Collecting personal data: consumers' awareness and concerns

Privacy

Graeff and Harmon (2002) studied the issue of consumer views about privacy, and found a few things. They found that consumers are generally concerned about privacy, but that the level of their concerns varied by demographic market segments. Further, they supported the long-held view that consumer concerns about privacy and how their personal information is used will affect their desire to make purchases on the Internet. Thus, there is a disconnect between the level of concern that consumers have with respect to their personal information, and their knowledge of how their information is gathered. Even consumers who were concerned about the use of their data were unaware, for example, that loyalty cards are used to gather consumers' personal information and record their shopping habits.

In a study contemporary to the same time frame as the Graeff and Harmon study, Phelps, D'Souza and Nowak (2001) lend support to Graeff and Harmon's findings. Phelps noted that privacy concerns have a negative correlation to purchase behavior and the purchase decision process. Their study focused on learning the antecedents of consumer privacy concerns and theorized that when such concerns are understood, they can be overcome. Overcoming these concerns would allow companies to sell more to consumers, especially online. My experience is that at that point in time, there was significant concern among the public about buying things online, given that online retailing was still fairly nascent, seen as something of a fly-by-night industry (the dot com boom/bust cycle having just been completed) and that online security was perceived as being underdeveloped.

That study in turn built on an earlier study by Phelps, Nowak and Ferrell (2000) that assessed the trade-offs that consumers make during the purchase decision process. Consumers view the primary trade-off as being between privacy and the protection of their information and the desire to make the purchase. Thus, if the product is easier to acquire online than offline, the consumer might be more willing to ignore feelings of discomfort about online purchasing. At the time, however, online purchasing was still in its infancy and many consumers were entirely unwilling to use the Internet to make purchases. Today, more consumers have a much higher level of comfort.

Consider another key element of the findings in Graeff and Harmon, which is that consumers seem unaware of how loyalty programs are used to collect personal information including demographic data and information about purchasing patterns. Consumers seem to be more wary of security online than offline, indicating that perhaps ten years ago consumers had less understanding -- or that they perceived their understanding to be lower -- of online vs. offline privacy. That privacy violations (or issues) have crept into the offline sphere in recent decades has perhaps gone unnoticed by a large number of consumers. This leads to the apparent disconnect between how privacy is viewed and how willing consumers are to cede their privacy offline vs. online.

Culnan and Bies (2003) discuss the role that business and government have in the privacy issue. As a response to consumer concerns, both business and government have been forced to address the issue. Phelps, Nowak and Ferrell (2000) noted that self-regulatory efforts by industry were expected to pay off, and that is something that appears to have worked over the course of the last decade or so. In addition, Culnan and Bies (2003) note that government has made some efforts to protect consumer privacy, and this can only have enhanced the perception among consumers that privacy is being protected.

That said, there is little evidence to suggest that consumers are more savvy about privacy either offline or online. If a study was conducted today to follow up on Graeff and Harmon, in my personal experience it would show that consumers are just as unaware as ever about how their data is collected and used. Loyalty programs have proliferated in the past decade, which means that consumers either remain unaware of how these are used, or that consumers are increasingly accepting the trade-off between privacy and convenience.

If anything, it is the latter. Consumers are faced today with declining opportunities to preserve privacy. So many purchases involve the tracking of information -- credit cards, debit cards, online purchases and purchases with loyalty programs all do this. At this point, the inconvenience of avoiding the collection of data is so significant that fewer consumers will be willing to put the protection of their personal information at a premium. While there have been some efforts on the part of government and self-regulatory efforts within the retail industry, consumers mostly want to believe that these efforts are sufficient. The average consumer knows nothing about the content of these efforts, so the decision to choose the convenience side of the trade-off is almost entirely emotional in nature. Consumers still know nothing about data collection, and how their data is used. They simply want to trust in the system because they value convenience above all else. With industry making it increasingly difficult to purchase things without data collection, consumers are increasingly trading off their privacy for convenience.