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By the end of summer, consumers will be awash in privacy notices from their banks, HMOs, and insurers. Thanks to the 1999 Gramm-Leach-Bliley Act, companies had until the beginning of this month to disclose how they're using consumers' personal data. The purpose of the law: to allow people more control over how their personal information is used — and with whom it's shared. The result so far: confusion, frustration, and worse — privacy panic.

Most companies realize consumers don't want them to share personal data with third parties. Yet they fail to understand why simply sending out a legalistic privacy brochure isn't enough to satisfy most consumers. More important, they fail to grasp the often-contradictory nature of consumers' privacy concerns. An exclusive poll commissioned by American Demographics and conducted by Market Facts in April reveals the inconsistencies between what consumers say and what they do when faced with privacy threats. Consumers may say they hate telemarketing, but they'll pony up their credit card number for the chance to win millions. They may say they're afraid of being robbed over the Internet, but they'll willingly fill out a financial background form for the opportunity to trade stocks online.

“On the one hand, consumers want companies to read their minds and give them what they want,� says DeeVee Devarakonda, chief marketing officer of Quaero, a Charlotte, North Carolina-based CRM services provider. “On the other hand, that means companies have to collect information, data mine, and create profiles, which makes consumers feel like they're being tracked and exploited. If companies can get to the bottom of these contradictions and communicate to consumers well, I think both sides can benefit.�

To win consumers' trust, marketers have to make sure customers understand a company's specific security provisions. They must convince the public that the special benefits reaped by giving up some privacy outweigh the cost; and they need to set a long-term policy that integrates privacy concerns into the company's overall business strategy. “Trust has become a business survival requirement,� says Kristin Valente, national leader of the privacy practice at Ernst & Young.

There's no question that privacy is a major consumer issue. An October 2000 poll by the National Consumers League revealed that consumers are more worried about personal privacy than about health care, education, crime, and taxes. A January 2001 Wirthlin Worldwide poll uncovered a host of negative emotions associated with revealing personal information during business transactions. The three most common words consumers used to describe their feelings were “cautious� (92 percent), “hesitant� (81 percent), and “suspicious� (72 percent).

Such words reflect specific privacy fears. According to the American Demographics survey, which polled 1,024 people, consumers' No. 1 fear is that businesses or individuals will target their children — 66 percent of those surveyed say they are extremely or very concerned. Another prevalent fear among consumers is that private information will somehow be used against them (58 percent). And over half of those surveyed fear that if they disclose private information, they'll be robbed or cheated, or their identity will be stolen.

Many of these fears are what legal scholar and privacy consultant Alan Westin calls “anti-victimization fears,� because they hinge on physical or financial harm. While marketers can help assure consumers of precautions taken to address such possibilities, these fears are addressed primarily by legal action in Congress and the courts. A number of bills pending on the Hill address a host of privacy matters, including allocating authority to the FTC for privacy protection, increasing penalties against computer crimes, and tightening amendments to the Electronic Communications Privacy Act of 1986.

“The privacy issue is very multilayered,� says Rachael Shanahan, chief privacy officer for Unica, an analytical CRM provider. “Being able to separate and understand those underlying fears is important, so that marketers can address what's of real concern to their target.�

Of real concern to businesses is what Westin calls “anti-manipulation� fears (“Companies will manipulate my behavior with the information they collect.�) and “anti-intrusion� fears (“Don't call me in the middle of dinnertime.�). While less extreme than say, identity theft or stalking, these concerns should not be underestimated. The second most prevalent fear expressed in the American Demographics survey is bombardment by solicitations (64 percent are extremely or very concerned). The level of fear varies among different populations. Mark Lawrence, chief privacy officer for Compucredit, says the target group for the Aspire Visa card — people without a solid financial history, such as immigrants, college students, and those with bad credit — is less fearful of junk mail. “With our demographics, privacy isn't a big concern,� Lawrence says. “I think our segment is more willing to give up private information than other groups. Part of it is that they haven't hit an annoyance threshold because they haven't been targeted by direct marketers to the same extent as other consumers.�

People with higher incomes and more education tend to be more sensitive about guarding their privacy. Women are more sensitive than men, seniors are more fearful than the young, and married people are more wary than singles. “People under 30 tend to be less fearful, but you're still talking high numbers — about 58 percent — saying they're extremely or very concerned about maintaining their privacy,� says Brendon Lynch, senior manager of privacy practice at Pricewaterhouse-Coopers. “I think marketers have to respect that consumers have individual differences, but I also believe privacy programs should be designed to accommodate the most sensitive consumer.� Lee Bonds, director of customer information services at Hewlett-Packard, agrees in erring on the side of caution: “The way we're looking at it is, if you can meet the highest set of expectations, the rest of it becomes much easier. And that seems to be what a lot of companies in the technology and financial sectors are finding out.�

Yet the fears expressed in surveys by even the most wary consumers far outpace the action they're willing to take to protect their privacy. For example, 70 percent of those polled by American Demographics are willing to press a button every time they visit a Web site or otherwise use a device to indicate a desire for privacy. But according to a March 2001 Wall Street Journal/Harris Interactive poll, only 54 percent of respondents claim to have taken even the relatively small step of deactivating or deleting cookies.

