Consumers value their personal data less when they were asked to trade it for goods and services than when asked to sell it for money.
That’s according to Professor Klaus Wertenbroch from INSEAD University in Singapore, who’s article in the NIM Marketing Intelligence Review details his experiments investigating the price consumers demand for their private information.
The research compared the cost amount several thousand participants on Amazon’s MTurk and Prolific demanded for the same private data in exchange for money or for goods or services.
“Consumers with rational preferences for privacy should want equal compensation in both conditions,” states Wertenbroch in his article, Marketing Automation: Marketing Utopia or Marketing Dystopia?
“However, across all experiments consumers systematically valued their private data less when they were asked to trade it for goods [as measured by how much money they wanted for these goods] than when they were asked to sell it for money.”
That is of course, the predominant form of current day data transaction, with e-commerce companies usually collecting consumers’ private data in return for services and not in return for money.
Wertenbroch outlines the debate between companies that argue that they aptly compensate consumers with better offers and free services like YouTube videos, social networking, etc., as opposed to critics who argue that companies do not compensate consumers enough.
“It seems that consumers undervalue their private data in such non-monetary exchange settings because they do not view their data as a marketable resource, even though they are handing the data over to for-profit companies,” says Wertenbroch.
“This allows companies to extract extraordinary profits and gain market power at consumers’ expense. The unprecedented valuations of the dominant technology companies, to which consumers turn over their private data, are perhaps a reflection of this uneven exchange. Markets for personal data may not work efficiently, at consumers’ expense.”
Companies should take a proactive approach to addressing such concerns, argues Wertenbroch.
“Instead of opposing attempts by consumers and regulators to protect privacy and to counteract the unlimited collection and use of private data, they should incorporate rules in their policies that give consumers authority over their data.
“Being transparent about how personal data is collected and used as well as providing consumers with a better understanding and control over their data can help restore faith in automated marketing routines.
“Avoiding marketing dystopia is in the best interest of all market participants – at least with a longer-term perspective. To avoid dystopia, companies need to take consumer psychology into account and resist the temptation to maximise short-term profits at the cost of consumers.”