The Problem when Personalization Collides with Privacy

Innovation faces it’s most complex problem yet: Personalization vs Privacy.

The struggle between rapid innovation in technology and concerns about ever dwindling personal privacy continue to dominate headlines. To deliver on the promise of everything the Internet of Things hopes to be, personalization is a key component to making those dreams a reality. But in doing so consumer products face an interesting challenge: navigating the balance between enabling highly personalized experiences while at the same time shielding the personalized information produced from a perceived loss of privacy.

The balance is far from straightforward, as increasingly consumers are demanding deeper and more personalized experiences which can really only come to pass with data aggregation, personalized experience mining and machine learning. Consumers expect that the world around them will reduce and remove barriers based on their spending and engagement habits… but very quickly the consumer is quick to reject such advances if there is a feeling that their privacy has been violated.

71% of consumers disagree (53% of them very strongly) with the premise that it is, “fair for an online or physical store to monitor what I’m doing online when I’m there, in exchange for letting me use the store’s wireless internet, or Wi-Fi, without charge.”

Perhaps it’s not a big surprise that Wi-Fi, which is seen as almost an expected, free commodity in public spaces, shouldn’t come at the expense of a loss of privacy. But what is surprising is that consumers have an even more adverse reaction when presented with a direct financial benefit in exchange for data.

91% of consumers disagree (77% of them strongly) that, “if companies give me a discount, it is a fair exchange for them to collect information about me without my knowing.”

Yet, when surveyed the same consumers expect a financial benefit for repeat business to a store, and expect that the store should respond to their shopping habits over time with more personalized offers and discounts. The situation creates a difficult paradox for businesses, who face the prospect of having to meet a consumer demand for something that will immediately generate a negative response if accurately fulfilled.

Several studies show that consumers dramatically underestimate the amount of personal information they are currently sharing. Consumers tend to think of privacy in terms of silos; what they provide each service in isolation rather than the combined or aggregate data they are sharing. Consumers are understanding of Facebook knowing their birthday, but are surprised and troubled when their local grocery store recognizes it. Consumers largely do not understand what it means to allow one service to read from another (the “social login”), even though this is a common and well utilized model with most social networks and online services.

Increasingly, consumers report that they are becoming more frustrated with their loss of privacy, and feel more negative than in years past around their personal information being accessed and leveraged. However, they also feel like this loss of privacy is inevitable, and that poor regulations and unethical companies have in effect “stolen” from them and they are helpless to do anything about it. To make matters worse, many businesses have poorly implemented privacy as a policy, or done so in dense T&Cs that are rarely read or understood by consumers. This adds to the feeling of inevitability and helplessness, but it also explains a rising sense of frustration and mistrust with companies.

Consumer confusion is consistent; more than half (65%) of shoppers failed to understand that the statement, “when a website has a privacy policy, it means the site will not share my information with other websites and companies without my permission” is false. Further, 49% of American adults who use the Internet believe (incorrectly) that by law a retailer like a grocery chain must obtain a person’s permission before selling information about that person’s food purchases to other companies.

Invariably when a news agency “uncovers” these kinds facts about data sharing and privacy, it increases the negative reaction and mistrust in shoppers while doing very little to educate the masses on privacy in general. Misinformation is rampant, and rarely aligns to traditional generational or early-adopter lines. Unlike the typical “early adopter” technology curve, the balance between privacy and personalization bucks traditional “eventual acceptance” logic. In fact, early adopters into the technology are more likely to understand the privacy implications and reject usage rather than adopt… breaking the typical pathway of innovation.

Yet, we also face a world where personalized, immersive experiences are at the heart of the Internet of Things revolution… and this progress will continue as hardware costs fall, the value of connected services evolves from a luxury to an expectation and it becomes even easier for developers to connect experiences.

In general, consumers typically prefer personalized experiences that trigger with some level of initial engagement from the consumer. For example; a consumer may become alarmed if a digital sign greets them by name as they pass by it, but would be more apt to appreciate the experience if it did so after the consumer interacted with the screen in some fashion (like with a touch screen map in a shopping center). This level of engagement presents the illusion of a sense of control, rather than helplessness.

Personalized experiences that ultimately work best are either extremely focused on a fully inclusive environment (like a hotel or plane, where there is a general awareness and acceptance of the business knowing and leveraging personal information) or benefits that exhibit themselves in very general, “passively helpful” ways. An example of the former would be a hotel using the in-room television to welcome guests back if they had stayed previously, and offering benefits attached to the hotel that the guest had shown interest in previously (drinks, food, spa services, valet services or media). An example of the later would be a retail shop offering to email a receipt based on an address on file, or automatically translating a digital sign or kiosk based on their language profile.

Managing the psychology of personalization and privacy is the challenge that clever code can’t necessarily solve; it’s about maintaining a sense of trust between the seller and consumer and falls entirely into the world of User Experience. One thing is for certain: the problem isn’t going to vanish by itself. The transition of privacy is the future of personalization.

Facts and figures obtained from “The Privacy Fallacy”:

https://www.asc.upenn.edu/sites/default/files/TradeoffFallacy_1.pdf