In general, consumers are not likely to actively protect their privacy even when steps to do so are readily available. For example, in a March 2001 Market Facts interactive poll, 60 percent of 1,823 respondents agree that the existence of a Web site privacy statement makes them feel more confident — women (65 percent) slightly more than men (56 percent). But at the same time, most consumers don't read such policy statements. According to the Wall Street Journal/Harris Interactive poll, a mere 4 percent read the privacy policies posted on visited Web sites every time, only 16 percent claim to read it frequently, and 40 percent admit to doing so rarely or never.

Those who don't trust companies to treat their privacy right can take matters into their own hands by installing privacy software. Microsoft is developing a new system, Platform for Privacy Preferences (P3P), which promises to allow consumers to program their own privacy standards for Internet browsing, though there are still hurdles to overcome before the software is made available. (For example, the program could severely limit information accessible to marketers.) Whether Microsoft's new system — which requires other companies to cooperate before it can be implemented — will work is unclear. Nor is it clear that consumers would be willing to use new software if it slows their browsers. In the American Demographics poll, only 39 percent of respondents say they would use such software if it means sacrificing speed, but even this seems high in relation to actual behavior. According to a December 2000 Harris Interactive poll, 15 percent of respondents have put software on their computers to protect private information; 10 percent have used software to surf anonymously; and 5 percent have installed software that renders online purchases anonymous.

Other signs indicate that consumer outcry over privacy is out of sync with attendant action. In an April 2000 Yankelovich poll, 79 percent of online users report that they immediately leave Web sites requiring they provide personal information before entering. But another poll by Harris Interactive has only 44 percent avoiding Web sites with lax privacy practices. Moreover, in the Wall Street Journal/Harris Interactive poll, only 5 percent say concerns about privacy cause them to leave a Web site or forgo an online purchase all the time; 9 percent frequently; and 47 percent claim that privacy concerns deter them rarely or never. “You might say that consumers are very conflicted,� observes Unica's Shanahan.

These inconsistencies extend to offline behavior as well. In the American Demographics survey, 66 percent of respondents say they either have or would make a phone call to prevent telemarketing or direct mail solicitations. However such intentions don't necessarily translate into action: According to the Yankelovich survey, a comparatively small 30 percent of respondents said they had asked to have their name removed from junk mailing lists, and 24 percent requested that their phone numbers be removed.


Creating and communicating the benefits of privacy invasion is where marketers can weigh in most effectively. Because while consumers say they want to protect their privacy, they can also be enticed to give some privacy up. According to the American Demographics survey, more than 1 consumer in 5 is tempted to exchange private information for cash incentives, discounts on purchases, or a free offer, such as Internet access or wireless service. Marketers can also work to persuade consumers of the myriad benefits of data collection. For example, if consumers understand that faster service, easier-to-obtain credit, cost savings, and targeted promotions are the direct result of questionnaires and cookies, they might respond better to such “invasions of privacy.�

Receptivity to such benefits varies according to demographics. Interest in incentives is highest among younger consumers, which makes sense, since they've been targeted the least. “Younger, tech-savvy, better-educated consumers are also less inclined to be afraid of things like identity theft, because they actually understand how secure servers work,� explains Warren Egnal, senior vice president and privacy group leader at Porter Novelli. “Part of it is just communicating to everyone else how unlikely it is, given current privacy laws and technology, that those fears could become a reality.�

The more educated consumers are about a company's privacy practices and security provisions, the less of an issue privacy is to them. But to fully address consumers' privacy concerns requires a multi-pronged effort. Some companies, however, are maneuvering through consumer contradictions by integrating privacy practices into every aspect of their business and then communicating those practices to consumers. Jan Davis, president of Rocketbridge, a managed security services provider, says her approach is to provide consumers with advance notice of privacy practices, give them the choice of whether or not to participate, allow them access to their own private information once permission is given, and provide them with incentives to participate in such programs. “The ideal of privacy is important to people,� Davis explains. “But the reality is that we live in a connected society, and if you want to enjoy the benefits of that society — be it access to credit or access to information — you have to be willing to share information. If people perceive that they're getting special benefits, they're much more willing to sacrifice privacy.�

At best, a balance must be struck — with clear benefits to companies and consumers. For businesses, this means weighing the kind of consumer information that yields a real return on investment versus the personal data consumers are most eager to protect. And for consumers, benefits such as discounts or promotions must be weighed against the risks of ceding private information. Once a corporate privacy policy is drafted, companies need to make sure it's enforced. Often, employing a chief privacy officer to work with marketing, communications, MIS, operations, and management is a good way to enforce such a policy. This is an increasingly popular choice for corporations that have chosen to take the lead on the privacy issue. According to Westin, who founded the Association of Corporate Privacy Officers, today's 200 to 300 chief privacy officers in America will likely grow to several thousand within a couple of years. (Germany already has 2,000 data-protection officers.)

Most important of all is that companies work with consumers, allowing them to be part of the privacy protection process, and enabling them to feel in control of their personal data as much as possible. After all, the information does belong to them.


