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Online Consumer Privacy Concerns are Growing

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Jan 7, 2007

Companies need to pay more attention to online consumer privacy

To quell the online consumer privacy issues that are stunting the growth of e-commerce, Web marketers need to pay more attention to online privacy concerns and to give consumers more control of the personal information collected about them, according to research by Naresh Malhotra, Regents’ professor of marketing at the College of Management.

“Despite the enormous potential of e-commerce, its share of the total economy remains less than 1 percent worldwide,” says Malhotra, lead researcher of the study “Internet Users’ Information Privacy Concerns (IUPIC): The Construct, the Scale, and a Causal Model,” which was published in the journal Information Systems Research. He cites a recent report showing that 94.5 percent of Americans have online privacy concerns and worry about abuse of their personal information when they shop online. Consumer privacy while shopping and surfing on the Internet is on everyone’s mind.

Malhotra’s study, which surveyed 742 households in one-on-one interviews, found that online consumer privacy is a key issue. Consumers’ online privacy concerns include a desire to be aware of and have direct control over their personal information that is stored in marketers’ databases. “Consumers should be able to add, delete or modify at will any of their personal information,” Malhotra says. “At the very least, companies should make sure that their consumers can easily verify their information and know how it is being used.”

Online consumer privacy can be at odds with what marketers want—as much personal information as possible in order to provide individualized service to customers, including details about shopping behavior, lifestyles and finances, he explains. For instance, airlines can e-mail people customized fare offers if they know their destination preferences, which brings up certain online privacy concerns.

“This mass customization increases the efficiency of marketing and the value that customers can derive as long as marketers don’t misuse the personal information collected,” Malhotra says.

Many e-commerce firms retain the right to sell personal information to outside parties unless consumers specifically opt out, which can raise issues about online consumer privacy. “Information should only be obtained from consumers in ways that don’t violate any ethical or legal norms,” Malhotra says. “Obtaining information without consent isn’t appropriate.”

Consumers are more willing to provide information voluntarily if online companies can engender a sense of trust, alleviating online privacy concerns, the study found. One way to do this is through the use of increasingly popular third-party “seal of approval” programs, such as the Better Business Bureau’s BBBOnline, he says. Online vendors who want to participate in these programs must follow a set of standards concerning online consumer privacy and security.

In addition to examining the control and trust issues of online consumers, Malhotra’s study also established a new scale for researchers to use in measuring the depth of Internet users’ online privacy concerns.