Respect Privacy for Online Loyalty

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"Community, Identity, Stability" -- the planetary motto in Aldous Huxley's gray utopian classic, "Brave New World" -- have hauntingly become the three hot points for our brave new online world.


We have built a science fiction-like online global community, but achieving universal consensus on identity and privacy issues, and convincing nonbelievers that the Internet is a stable and safe place to conduct business, remain elusive goals.


If we are to build a successful and sustainable new online town square, we will have to face the inevitable -- that government involvement is necessary to help establish fair and consistent rules of conduct. Businesses, consumers and our government representatives need to work together now to develop a workable policy, or we invite reactionary legislation that could threaten online commerce.


Consumer suspicion of online commerce exists today because some of our e-commerce brethren view the online privacy equation backward. They want to place control of our identities in hands that consumers have no control over. Never mind that consumers tell them they would be willing to purchase more and give more personal information as long as they control the information and how it is used.


According to a recent report by the Pew Internet & American Life Project, Washington, 84 percent of Internet users are concerned about businesses having their personal information; only half had ever given personal information to a Web site; and less than half had ever bought anything online using a credit card. But businesses are not in tune with how consumers feel about privacy. In a recent survey of online businesses conducted by IntelliQuest, Austin, TX, 49 percent of online businesses believe that consumers feel their privacy rights are being adequately protected.


The Pew survey also showed that almost 64 percent of Internet users would provide personal information under the right circumstances. Yet 74 percent of online businesses believe that consumers would be less likely to visit Web sites if they are informed that the site would collect personal information, according to the IntelliQuest report. To top it off, only 51 percent of online businesses have a privacy policy posted on their Web site.


This is called the privacy gap.


The inconsistencies in these numbers are troubling. The stakes in our brave new online world are high as we try to build confidence that online commerce is safe and convenient.


Although 90 percent of businesses believe that self-regulation of privacy issues is working for their companies, only 54 percent of Internet marketers believe self-regulation is working for the industry. In addition, businesses realize that these privacy issues are holding back the e-commerce engine.


In the IntelliQuest survey, 92 percent of marketing decision-makers said they believe that consumers would purchase more goods and services online if they felt more confident about Internet privacy protection. But the privacy gap is holding the industry back from solving these issues.


Many people appreciate the convenience of online shopping. According to a report by the National Retail Federation, Washington, and Forrester Research, Cambridge, MA, online sales have grown 44 percent since January. Forrester projects that total annual online sales will hit $184 billion by 2004, equivalent to 7 percent of all retail sales.


But the migration to conducting business online is not a given as many think, as long as privacy registers as a true consumer concern.


There are five necessary components to online privacy protection that will build consumer confidence in online commerce:


Notice. It is essential to provide online consumers with prior notice outlining what personal information is being collected, how that information will be used, and whether it will be shared with third parties. Notice must be given before the consumer registers at the Web site.


• Permission. Web sites must actively request the online consumer's permission to be included in any marketing programs. Businesses that actively ask for the consumer to opt in to marketing programs will realize a more loyal and valuable customer.


• Access. Online consumers must have access to their profile information at all times. If a consumer gives up hiking and takes up skiing, that consumer should be able to easily update his profile with his preferred vendors.


• Control. Online consumers must be in control of their relationships with online services. Not only should they have the ability to update their profile information as they see fit, but also they must be able to opt out of the program completely. Most vendors have a "no questions asked" return policy. Vendors should have the same policy for consumers who want to be removed from their marketing lists.


• Consistency. Online privacy policies must be consistent across every Web site and apply to every online relationship. This is the only way consumers will feel secure visiting every Web site, and there is only one way to achieve it: through government guidelines. Consistency is the only way to make the first four points count, and to develop and maintain consumer confidence in online commerce.


Unfortunately, most online trade groups cannot accept the self-evident: Self-regulation has not and will not work, and the government is the only entity with the wherewithal to ensure that everyone plays by the same rules in respecting online privacy. It's the same formula behind the rotten apple spoiling the entire cart - it only takes one unscrupulous company to cast doubt on an entire industry. Government involvement would help everyone.


Consumers are saying the same thing. Ninety-four percent told the Pew survey that any company that violates its privacy policy should be disciplined. But who can provide the enforcement? Trade groups? Not likely.


Similar to that old cartoon with the politician running after the crowd shouting "Tell me where you are going, and I will lead you!" our elected officials are running fast to get ahead of the people on this issue. We dodged a legislative bullet this year, but we will not be as lucky next year unless businesses, consumers and the government work together now to design effective, workable guidelines.


E-commerce industry members must be bold in their willingness to accept a governmental role in exchange for a higher level of trust from their customers. Then we can get on with the important business of building our brave new world.


• Anand Jagannathan is founder/chairman of Responsys.com, Palo Alto, CA. Reach him at anandj@responsys.com.
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