Increasingly businesses collect customer data for a range of marketing and management purposes. New research suggests that businesses may be susceptible to negative outcomes simply from customer's perceptions of potential harm from these practices.
Kelly D. Martin from Colorado State University and colleagues from the University of Washington provide evidence to suggest that customers' vulnerability worries, rather than general privacy concerns, lead to adverse business outcomes, such as customers falsifying information, spreading negative opinions about the firm, and switching behaviour. In a series of experimental and observational studies informed by gossip theory, the authors show that mere access to data can lead to feelings of violation and reduction in trust. A more extreme violation via a data breach hurts the performance of both the breached firm and competitors through spillover effects. Notably, the analyses also indicate that negative outcomes are suppressed by data use transparency and allowing customers control over their own data.
The findings are a starting point for thinking about how customers perceive and react to personal data use in the era of big data. The next step is to better understand how firms recover from data security breaches and manage perceptions around data collection, use and security in the long term.