Data protection: How can SMEs secure online consumers’ trust?

Published on 09/08/2022 by Andrew Blair

In a previous article, we investigated online shoppers’ privacy concerns. In this follow-up piece, we find out how a company’s data practices can affect online consumer trust. 

An online shopper verifying online data privacy through phone security

Online threats such as cyberattacks and data breaches call for organisations to prioritise data protection so customers can trust that their personal information is in safe hands. In part one of this two-part series on data privacy, we found that nearly two-thirds (64%) of online consumers evaluate a company’s data privacy reputation before doing business with them. As such, gaining online consumer confidence is imperative for SMEs to attain customer information. Getting to know as much about your customers as possible can then shape business campaigns by building individual brand connections through personalised customer experiences.

So, what does it take to earn online consumer trust so potential customers will be willing to share their sought-after data with your organisation? To find out, we surveyed 1,037 Australians who shop online at least once a month. We wanted to know if online shoppers value companies that value their privacy, and what’s important to them for a company to gain their trust. We also looked at online consumers’ opinions about the need for data privacy regulations and what they see as their biggest online privacy challenges. The full survey methodology is at the end of this article.

Online consumers value companies that value their privacy 

Building trust with your customers partly depends on how much you align your values with your customers’ values. A customer-focused approach can go a long way to gaining their confidence, and prioritising how you treat their data can help in pursuing their trust. The majority of survey-takers perceived a company’s strategy for handling consumer data as a sign of how it treats its customers. 

 single statistic showing 90% of respondents who agree with how a company treats their data reflects how they treat them as customers.

Valuing your customers’ privacy can help achieve consumer confidence to share their information with your company. Customer data can give you better insights into your customers’ behaviour and preferences to then help your organisation deliver better, personalised experiences. Therefore, SMEs must keep in mind how they collect, use, and protect their customers’ information and value their customers’ data privacy as much as they value their customers. 

Half of online consumers would pay more to avoid data collection 

When consumers shop online, they are often required to disclose specific personal information that companies collect and use to get more efficient leads when channelling direct marketing or targeted advertising. However, not all respondents felt the same about companies collecting their personal information. There is a divided view among Aussies in which half of the respondents (50%) said they wouldn’t pay extra for a private version of a product, whereas 42% said ‘yes, they would pay a little more’, and 8% ‘a lot more’ for a product or service if the company would not collect or monetise their personal information. 

A donut chart showing the willingness of online consumers to pay more for a private version of a product or service.

From a business perspective, charging for a private version of a product or service may be lucrative. However, this means sacrificing the opportunity to collect valuable information that could help your business make data-driven decisions.

Interestingly, 67% of the respondents either ‘somewhat agree’ or ‘strongly agree’ that they are happy to share personal information if it means better, more efficient products or services. Furthermore, 65% of survey-takers agreed they would willingly share personal details in return for personalised products or services. These results indicate some disparity in consumer perception of how companies use their data. We took a further look to see what survey-takers felt was essential to them for companies to gain their trust as new customers.

Online consumers trust companies that explain how their data is protected

We asked participants to rate the importance on a scale from ‘not at all important’ to ‘very important’ of eight ways a company can earn their trust as a new customer. Our survey found that the most importance was placed, by a combined total of 93% of respondents, on how clearly a company explains how their data will be protected, with 37% of Aussie online consumers considering this as ‘somewhat important’ and 56% ‘very important’. 

In contrast, a combined total of 16% of respondents placed the least importance on whether they had heard of the company before (11% said it was ‘not very important’ and 5% said it was ‘not important at all’). Therefore, the results indicate that, regardless of how well-known your company is, transparency around data protection is essential in gaining online consumer trust.

5 tips to keep your customer data secure

Reassuring customers about data protection by providing a clear explanation of your privacy policy is an opportunity to gain their trust in your security measures. Here are five tips to safeguard customer data: 

  1. Compliance: Minimise access to data and train staff about the data protection policies of your business as well as legal procedures to ensure sensitive customer information is handled safely.
  2. Data encryption: Prevent unauthorised access to sensitive customer information with encryption software. The use of built-in encryption, cryptography, and policy controls converts data and makes it unreadable to hackers.
  3. Data verification: Reduce the impacts of data breaches by verifying data rather than storing sensitive high-risk information such as credit card details. 
  4. Multi-factor authentication: Include additional security software for login processes to help validate and verify the identity of users through various authentication methods.
  5. Software updates: Keep on top of software updates by doing routine updates to ensure the latest security fixes are installed.

