What is the value of data privacy to online shoppers? About 65 cents, according to a new study of by researchers in Britain and Germany.

The report: “Study on Monetising Privacy: An Economic Model for Pricing Personal Information” was released in February and presents the results of work by researchers from DIW Berlin, the German Institute for Economic Research, and the University of Cambridge in the UK. The study was sponsored and released by ENISA, the European Network and Information Sharing Agency. In it, researchers found that consumers consistently prefer companies that protect the privacy of their data over companies that don’t. Unfortunately, that preference for privacy wasn’t very strong. Online consumers in the ENISA-sponsored test were reluctant to spend more than a €.50 (.$65) premium to protect information like their e-mail address and cell phone number from marketers, researchers found, suggesting that the intrinsic value of privacy protections is low for most consumers.

To measure the strength of consumer preferences for data privacy, researchers invited 443 participants into their laboratory in Berlin to shop for cinema tickets. Participants were given the choice of buying tickets from a privacy-friendly firm and a privacy-unfriendly firm. Both companies required a minimum of personal information: full name, date of birth and email address. Depending on treatment, but the privacy-invasive seller also requested the mobile phone number or permission to use the email address for marketing, according to a post describing the experiment on the blog lightbluetouchpaper

The laboratory experiment showed that the majority of consumers buy from a more privacy-invasive provider if the service provider charges a lower price. How much lower? Not much, researchers discovered. A discount of just E0.50 was enough to sway consumers away from a vendor who would protect the privacy of their personal data.
That isn’t to say that consumers don’t value privacy at all. When prices were the same, privacy-friendly firms handily beat their privacy-invading competitors, establishing a market share of between 62 and 83 percent, researchers found. Furthermore, a healthy minority of buyers – 29 percent – were willing to pay extra for not having to reveal their mobile phone number.

The laboratory experiment was complemented by a field experiment involving more than 2,300 participants and 139 transactions and observations. The field experiment confirmed the trends observed in the laboratory, according to the report.

The results of the study confirm the findings of earlier experiments that found most consumers diffident about the intrinsic value of data privacy. In a 2010 paper from the Leibniz Information Centre for Economics, researchers conducted a similar experiment involving DVD purchases and found that consumers responded far more to price differences than privacy protections: consistently opting to buy from a store offering lower prices, even if those stores also harvested personal information from shoppers.

In the ENISA study, researchers concluded that the results of their survey send a clear message to companies and marketing firms: a sizeable proportion of consumers are willing to pay a higher price for privacy. Companies that do business online can capitalise on that by becoming privacy-friendly, they say.

The topic of consumer privacy has taken on new resonance in recent months. Media reports have called attention to poor data privacy practices employed by mobile application developers. The FTC reached a deal with social networking giant Facebook over its decision to force changes on users that many saw as reducing privacy protections. Google, also, has come under fire for changes to its user privacy policies that many saw as loosening privacy protectionsfor users of some of its products. Finally, in February, the Obama administration unveiled a new consumer-privacy plan designed to help better protect users’ rights online, including a privacy “bill of rights” that spells out exactly what consumers should expect from the companies they work with online. In conjunction with this new initiative, Google has said that it finally will add the do-not-track button to its Chrome browser.

Categories: Cloud Security, Compliance

Comments (7)

  1. Anonymous
    1

    What hasn’t been mentioned was how secure customers felt that the extra charge would successfully protect their data. The service that charges extra could be just as bad or worse – or they could try to protect your personal information but fail.

  2. Anonymous
    2

    I’m not sure how “security” matters here. The difference was the more expensive company didn’t even ASK for the additional info. They don’t need to protect what they don’t have.

  3. Sniper
    3

    Then you have complex issues like Tesco vs Aldi :). Tesco has a loyalty card system. They track everything you do as an individual and then market products to you based on your shopping habits. They charge more money on their products for this “feature” (invasion).

    Aldi have no loyalty card system. They most likely track the collective purchasing habits of all of their consumers in a given area and then stock appropriate goods depending on the time of the year and give a discount. The special offer usually targets the perfect conditions (it’s going to snow and people usually buy grit and snow shovels at this time of year) and sell out their goods almost on the same day. They consistently sell products for lower than Tesco who use your data more invasively to target you as an individual.

    Maybe this criteria could be added to the test as well?

  4. Tinman
    4

      I don’t think it’s so much as how much they’d pay, but for the fact that they shouldn’t have to pay for their privacy.

      Plus, just how many of those people actually read the privacy policy of the site they were doing business with.  There are several online shopping sites that I refuse to do business with just because of their privacy policies…

  5. Tinman
    5

      I don’t think it’s so much as how much they’d pay, but for the fact that they shouldn’t have to pay for their privacy.

      Plus, just how many of those people actually read the privacy policy of the site they were doing business with.  There are several online shopping sites that I refuse to do business with just because of their privacy policies…

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