Data Privacy: Effects on Customer and Firm Performance
Abstract
Although marketers increasingly rely on customer data, firms have little insight into the ramifications of such data use and do not know how to prevent negative effects. Data management efforts may heighten customers’ vulnerability worries or create real vulnerability. Using a conceptual framework grounded in gossip theory, the authors link customer vulnerability to negative performance effects. Three studies show that transparency and control in firms’ data management practices can suppress the negative effects of customer data vulnerability. Experimental manipulations reveal that mere access to personal data inflates feelings of violation and reduces trust. An event study of data security breaches affecting 414 public companies also confirms negative effects, as well as spillover vulnerabilities from rival firms’ breaches, on firm performance. Severity of the breach hurts the focal firm but helps the rival firm, which provides some insight into mixed findings in prior research. Finally, a field study with actual customers of 15 companies across three industries demonstrates consistent effects across four types of customer data vulnerability and confirms that violation and trust mediate the effects of data vulnerabilities on outcomes.
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If emails feel invasive, customer trust can drop, and poor data practices can harm a brand's reputation, making transparency in data usage essential for long-term success.
“Privacy concerns also play significant role; if emails feel invasive, customer trust can drop and poor data practices can harm brand's reputation, making transparency in data usage essential for long-term success (Acquisti & Gross, 2006;Martin et al., 2017).”
From Feeling Watched: A Phenomenological Exploration of Consumer Discomfort and Data Privacy Concerns in E-Commerce Personalized Email Marketing (2025) · cites this paper as Martin et al., 2017
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Walton, S., Wheeler, P. R., Zhang, Y., & Zhao, X.-L. (2020) · The Journal of Information Systems · doi:10.2308/isys-19-033 · Cited by 65
Breaking the Privacy Paradox: The Value of Privacy and Associated Duty of Firms
Martin, K. E. (2019) · Business Ethics Quarterly · doi:10.1017/beq.2019.24 · Cited by 68 · see citing works
Self-citationBowen, C., & Snoke, J. (2019) · Journal of Privacy and Confidentiality · doi:10.29012/jpc.748 · Cited by 64 · see citing works
“…data access for seemingly research purposes, such as the Facebook - Cambridge Analytica Scandal, have heightened data privacy concerns over how private companies and government organizations gather and disseminate information [Martin et al., 2017, Tsay-Vogel et al., 2018, González et al., 2019].”
Motivations and barriers to purchasing online: understanding consumer responses
Rahman, S. U., Khan, M. A., & Iqbal, N. (2018) · South Asian Journal of Business Studies · doi:10.1108/sajbs-11-2016-0088 · Cited by 76 · see citing works
Voorveld, H. A. M., Meppelink, C. S., & Boerman, S. C. (2024) · International Journal of Advertising · doi:10.1080/02650487.2023.2264045 · Cited by 62 · see citing works
“…with regards to the use of algorithms in social media because, for example, transparency and control have a strong impact on trusting a company (Martin, Borah, and Palmatier 2017) and may influence the effectiveness of social media advertising (e.g. Morimoto 2021; Youn and Shin 2020; Segijn…”
InfluentialData Breach Announcements and Stock Market Reactions: A Matter of Timing?
Förderer, J., & Schütz, S. (2022) · Management Sciences · doi:10.1287/mnsc.2021.4264 · Cited by 62 · see citing works
Review of the changing electricity industry value chain in the ICT convergence era
Park, C., & Heo, W. (2020) · Journal of Cleaner Production · doi:10.1016/j.jclepro.2020.120743 · Cited by 62 · see citing works
Lefkeli, D., Karataş, M., & Gürhan-Canli, Z. (2024) · International Journal of Research in Marketing · doi:10.1016/j.ijresmar.2023.08.011 · Cited by 62 · see citing works
Perceived brand transparency: A conceptualization and measurement scale
Montecchi, M., Plangger, K., West, D., & de Ruyter, K. (2024) · Psychology & Marketing · doi:10.1002/mar.22048 · Cited by 61 · see citing works
Alkis, A., & Kose, T. (2022) · Computers in Human Behavior · doi:10.1016/j.chb.2022.107412 · Cited by 61 · see citing works
Drivers of privacy concerns when interacting with a chatbot in a customer service encounter
Bouhia, M., Rajaobelina, L., Tep, S. P., Arcand, M., & Ricard, L. (2022) · International Journal of Bank Marketing · doi:10.1108/ijbm-09-2021-0442 · Cited by 94 · see citing works
Data Privacy in Retail: Navigating Tensions and Directing Future Research
Martin, K. D., & Palmatier, R. W. (2020) · Journal of Retailing · doi:10.1016/j.jretai.2020.10.002 · Cited by 75 · see citing works
Self-citationMonitoring Policies and Gig Workers’ Job Preferences
Liang, C., Peng, J., Hong, Y., & Gu, B. (2019) · Information Systems Research · doi:10.1287/isre.2022.1130 · Cited by 72 · see citing works
“c) Workers have a sense of autonomy (Martin et al. 2017).”
