Insight is power: Understanding the terms of the consumer-firm data exchange

TLDR

Retailers undergoing online and digital transformations recognize that collecting, analyzing, and translating consumer data is essential for competitive advantage, yet the data exchanged is governed by often implicit terms that shape consumer expectations. This manuscript develops a conceptual framework that identifies four key criteria—data ownership, intimacy, permanence, and value—underlying consumer perceptions of data exchange terms, and examines how these terms influence firm outcomes, including factors that enhance data leverage and those that heighten violation risk. The framework delineates the four criteria as the core components of consumers’ perceived terms of data exchange. The study shows that operating within these terms signals privacy respect while enabling firms to deliver data‑driven value, whereas violating even implicit terms can trigger financial, reputational, and legal repercussions; it also proposes 11 research questions and managerial implications for better leveraging data in customer relationships.

Abstract

As online and digital transformations disrupt their business, retailers are aware of the crucial role of collecting, analyzing, and translating consumer data into competitive advantages. Underlying these disclosures of data from consumers to firms are, often implicit, terms that guide consumers’ expectations regarding the data exchange. This manuscript develops and discusses a conceptual framework that identifies four key criteria (data ownership, data intimacy, data permanence, data value) that make up consumers’ perceptions of the terms of the data exchange, and highlights how these terms affect important firm outcomes. It identifies factors that enhance firms’ ability to leverage consumer data, as well as factors that could increase the risk of violating the terms of these agreements. Understanding and operating within these terms is essential to signal respect for consumer privacy, while allowing firms to deliver data-driven value to consumers. Violating these terms, even those that are implicit, can create negative externalities with financial, reputational, and legal repercussion on the firm. The authors propose 11 research questions, and also provide managerial implications for how to better leverage data from and for valuable customer relationships.