Why Personalization Matters for Consumer Privacy

A recent survey shows that personalized benefits can help address consumer data privacy concerns.

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User data provides companies with rich opportunities for creating personalized experiences and tailoring services to customer needs. At the same time, recent high-profile abuses of consumer data have raised concerns over how companies can strike the right balance between personalization and privacy. To help inform decision-making, we recently ran a survey asking people about their views on the benefits of personalization, brand tracking of their activities, and the trade-offs between the two. The survey included 1,012 U.S. consumers between the ages of 18 and 70 who had purchased online in the past six months.

Across the board, people are concerned about brands tracking their activity, but the level of concern varies across activity type. Some 40% indicate they are not as concerned about their content consumption, purchases, online searches, and even opt-in wristband (such as Fitbits) usage being tracked and captured. The use of machine learning and advanced analytics capable of “hacking the consumer” by tracking digital content consumption and search behavior doesn’t seem to lead to increased customer anxiety.

The level of concern rises, however, with activities that are often considered more intrusive. These include algorithms having full-text access to emails, the use of facial recognition in physical stores, and voice recognition devices listening in while connected in homes.

How Perceived Benefits and Demographics Affect Privacy Concerns

As the benefits of personalization become more attractive for surveyed consumers, the level of concern about privacy declines. Not surprisingly, receiving individualized pricing in the form of discounts for a product or service that consumers really wanted was among the most favored benefits for data use, with 57% expressing excitement. Coming in second, with 55% expressing excitement, was receiving a free product or service that consumers wanted but felt was too indulgent or not high enough in priority to purchase themselves. Interestingly, receiving dedicated concierge services and personalized advice came in at the bottom of the list of customer delights (less than 25% excitement each).

Concern over data practices increases with age, however, while excitement over free benefits declines. Some 65% of those under age 24 are not concerned about companies analyzing their buying patterns compared with 30% for those over 65. Similarly, for younger consumers, the better the benefit, the less concerned they are about privacy compared with other age groups.

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An MIT SMR initiative exploring how technology is reshaping the practice of management.
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The authors wish to thank Charlie Guenther, Jason Keovichit, and Dynata for their research, analyses, and thought leadership in support of this article.

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