Customer Data: Designing for Transparency and Trust

With the help of technology, companies today sweep up huge amounts of customer data. But they tend to be opaque about the information they collect and often resell, which leaves their customers feeling uneasy. Though that practice may give firms an edge in the short term, in the long run it undermines consumers’ trust, which in turn hurts competitiveness, say authors Morey, Forbath, and Schoop.

In this article, the three share the results of a survey of 900 people across five countries, which looked at attitudes about data privacy and security. It examined what people knew about the information trails they leave online, which organizations they did—and did not—trust with their data, and which data they valued the most.

The results show that the value consumers place on different data depends a lot on what it is and how it is used. In general, the perceived value rises as the data’s breadth and sensitivity increases from basic, voluntarily shared information to detailed, predictive profiles that firms create through analytics, and as its uses shift from benefiting the consumer to benefiting the company. If data is used to improve a product, consumers generally feel the enhancement itself is a fair trade, but they expect more in return for data used to target marketing, and the most in return for data sold to third parties.

To build trust, companies must be transparent about the data they gather and offer consumers appropriate value in exchange for it. Simple legal disclosures aren’t enough, however; companies must actively educate their customers and incorporate fairness into their products and models from the start. Companies that get this will win consumers’ goodwill and business and continued access to their data. Companies that don’t will find themselves at a serious disadvantage, and maybe even shut out.

HBR Reprint R1505H