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May 28, 2002

Proving Privacy

Having a privacy policy is no longer enough. Consumers want verification that companies are actually following through on their promises

By Kristin Valente

Now, more than ever, the world is operating in a less trusting environment. Recent events have significantly changed the global economic and competitive landscape as well as consumer and business confidence. Business leaders find themselves managing in a climate of unprecedented challenges, uncertainty, and growing trust discontinuities.

A difficult economy often results in a return to traditional management approaches and concerns. But times have changed. Businesses have a significant and fundamental need to build and maintain trusted relationships at all enterprise levels. And meeting that need must become a core business value. Maintaining and growing the enterprise requires the preservation of loyal customers, the attraction of new markets, the retention of high-performing employees, and the continuation of successful partnerships and ventures. What's more, performing a solitary action won't gain this trust — it must be earned every day.

Trust needs to permeate throughout the enterprise, but perhaps the single most visible element in the trust debate today is privacy — both online and off. Not surprisingly, for the third year in a row, 75 percent of consumers recently surveyed by Harris Interactive felt that they had lost all control of how businesses used their personal information. Here's the wake-up call: 83 percent of consumers polled stated that they would stop doing business entirely with a company if they heard or read that a company was using its customers' information in a way they consider improper.

Businesses have missed consumer expectations. In their zeal to leverage technology and customer information databases, businesses have alienated consumers to the extent that most fear that they will receive unwanted product offers and an alarming majority — 56 percent — has major concerns that businesses aren't keeping the promises they make in their privacy policies.

(The survey, entitled "Privacy On and Off the Internet: What Consumers Want." was conducted by Harris Interactive for Privacy & American Business and sponsored by Ernst & Young and the AICPA. Harris surveyed more than 1,500 American consumers from Nov. 5-22, 2001.)

Waiting for Regulation

The debate over privacy legislation likely distracts most businesses from the core issue of privacy as a trust issue between the business and the consumer. Waiting for regulation may be just a further signal to consumers that businesses won't protect their data unless mandated to do so. What's more, more legislation isn't necessarily what consumers want. In fact, when Harris Interactive asked consumers if existing laws and organizational practices provide a reasonable level of protection for consumer privacy 62 percent disagreed. That's up from 38 percent just two years ago.

At the outset, businesses intended to demonstrate that self-regulation was the answer to consumer and government privacy concerns. Business, with the assistance of industry-based privacy standards, could establish self-monitoring mechanisms to ensure that consumer confidence in privacy practices was established and maintained. Yet these programs failed to provide enforcement mechanisms. Consumers were left with no choice but to return to government solutions for relief.

The result has been a number of privacy laws, globally, and a myriad of proposed laws at the federal, state, and local levels. Often focused on a specific industry segment or business model, these laws mandated activities and set performance minimum standards. Consumers want more.