Women care less than men do about their food preferences, but are much more protective of body weight information.


TOTAL MALE FEMALE 18-24 25-34 35-44 45-54 55-64 65+
Home address 73% 69% 78% 84% 80% 74% 74% 67% 60%
Home phone number 76% 72% 80% 79% 80% 80% 80% 69% 64%
E-mail address 67% 63% 70% 61% 74% 68% 74% 74% 45%
Credit car number 97% 96% 97% 94% 99% 99% 98% 99% 91%
Financial information 91% 89% 92% 75% 95% 96% 90% 92% 94%
Social Security number 96% 96% 97% 86% 99% 98% 97% 98% 97%
Health information 69% 69% 69% 57% 78% 69% 77% 66% 58%
Spending habits 49% 49% 48% 20% 46% 49% 51% 60% 62%
Body measurements/weight 57% 44% 69% 42% 56% 62% 64% 58% 55%
Brand preferences 19% 21% 18% 7% 18% 25% 19% 16% 24%
Product style preferences 16% 17% 15% 10% 17% 17% 17% 12% 21%
Food preferences 23% 24% 22% 9% 22% 24% 24% 22% 32%
None of the above 1% 1% 0% 4% 0% 0% 0% 0% 0%


The following would make me more likely to provide personal information:

Free service like Internet access or wireless service 22% 26% 19% 21% 29%
Cash incentive 21% 25% 17% 20% 26%
Membership in a loyalty program 19% 21% 18% 19% 21%
Chance to win a large cash prize in a sweepstakes 15% 18% 13% 14% 20%
Access to additional content or information 17% 18% 15 15% 25%
Discounts on purchases 22% 24% 20% 21% 30%
None of the above 53% 51% 56% 56% 41%


How concerned are you about the following potential situations after the disclosure of personal information?



What Consumers Fear

Good news for marketers: According to American Demographics' survey, consumers are far less concerned about protecting their shopping habits than they are about safekeeping basic socioeconomic information. Only 19 percent consider brand preferences private, 16 percent would guard their preferred clothing styles, and 23 percent preferences in food. Concern about spending habits and brand preferences increases as one gets older (62 percent of those 65 and older consider shopping information private versus 20 percent of those 18 to 24).

Married people are more concerned about information being used against them than unmarrieds (61 percent versus 53 percent); racial minorities are more concerned than whites (69 percent and 55 percent respectively); and Northeasterners are significantly more fearful than the rest of the country.

Unmarried respondents and people without children are particularly prone to a fear of being robbed or cheated — each 5 percentage points higher than their married and child-rearing counterparts. Racial minorities, people with a high school education or less, and the unemployed are also more likely to fear such theft. As for fear of identity theft, women are more concerned than men (57 percent versus 51 percent). A high level of alarm is also seen among Southerners (57 percent), racial minorities (12 percentage points higher than whites), and the unemployed (62 percent versus 54 percent of those working full-time).

What Consumers Will Do About It

The more affluent the consumer, the more likely he is to make a phone call to protect privacy, with 76 percent of those earning more than $75,000 willing to do so versus 53 percent of those with incomes less than $25,000. Northeasterners and those with more education are also more likely to take such measures. Educated respondents would likely press a button every time they visit a Web site or otherwise use a device to indicate a desire for privacy (81 percent of those with post-grad education compared with 63 percent of those with a high school diploma or less).

Not surprisingly, willingness to pay a fee to protect privacy rises with income level. Young people are more willing than their elders; and minorities more willing than whites (37 percent and 22 percent respectively). Westerners and Northeasterners are more willing than those in other regions to fork over cash for privacy (30 percent and 27 percent respectively versus 18 percent of Midwesterners and 23 percent of Southerners).

Those least likely to take action to combat privacy threats are the retired, nearly one-third of whom indicate they are willing to do none of the above. Apathy increases with age: 34 percent of those 65 and older have done and intend to do nothing, compared with only 8 percent of those aged 18 to 24. Conversely, inaction falls with income: only 7 percent of those earning more than $75,000 intend to do nothing, compared with 18 percent of people earning under $25,000.

Conquering Consumer Fears

Most people are willing to give up some privacy — for the right price: 45 percent of consumers between the ages of 18 and 24 would exchange information for cash, compared with only 8 percent of people aged 55 to 64, and 9 percent of those over 65. Similarly, 43 percent of 18- to 24-year-olds would exchange information for a free service, compared with 13 percent of those between the ages of 55 and 64. Men, racial minorities, unmarrieds, and households without children are more likely to barter in exchange for information. The more affluent the consumer, the greater the response to cash incentives, free service, loyalty programs, and additional content or information. Consumers in the lower-income bracket are more likely to be lured by sweepstakes and discounts.

Regional differences emerged in incentive preferences. Midwesterners are the least likely to exchange private information (57 percent say that none of the above inducements would work), and Westerners most likely (only 49 percent say their privacy cannot be bought). Midwesterners are keenest on discounts and cash incentives; Westerners and Southerners favor free service first and discounts second, and Northeasterners are most compelled by cash.

— PP

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