Consumers Will Pay a Premium for Privacy

Consumers are willing to pay extra to buy items from online retailers when they can easily ascertain how retailers’ policies will protect their privacy, shows a recent study from Carnegie Mellon University.

In a report released on June 6, 2008, participants in the laboratory study used a Carnegie Mellon shopping search engine called Privacy Finder, www.privacyfinder.org, that can automatically evaluate a Web site’s privacy policies and display the results on the search results page. The study, led by Lorrie Cranor, director of the Carnegie Mellon Usable Privacy and Security (CUPS) Lab, found that people were more likely to buy from online merchants with good privacy policies, which were identified by Privacy Finder. They were also willing to pay about 60 cents extra on a $15 purchase when buying from a site with a privacy policy they liked.

The study is the first to suggest that people will pay a premium to protect their privacy when shopping online. Yesterday, the New York Times reported that Google has begun linking it’s privacy policy right off the home page.