October 30, 2002

The Only Choice

A privacy strategy is no longer just an option - it's a requirement

by Matthew Ellis

Online retailer Toysmart.com filed and went bankrupt after including its customer database on a list of assets to be sold. Internet advertising company DoubleClick Inc. was accused of compiling and selling customer information without proper disclosures - and later became the subject of a class-action lawsuit and complaints to the Federal Trade Commission (FTC). Pharmaceutical company Eli Lilly blamed a "programming error" when it publicly displayed the email addresses of approximately 600 Prozac users.

These are only a few examples of recent high-profile privacy debacles. Throw in the vast amount of new privacy legislation on the horizon, not to mention lawsuits pending against many online retailers, and the message is clear: Privacy is no longer a choice or a concept. It's a reality - part of the cycle that affects a company's brand and shareholder value.

To be successful, a company must develop, build, and execute a global strategy to protect individuals' information, as well as brand privacy as an ethical foundation of the organization. This strategy must specifically deal with privacy legislation and be consistent and compliant with an organization's adopted privacy policies, procedures, and ethics.

To be effective, the strategy should follow best practices for the organization's geographic regions and include ways to prove or build trust in its privacy measures and policies with hard data. Organizations must also clearly communicate their strategies to their customers and employees and frequently review their current state of privacy.

Customers Demand It

As recently as three years ago, companies thought a privacy strategy was nice to have - not a necessity for business success. In today's marketplace, however, it's nonnegotiable. Consumers demand it, and leading and ethical companies must deliver it.

In a 1999 survey conducted by The Wall Street Journal and NBC News, 29 percent of people polled said they were more worried about threats to their personal privacy than overpopulation, war, and global warming. This public concern has substantially increased since the events of Sept. 11th and e-commerce's passing through its "bubble" phase, and is becoming a viable channel for doing business.

Although more consumers are increasingly buying goods and services online, they still distrust companies with their personal information. A 2001 Forrester Research report stated that $15 billion of projected 2001 e-commerce revenues could be unrealized because of consumers' privacy concerns. This is a huge number in the wake of the market slowdown and low consumer confidence numbers provided by the U.S. Government.

A recent survey conducted by third-party research firm Harris Interactive echoed these findings. The survey, "Privacy On and Off the Internet: What Consumers Want," included feedback from 1,529 people interviewed online in November 2001.

The survey revealed three major consumer concerns regarding the way online companies handle personal information: Companies might provide information to other companies without permission

Hackers might steal personal data.

Businesses must give consumers more assurance than typical privacy policies to earn their trust. To succeed, organizations need to be able to develop, build, and maintain trust with consumers through a more strategic, concerted education and branding effort.

How to Begin

To develop a successful privacy branding strategy, companies must first gather baseline data on their privacy policies and issues. They must ask themselves: How is customer information currently used? Who has access to this information, and how and why do they use it?

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