June 15, 2007, 12:00 AM

Consumers will pay more to shop at sites that protect their privacy

A Carnegie Mellon study shows consumers are more likely to shop at online retailers that respect privacy, even when they have to pay more, if there is an easy way to determine which retailers have strong privacy policies.

A study by researchers at Carnegie Mellon University suggests consumers will pay more for privacy-if there is an easy way to determine which online retailers have strong privacy policies.

One step that would make it easier to make that determination is if privacy rankings appeared along with results from major search engines, says Lorrie Cranor, one of the authors of the study and an associate professor of computer science, engineering and public policy at the Pittsburgh university. She says she has had discussions with “more than one” search engine about including privacy rankings next to e-retailer listings. “None of them have said yes we’ll do it, but we’ve had some interest,” Cranor says.

She says the results of the study suggests online retailers that have strong privacy policies-such as promising not to share consumer information with others and not to bombard customers with marketing e-mails-should make that clear in simple language on a prominent web page.

“We’ve learned that if you don’t make privacy information really obvious nobody knows about it because people don’t actually read privacy policies,” she says. “If you have a privacy policy that’s better than your competitors, you should let people know about it.”

The study that Cranor and her colleagues reported on at a recent information security conference suggests that’s worth doing because some consumers will make purchasing decisions based on privacy-even if it means paying a little more.

The study conducted last fall in a laboratory setting involved 72 individuals who had credit cards and had made purchases online. They were each given $45 and instructed to use their own credit cards to buy a quantity of batteries and a vibrator-an item chosen because consumers would be likely to want to keep the purchase quiet. Each purchase was expected to cost around $15, and consumers had an incentive to search for the lowest price because they could keep any change left over from their $45.

Participants were divided into three groups: one saw privacy rankings of retailers when they searched for items, a second saw only what the search engines normally present, and a third group saw additional information that had no relation to privacy. Those who saw privacy rankings were more likely to purchase at sites with strong privacy policies, even if they had to pay more.

“When we have privacy information we see at least two-thirds of people will make a purchase not at the first site on the list but a site that offers some additional privacy protection, even at a higher price,” Cranor says.

In the study, those with privacy information paid on average about 60 cents more per item. But Cranor says that does not mean they would not have been willing to pay an even higher premium if necessary. “We know that given the prices offered they were willing to pay that amount,” she says.

The privacy information was presented in the form of four squares next to each search result: sites with the strongest privacy protections had all four squares colored green, while those with the weakest protections had no green squares. The ratings came from a technology called Privacy Finder that can assess the privacy information on a web site automatically, as long as the privacy policies are presented in a standardized format known as P3P developed by the World Wide Web Consortium, an international body that develops Internet protocols. Cranor was among the authors of P3P.

Privacy Finder submits search queries to Google and Yahoo, obtains the results, then checks for privacy policies of the sites in the search results and displays icons denoting the level of privacy assurance of each site. Privacy Finder was developed by Carnegie Mellon’s Usable Privacy and Security Laboratory.

Cranor says Privacy Finder is available and running on a Carnegie Mellon server, but has few users. “Imagine if this were built into a major search engine and everyone saw these privacy icons,” she says. She says that would be an incentive for retailers to adopt strong privacy policies and present them in the P3P format so that they would get high privacy ratings on a search results page.

Cranor says her team plans further studies, including one involving volunteers who will use Privacy Finder as they shop from their home computers to see whether the privacy rankings influence consumers’ purchase decisions under non-laboratory conditions.

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