According to our respondents, the four top elements considered ‘very important’ for a company to gain the trust of a new online customer is when a company:

  • Clearly explains how their data is protected (56%)
  • Clearly explains how their data is used (53%)
  • Clearly explains the types of data it collects (48%)
  • Indicates compliance with relevant industry regulations (45%)

In light of the above, a combined total of 67% of the respondents either ‘somewhat agree’ or ‘strongly agree’ that they trust companies are using their personal information responsibly. However, survey-takers said that they would still prefer to pay for a service (60%) or would prefer to see ads (63%) rather than share their data. 

Data privacy regulations are necessary for online consumers

Taking an honest approach to data privacy by clearly explaining how data is protected, used, and collected is one way to earn online consumer trust. In addition to transparency, adhering to data privacy best practices and legislation is also necessary to earn online consumers’ trust. Our survey found that only 6% of respondents thought data privacy regulations were unnecessary. The majority of the respondents felt that there is a need for data privacy regulations in the following:

  • How companies use their data (76%)
  • How companies protect their data (73%)
  • Whether companies sell their data (70%)
  • How companies collect their data (66%)

Privacy by design

Adopting privacy by design is a way to efficiently and effectively protect consumer privacy. It’s a process to ensure good privacy practices are built into your organisation’s decision-making and the design and structure of your information systems, business processes, products, and services. A Privacy Impact Assessment (PIA) identifies a project’s impact on the privacy of individuals and sets out recommendations for managing, minimising, or eliminating those impacts.

Data privacy challenges for online consumers

With the end of third-party cookies on the horizon, the update from Google Chrome may be music to the ears of privacy-focused consumers. However, this could pose a challenge for today’s marketers, reliant on data and analytics to better understand and anticipate their customers’ needs. In return for customers to share their data, SMEs need to provide their customers with a more transparent data collection process. That process should clearly lay out what they intend to do with that data. When asked our survey-takers what their biggest online data privacy challenge is and 43% said ‘understanding how companies use the data they collect about me’. 

Understanding how companies protect customer data also posed a challenge for respondents. With data breaches frequently reported in the media, it is important to reassure customers their data is safe. A data breach happens when personal information is accessed, disclosed without authorisation, or lost. In the event of a data breach, organisations covered by the Privacy Act 1988 need to notify the affected individuals and the Office of the Australian Information Commissioner (OAIC).

When data security impacts customers it can severely damage an organisation’s reputation and make it difficult to maintain existing relationships or attract new customers.

Key statistics showing the biggest privacy challenges for online consumers

Data protection is paramount for online consumers’ trust

Organisations need to communicate clearly to customers how they will use their data. Most Aussie online shoppers don’t understand how companies use their personal information and think the use of their data should be controlled by regulations. 

Although the majority of survey-takers trust companies to use their personal information responsibly, the protection of data remains a higher concern. If companies want to gain consumer confidence they should prioritise data security and show that they value customers’ data privacy as much as they value their data. 

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To collect this data, Software Advice interviewed 1,037 Australians online in June 2022. The candidates had to fulfil the following criteria:

  • Australian resident
  • Above the age of 18
  • Shop online at least once per month 

NOTE: This document, while intended to inform our clients about the current data privacy and security challenges experienced by companies in the global marketplace, is in no way intended to provide legal advice or to endorse a specific course of action. For advice on your specific situation, consult your legal counsel.

This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the author

Andrew is a Content Analyst for Software Advice, giving SMEs insights into tech, software and business trends. Interest in entrepreneurship, furthering projects and startups.

Andrew is a Content Analyst for Software Advice, giving SMEs insights into tech, software and business trends. Interest in entrepreneurship, furthering projects and startups.