistent our discussion in a previous post of the “privacy by design” framework. As we discussed, businesses that address privacy into the design of their products and services are less likely to face consumer and regulatory backlash or incur the costs of remediation. Yet businesses may benefit in another way from protective and consumer-friendly privacy practices - the results of this recent study indicate that such practices may be leveraged as a selling point.
The results of the study offer new insight into consumers’ valuations of personal data and online behavior. Control group participants generally purchased their products from the websites offering the lowest prices. In contrast, test group participants - who saw the privacy meter icons and knew that the icons represented the level of privacy protections utilized by the websites - were more likely to make purchases from websites offering medium or high levels of privacy, even if those sites charged higher prices for identical products. Additionally, participants demonstrated that they would spend an average of 59 to 62 cents more to buy the same product from websites offering stronger privacy protections.
The Take Away
The study also suggests that businesses “may use technological means to showcase their privacy-friendly privacy policies and thereby gain a competitive advantage” and “maximize profits.” Specifically, “if the adoption of P3P increases, businesses protective of customer privacy may be able to attract consumers by posting their P3P policies and signaling good privacy practices.”