BackgroundInfluentialKey, T. M., Clark, T. W., Ferrell, O. C., Stewart, D. W., & PITT, L. F. (2020) · AMS Review · doi:10.1007/s13162-020-00176-7 · Cited by 68 · see citing works
Signaling revisited: The use of signals in the market for IPOS
Park, U., Borah, A., & Kotha, S. (2016) · Strategic Management Journal · doi:10.1002/smj.2571 · Cited by 58 · see citing works
Self-citationWang, Z., Yuan, R., Luo, J., Liu, M. J., & Yannopoulou, N. (2023) · Journal of Business Research · doi:10.1016/j.jbusres.2023.114070 · Cited by 63 · see citing works
Effects of data breaches from user-generated content: A corporate reputation analysis
Confente, I., Siciliano, G., Gaudenzi, B., & Eickhoff, M. (2019) · European Management Journal · doi:10.1016/j.emj.2019.01.007 · Cited by 56 · see citing works
Labrecque, L. I., Markos, E., Swani, K., & Peña, P. Y. (2021) · Journal of Business Research · doi:10.1016/j.jbusres.2021.06.054 · Cited by 65 · see citing works
Bùi, K. (2020) · Journal of Promotion Management · doi:10.1080/10496491.2020.1838028 · Cited by 55 · see citing works
“Therefore, the customers recognized their information provided through services, including mobile banking, was being used not only by banks but also by other parties such as insurance and real estate (Martin et al., 2017).”
BackgroundArdabili, B. R., Pazho, A. D., Noghre, G. A., Neff, C., Bhaskararayuni, S. D., Ravindran, A., Reid, S., & Tabkhi, H. (2023) · Computational Urban Science · doi:10.1007/s43762-023-00097-8 · Cited by 69 · see citing works
“Either the firms misuse the shared video records [9]or some staff in the firm illegally use them [10], individuals’ privacy is violated.”
Backgroundvan Angeren, J., Vroom, G., McCann, B. T., Podoynitsyna, K. S., & Langerak, F. (2022) · Strategic Management Journal · doi:10.1002/smj.3394 · Cited by 62 · see citing works
“This naturally leads to skepticism and privacy concerns among customers, who question how a free product makes money and what happens to their personal data in the process (Martin et al. , 2017), and these concerns can have considerable impact on product appeal.”
BackgroundProtecting data privacy is key to a smart energy future
Véliz, C., & Grunewald, P. (2018) · Nature Energy · doi:10.1038/s41560-018-0203-3 · Cited by 54 · see citing works
Touriano, D., Sutrisno, S., Kuraesin, A. D., Santosa, S., & Ausat, A. M. A. (2023) · Jurnal Minfo Polgan · doi:10.33395/jmp.v12i1.12454 · Cited by 53 · see citing works
“The compromise of data privacy can have detrimental effects on the trust of employees and the overall reputation of the organisation (Martin et al., 2017).”
BackgroundConsumers’ privacy calculus: The PRICAL index development and validation
Beke, F. T., Eggers, F., Verhoef, P. C., & Wieringa, J. E. (2021) · International Journal of Research in Marketing · doi:10.1016/j.ijresmar.2021.05.005 · Cited by 64 · see citing works
Cloarec, J. (2022) · Journal of Business Research · doi:10.1016/j.jbusres.2022.07.045 · Cited by 58 · see citing works
When and how consumers are willing to exchange data with retailers: An exploratory segmentation
Pallant, J. I., Pallant, J. L., Sands, S., Ferraro, C., & Afifi, E. (2021) · Journal of Retailing and Consumer Services · doi:10.1016/j.jretconser.2021.102774 · Cited by 62 · see citing works
van Ooijen, C., Ubaldi, B., & Welby, B. (2019) · OECD Working Papers on Public Governance · doi:10.1787/09ab162c-en · Cited by 49 · see citing works
AI is Changing the World: For Better or for Worse?
Grewal, D., Guha, A., & Becker, M. (2024) · Journal of Macromarketing · doi:10.1177/02761467241254450 · Cited by 48 · see citing works
“Data privacy issues arise because AI requires vast (user) data, which are often stored for longer and contain richer information (e.g., about family members) than users realize (see also Martin and Murphy 2017; Martin, Borah, and Palmatier 2017).”
A study of KOL effectiveness on brand image of skincare products
Xiong, L., Cho, V., Law, K. M. Y., & Lam, L. (2021) · Enterprise Information Systems · doi:10.1080/17517575.2021.1924864 · Cited by 58 · see citing works
“Furthermore, Martin, Borah, and Palmatier (2017) showed that data vulnerability would reduce trust and in turns have negative impacts on firm performance.”
BackgroundReacting to the scope of a data breach: The differential role of fear and anger
Chatterjee, S., Gao, X., Sarkar, S., & Uzmanoglu, C. (2019) · Journal of Business Research · doi:10.1016/j.jbusres.2019.04.024 · Cited by 55 · see citing works
- Authors
- Martin, K. D., Borah, A., & Palmatier, R. W.
- Affiliations
- Colorado State University (US)
- University of Washington (US)
- Venue
- Journal of Marketing
- Publisher
- SAGE Publications
- Published
- 2017-01
- Volume
- 81
- Issue
- 1
- Pages
- 36-58
- ISSN
- 0022-2429 (ISSN-L)
- 1547-7185
- OpenAlex
- W2495772237
- Cited by
- 786
- References
- 0
- Citations by year
- 2026: 123 · 2025: 132 · 2024: 92 · 2023: 99 · 2022: 97 · 2021: 67 · 2020: 82 · 2019: 54 · 2018: 26 · 2017: 13 · 2016: 1
- FWCI
- 89.60
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Journal of Marketing (publishedVersion)
- Griffith Research Online (submittedVersion)
- Funders
- Colorado State University
- Marketing Science Institute
- Topics
- Social Sciences › Sociology and Political Science › Privacy, Security, and Data Protection
- Social Sciences › Business, Management and Accounting › Organizational Behavior and Human Resource Management › Customer Service Quality and Loyalty
- Physical Sciences › Computer Science › Information Systems › Information and Cyber Security
- Keywords
- data privacy, data management practices, consumer trust, data breaches, firm performance, customer performance, transparency, data control, spillover effects, rival firms
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Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
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