Eroding Customer Trust, One Data Auction at a Time

Sports Authority customers can expect to hear from Dick's Sporting Goods in the near future.
Data Analytics

Sports Authority customers can expect to hear from Dick's Sporting Goods in the near future. Sports Authority, which recently filed for Chapter 11 bankruptcy protection, has sold its intellectual property including about 114 million customers' files and 25 million email addresses to Dick's Sporting Goods in an auction, Los Angeles Times reports.

Businesses can legally sell consumer information as long as it is made clear in a privacy policy that the data can be transferred or sold if the company is acquired or goes out of business. Of course, few people take the time to carefully read a company's privacy policy before sharing their email address and other personal information. Moreover some companies, like Radio Shack, may try to renege on their promise not to sell their customer data. The result is a deepening distrust among consumers who are increasingly wary of sharing their personal information with brands.

Although many companies claim that they are using the data to improve the customer experience, consumers fear losing control over who has access to their personal data and getting spammed with irrelevant emails and ads.

In a survey of 8,000 consumers conducted by the Columbia Business School in conjunction with marketing analytics company Aimia, 75 percent of respondents were worried sharing data makes them targets for marketing campaigns and 86 percent wanted to exercise greater control over the data companies hold about them.

At the same time, consumers face a privacy paradox. Consumers value their privacy, but many will give away their personal information in return for free access to a service or a discount. In fact, 80 percent of the respondents said they would share a non-required piece of data for rewards points, and a majority would share data for more experiential benefits like product recommendations or a tool to help them with complex decisions.

But businesses would be foolish to assume that coupons and free service offers are enough for customers to continue sharing their data with them. As the report notes, "more and more consumers will likely take defensive actions. Therefore, the key issue for companies will be driving a value proposition that keeps consumers happy and willing to share their personal data."

In other words, the bar for gaining customer trust is rising and the sooner companies realize this, the sooner they can build customer relationships that drive up the bottom line.