Use privacy to build customer trust, loyalty

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There is a troubling reality within marketing. Too many companies fail to understand the strategic significance of privacy. In spite of a growing body of evidence that shows privacy's importance to marketing, and in spite of the obvious association between consumer privacy and brand trust, privacy is still regarded as an expensive inconvenience to the marketing community.

Privacy and information management research firm Ponemon Institute recently conducted a study titled "What Marketing Professionals Think About the Value of Privacy to Consumers." It asked nearly 300 randomly selected U.S. marketing professionals about marketers' attitudes toward privacy, privacy-related marketing practices and cooperation between marketing and privacy personnel.

What marketers think
The study found 51 percent of marketers believe privacy policies make marketing more difficult, while only 26 percent see privacy as no problem to their task. Of the marketers surveyed, 94 percent said that privacy compliance reduces substantially the number of potential contacts available to them, and 70 percent feel that privacy compliance adds unnecessary cost to a marketing program.

Furthermore, only 44 percent of marketers have ever sought assistance from their privacy office when planning or implementing a marketing campaign. It is also worth noting that 85 percent see the corporate privacy function as a resource for guidance on privacy law and regulations, while only 13 percent work with privacy personnel on ways privacy can add value to marketing's function.

Clearly there is a need for marketers and privacy professionals to better understand each other. The good news is that the gulf may not be as wide as it seems.

Seventy-three percent of marketers said that customer trust is important to their success, and 76 percent said that respecting customer privacy preferences is integral to building such trust. In addition, more than 70 percent of marketers said that respect for customer privacy is important to their company's brand and reputation. A majority of respondents want clear guidance on how to comply with privacy laws, regulations and in-house policies, and many marketers want additional training on how to implement privacy-sensitive campaigns.

What consumers think
In its consumer research, the Ponemon Institute defines privacy trust as a process for engendering confidence in how an organization's leaders, employees and contractors handle and manage individuals' personal information. Privacy trust requires that an organization ensure data management practices are aligned with stakeholder perceptions about using, sharing and retaining personal data. The key components of privacy trust are based on the Federal Trade Commission's Fair Information Practice Principles.

Based on more than 125 independent privacy trust studies conducted between 2002 and 2006, Ponemon Institute determined about 8 percent of Americans appear to be privacy-centric. Daily events that reduce confidence in their sense of privacy or the safety of their sensitive personal information will have a significant impact on their actions.

It found about 73 percent of Americans appear to be privacy-sensitive. Privacy is important to them, but they will not change their behavior or information-sharing practices.

About 19 percent of Americans appear to be privacy-complacent. They really don't care very much about the sharing or selling of their most sensitive personal information, such as Social Security numbers.

Ponemon Institute research also shows that consumers from all three categories are more willing to share more of their personal information and do more business with companies when they have a trust-based relationship.

A favorable opinion about a company's brand and products, a personal experience with a call center employee or other employee or how well the company's advertising messages resonate with consumers all play a role in consumer perceptions about privacy.

Ponemon Institute's "Most Trusted Companies for Privacy" study listed 10 factors to consider when judging a company's trustworthiness. Company reputation for product or service quality, limits to the collection, use and sharing of personal information and ads that are respectful of an individual's privacy rights were the top factors ranked in terms of importance.

Also important to consumers was a sense that security protections are in place when the consumer provides personal information, the company's privacy policy, positive experience in resolving a privacy concern or question and the ability to access personal information collected about themselves. Also on the list were press coverage of the company's data protection practices, the existence of a trust seal or audit report for privacy or data protection and the company's privacy education and outreach.

A 2004 Yankelovich study, "A Crisis of Confidence: Rebuilding the Bonds of Trust," also documented the importance of consumer trust. According to the study, trust increases customer retention, boosts spending, enables premium pricing and provides lasting competitive advantages. According to Yankelovich, most Americans agree that they usually shop at businesses that have earned their trust, even if they tend to charge more than their rivals.

Overcoming negative perceptions
The onus is on privacy professionals to inform marketers about the economic benefits privacy practices create for an organization. These include reducing operating inefficiencies by ensuring that consumer data not essential to a marketing campaign are not collected or stored, improving information flows about consumers by taking a data inventory, and decreasing risks of regulatory action or fines and lawsuits by reviewing marketing campaigns to make sure they are compliant.

The Ponemon Institute has five recommendations for building consumer trust.

1. Introduce greater transparency to online ads and Web pages. Explain why an individual received the ad and allow for an opt-out.

2. Ensure affirmed consent is obtained prior to collecting personal information.

3. Explain how permissions are captured and used and how information provided by the consumer benefits that consumer.

4. Consumers are more likely to click on an ad that reflects their interests even when the ad uses cookies. The more knowledgeable a consumer is about cookies, the less concerned he or she is about them.

5. Personalization is not viewed as a diminishment of privacy. In fact, it appears that people who care the most about privacy see real value in receiving tailored content.

These recommendations reflect the basic components of what consumers perceive as important to building trust. That is, limiting the collection of personal information and being respectful of an individual's privacy rights and preferences.

Privacy considerations for marketers
The following 10 considerations can assist marketers in understanding how to work with privacy colleagues to increase customers' trust and loyalty.

1. Do you know your customers' attitudes about privacy? Do you have privacy-centric, sensitive or complacent customers? Do you incorporate this understanding of your customers' privacy preferences in your marketing campaigns to enhance their receptiveness to your messages?

2. Do you share market research data with the privacy function to help ensure the company's privacy commitments reflect the interests and purchasing habits of its customers?

3. Have you considered addressing in your marketing strategy the 8 percent of Americans who are privacy-centric? While it may not be possible or a good idea to completely change your marketing strategy, gaining the trust of this group can result in new and loyal customers.

4. Have you implemented steps to assure the consumers that reasonable safeguards have been taken to secure their information? Almost three-quarters of Americans are considered privacy-sensitive. This group is willing to share more data about themselves if they are confident that reasonable safeguards are taken to secure their information.

5. Do you collect too much personal information from a customer at one time? It takes time to establish trust with your customers. As trust is established, you will find you are able to collect more information that is helpful for creating targeted marketing messages.

6. Do you know where your customer data are? Do you work with your privacy and IT functions to inventory personal information collected, stored and outsourced to third-party vendors? Do you partner with the privacy function to make sure appropriate measures are taken to protect data at every stage of its use?

7. Do you measure and monitor the effectiveness of incorporating privacy practices in your marketing strategies? These can include an increase in customers' willingness to opt-in to receiving more ads, a reduction in customer churn and more sharing of personal information.

8. Do you work with the privacy function to ensure that personalization technologies address the privacy preferences of customers?

9. Are you aware of your company's privacy events that might impact your customers' trust? These can include outsourcing customer data to third parties or vendors in other countries, data breaches or new privacy regulations. Do you work with the privacy function to assure your customers that all necessary steps are being taken to safeguard their personal information?

10. Are employees who have direct contact with customers trained in the company's privacy commitments and practices and can respond to any question about the collecting, sharing and outsourcing of their personal information?

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