Privacy guarantees can reduce sales
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Imagine. You sit down at a cozy neighborhood café to enjoy a nice breakfast.
You take a seat by the window and notice a big sign on the glass:
“BULLETPROOF GLASS. European standard EN 1063 certified. Made in Germany. Tested against Kalashnikov AK 47 bullets”
(Actual bulletproof glass description, by the way).
Would you feel more relaxed, or would you freak out and get out of there as fast as possible?
Why would this relaxed little cafe even have bulletproof glass? And why are they so keen on telling me about it?
While not so extreme, privacy notices on websites can have the same effect.
Let’s take a look at this new study from Utah State, Ohio State, and Harvard University.
P.S.: Wow, already 367 sales of Ariyh’s first ever Playbook, the Playbook of Pricing & Promotions. Thank you for all your support with the launch!
I’m very happy with the initial feedback I’ve been receiving. Let me know how you use it to boost your profits 🙂
Impacted metrics: Customer acquisition
Channels: Privacy | Website | App
For: B2C. Can be tested for B2B
Research date: February 2022
Avoid prominent formal notices that use technical or legalese language (e.g. “256-bit highly secure data encryption”, “Acme LLC, in compliance with GDPR and CCPA, will legally ensure…”). Unless people have a reason to distrust you (e.g. due to a high-profile data breach).
Either way, take great care of your customer’s data. It’s the ethical thing to do, and if you don’t and something goes wrong it will destroy customers’ trust in you.
Formal privacy notices on websites and apps can make people feel more, rather than less, vulnerable. In turn, this reduces sales.
Doesn’t happen if people are already distrustful of the company
Is reduced or reversed when the notice uses friendly, non-legalese language (e.g. “It goes without saying, your data is safe with us”)
For example, as part of a series of 6 experiments:
Canadian credit-report fintech Borrowell’s signup rate was 4.6% higher (41.48% vs 39.66%) when they simply linked to Borrowell’s privacy notice on the first page of their form, rather than explaining how they safeguard customer information
🧠 Why it works
When directly asked about privacy and data protection, we prefer companies that offer us more protection and privacy.
But when we are shopping for a product we like, that's not usually the main thing we are thinking about.
We expect to have an unwritten understanding between us and the company we are buying from: we open up and share our data, and you - obviously - have good intentions of keeping it safe.
But most privacy notices are formal legal contracts, not unwritten understandings of trust. And formal contracts are known to actually harm trust.
So legal, formal sounding, assurances that we should not worry about our data - when we weren’t even worrying about it in the first place - actually backfire and reduce our trust.
In turn, when we trust a company less, we’re less likely to buy from it - especially if it involves handing over our data.
As data privacy and data transparency become more commonly expected, people might come to expect clearer assurances of data protection. If these expectations grow, the effect could reverse when privacy protection is not clearly and obviously explained.
🏢 Companies using this
In a survey of 70 managers, 52 (74%) expected that showing a privacy notice would make customers feel more secure. 10 (14%) thought it would have no effect, and only 8 (11%) thought it would make them feel less secure.
An analysis of privacy notices of 50 random companies listed on the NASDAQ stock exchange, found that they mostly used formal language rather than friendly, caring, words.
⚡ Steps to implement
You must have a privacy and data protection policy if you collect data, but be aware of how you present it in key moments (e.g. when a person first lands on your website, while signing up, when paying).
🔍 Study type
Online experiments and field experiment (on 15,864 prospective customers of Borrowell in May 2019)
The Bulletproof Glass Effect: Unintended Consequences of Privacy Notices. Journal of Marketing Research (February 2022).
Aaron R. Brough. Huntsman School of Business, Utah State University.
David A. Norton. The Ohio State University
Shannon Sciarappa. Harvard Business School, Harvard University
Leslie K. John. Harvard Business School, Harvard University
Remember: This is a new scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.
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