How brands can solve the personalization and privacy paradox

This is the personalization paradox. It’s a dilemma companies must navigate carefully if they want to be known for great customer experience.

This tension between personalization and privacy is one of the key insights from the Qualtrics 2025 Consumer Trends Report, which surveyed nearly 24,000 consumers across 23 countries. Two-thirds (64%) of respondents said they prefer to buy from companies that personalize their interactions. Yet only 27% are comfortable with organizations using unsolicited data to achieve that level of customization.

This reluctance to share data is driven by the finding that only 33% of consumers trust companies to use the personal information they’ve shared responsibly, a reality that was likely influenced by high-profile data breaches and instances where data was misused.

Trust as Currency

Consumers are more likely to buy from brands that understand their preferences, deliver experiences that feel bespoke, and personalize their interactions. It’s easy to see why: Personalization can make shopping more convenient, content more relevant, and overall experiences more enjoyable.

At the heart of solving the personalization paradox issue is trust. Personalization relies on access to consumer’s data, but trust is the currency that determines whether consumers are willing to share that data.

The more a consumer trusts a brand, the more likely they are to feel comfortable with sharing personal information. But only half are comfortable with companies using their purchase history to create personalized experiences, according to the report’s survey. Even fewer trust companies to use their website visits, chat bot interactions, and phone calls to customer service to tailor services to their needs, leaving a significant gap for businesses to address.

Building trust starts with transparency. Consumers want to know what data is being collected, how it’s being used, and what they can expect in return. Brands that are open and upfront about their data practices are more likely to gain consumer trust. This means giving consumers control by allowing them to opt-in to data collection and personalize their preferences without feeling coerced.

Three Ways to Make Personalization Possible

As consumers grow more protective of their data, businesses must find new ways to meet their expectations for personalized experiences:

Consent-driven data collection. This approach prioritizes consumer control, giving them the ability to decide what information they share and how it will be used. By providing these options, businesses can combine direct consumer input with other data sources to deepen relationships with consumers and provide meaningful personalization.

Zero-party data—information that consumers willingly provide to a company. Unlike third-party data, which is often collected and shared without a consumer’s direct knowledge, zero-party data is shared explicitly by the consumer. This not only ensures compliance with data protection regulations but also builds trust by giving consumers control. Examples of zero-party data include customer emails, phone numbers and loyalty program information.

Artificial intelligence (AI) tools to analyze customer behavior patterns. AI-powered recommendation engines can tailor product suggestions based on a consumer’s purchase history without needing access to sensitive personal data.

Real-time insights enabled Lumen, a communications technology company, to tailor its interactions with customers based on their specific needs and recent experiences. Call-center agents can now see a Customer Health Score that fluctuates daily based on real-time operational inputs. The platform pulls data from more than two dozen sources like customer interactions and service performance. The added insights enable agents to communicate with greater relevance, as well as empathy. As a result, Lumen has pushed past its customer asxperience (CX) plateau, enjoying a 17-point surge in year-over-year net promoter score (NPS). Lumen is a Qualtrics Customer.

Personalization or Privacy? The answer should be both.

Brands should not assume existing customers will stay loyal without intentional effort to keep them.

Consumers surveyed were clear that following through on basic commitments carries the most weight. They want to be able to trust what a business tells them. New company initiatives may test comfort zones, so it is essential to have the basics in place and uphold them.

In this new era of consumer expectations, businesses will need to solve the personalization paradox if they want to retain customer trust and loyalty.

Personalization and privacy should not be mutually exclusive. With the right approach, companies can provide the tailored experiences consumers want while respecting their privacy.

This isn’t just about meeting current consumer expectations today—it’s about preparing for the future. As the demand for personalization grows, so too will the expectation for businesses to manage it in a way that is both ethical and transparent.