As most consumers value both personalization and privacy, businesses must find a balance between them to build trust and meet compliance.
Accomplishing this requires everyone in your company to understand the tradeoffs between personalization and privacy. From developers creating products to salespeople managing leads, everyone must keep privacy in their minds.
- Benefits of Personalization
Personalizing customer communications is one of the most essential tools businesses have at their disposal. It helps build trust with customers while differentiating themselves from competitors and increasing sales and brand loyalty. However, for this strategy to truly reap its full potential benefits, businesses must know how to balance personalization with data privacy issues.
Personalizing customer communication involves collecting and analyzing customer data to develop tailored messages for each individual. Unfortunately, however, consumers can be wary about how their data is being used. ” Data fundamentalists,” for instance, often refuse to share it without clear benefit. On the other hand, “data unconcerned” might hand it over without hesitation, while most are data pragmatists—people concerned about privacy but open to making tradeoffs in exchange for potential gains.
While 71% of consumers expect personalized experiences from brands they interact with, it can still be challenging for businesses to provide. Consumers could view using personal data in this manner as an invasion of their privacy, leading to negative associations with that brand and possibly driving them away in droves.
Personalization relies heavily on data quality. Businesses must be transparent with their data collection and usage policies to protect consumer privacy. This should include notifying customers of the data gathered, how it will be used, and why. Employee training on privacy and ethics is also crucial; developers who build personalization solutions, customer service representatives who contact opt-in customers for personalization solutions, or marketers must become acquainted with new regulations such as GDPR or CCPA should all receive appropriate instruction in data ethics training.
Unresolved security and privacy issues of personalization can have severe repercussions for businesses: slow time to market, limited remarketing efforts and consumer data collection capabilities, or worse yet, regulatory fines (like Sephora’s). Achieving perfection means reduced risk, data privacy at the heart of the company value proposition, increased customer satisfaction significantly, and less likelihood of costly penalties being levied against the organization.
- Benefits of Privacy
Though privacy poses risks, it has many advantages. People want to feel safe online, and companies prioritizing data protection can foster customer trust and build consumer loyalty.
Privacy can also help maintain long-term personal relationships. Marketers who understand their customers well can create targeted messages that are more likely to resonate while adhering to data protection laws and regulations through a commitment to ensure businesses comply.
However, consumers have an asymmetry between their privacy views and actions. Only 37% believe companies are transparent about how they use data collected by them – while at the same time, significant numbers refuse to buy from companies who disagree with their data-gathering practices – known as The Privacy Paradox and one of the most significant challenges marketers are currently facing.
Consumers need to understand their privacy rights better and safeguard their information. At the same time, businesses must alter their approach to data collection, emphasizing collecting only what is necessary for personalization while limiting storage needs. They should be more transparent about how their data will be used and prioritize getting consent before using individuals’ data for personalization.
Companies looking to balance personalization and privacy must consider these issues from the outset of any project or initiative. This approach, known as Privacy-by-Design, helps reduce the risks of breaches while simultaneously safeguarding personal data.
Finding an equilibrium between personalization and privacy can be a delicate balancing act for marketers, yet finding this balance is crucial to their success. By building strong customer relationships while taking an intentional privacy-by-design approach, they can avoid the Privacy Paradox while continuing to deliver customized experiences that drive engagement and conversions. Reaching this balance will require collaboration between marketing and legal teams in developing an ethical data-driven methodology for personalized experiences that deliver on both fronts.
- Tradeoffs of Personalization
Personalization has become invaluable for brands seeking to keep users engaged and boost revenue. While personalized content may meet individual needs, brands should carefully consider how consumers might feel if their privacy has been violated when employing this technology.
Though personalization offers many benefits, it also creates tensions between consumer perceptions of how brands use and treat their data (the personalization-privacy paradox). A prime example of this dynamic is TikTok. This app-based video platform captures users’ behavior via its interface to generate tailored videos to keep users hypnotized for as long as possible. While many users appreciate its benefits, some have voiced privacy concerns or exhibited hesitation to continue using TikTok.
To better comprehend this tension, we surveyed Gen Z consumers’ willingness to provide their data to digital marketers in exchange for personalized content. Participants were asked about various benefits that digital personalization may offer them and their perception of any risks that would outweigh these gains, using a privacy calculus scale and a list of 10 benefit scenarios discussed previously (Jahari et al., 2022).
Results revealed that both types of personalization benefits impacted consumers’ willingness to disclose information for these purposes, with those more pertinent to individual needs being more willing to part with it. This was particularly evident for data categories related to topics of interest; it did not hold with more personal categories such as ID numbers or medical details.
Our findings also shed light on an underappreciated tension within existing privacy calculus literature: Consumers’ high privacy sensitivity prioritizes restricting the collection of their personal data to avoid brand-caused irritation, further compounding the personalization-privacy paradox and hindering marketing efforts. More extensive framework studies should investigate its antecedents and consequences.
- Tradeoffs of Privacy
Undoubtedly, the personalization of technology has provided users with many advantages, yet privacy concerns have grown as more individuals share details about themselves online. This has sparked discussions surrounding tradeoffs between privacy and personalization; privacy should always be kept top of mind when making decisions about data use, but when considering personalization risks against benefits, it is also essential that individuals remember they have control over what information is disclosed about themselves.
Privacy calculus, which involves weighing benefits against risks when it comes to disclosure, has long been used by researchers to explain consumers’ willingness to reveal private data online (Dinev & Hart, 2006). Studies using this model have examined attitudes about private information disclosure across various contexts – online transactions (Kehr et al., 2015), chat rooms (Jiang et al. 2013a/b), mobile applications (Dinev & Hart, 2007), location-based services (Wang et al., 2016), virtual health communities (Kordzadeh & Warren, 2017), SNSs (Dinev & Metzger, 2016).
Privacy calculus presumes that individuals make rational calculations of benefits and risks before deciding whether or not to reveal personal information online. However, the privacy paradox, which refers to preference-behavior inconsistency in privacy choices, shows this may not always be the case; people’s willingness to disclose private data may often be motivated by heuristic and cognitive biases, which affect risk estimation and evaluation processes (Barth & de Jong, 2017).
As part of their job duties in hospitals, doctors must match patients’ fingerprints against criminal databases to gain access to medical records. Although this may violate patient privacy, it could potentially save their life. 23andMe also offers customers DNA tests to facilitate research into diseases; they have reported that over 80% of their 950,000 customers agree to provide this data as the potential benefits may outweigh any concerns over sharing it with them.