Pro-Privacy is Good For Business

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Contrary to popular belief, an aggressive pro-privacy stance is good for business.

If companies take a strong position for the protection of consumer privacy, they will enhance their brand, gain loyal customers, improve data quality, increase the efficacy of direct marketing campaigns and enhance their global marketability. However, existing privacy legislation needs an overhaul, and new legislation must deliver more value with less cost to business.

Consumers have begun to shop where their privacy is protected - they want to know what will be done with their personal information. Increasingly, people are limiting the information that they provide to companies with whom they do business. Even warranty registrations are waning, because consumers realize that the information they provide is widely and freely sold. When companies start going the extra mile for their customers by taking a hard line on privacy, then customer satisfaction, and repeat business, will increase.

Lack of privacy protection is angering the consumer. When was the last time you actually read all your junk email, or your junk postal mail? Even companies that legitimately market to consumers who have opted-in to mailing lists have become guilty by association. These innocent companies are likely to be accused of intruding upon that customer, since there are so many other companies that have violated the consumer's privacy. Data quality is another major problem. Since there are countless abuses of privacy, people are entering erroneous data into corporate databases to protect themselves. This decreases the value of these databases. What would you be willing to do to cut your data errors in half?

Clearly, standard measures taken by most companies to protect consumer privacy are not adequate, as can be seen by the rising tide of negative opinion regarding corporate America's use of consumer information. It is not enough to inform the consumer in vague privacy statements that their information will be shared, even when an 'opt-out' option is provided. Consumers need to feel confident that the information they provide will be used in ways that they expect. However, if the information is shared for other purposes, then the company should first seek the consumer's permission.

It is difficult to protect consumer information from both intentional and unintentional release. A great deal of effort must be undertaken to ensure that an individual's privacy preferences are respected in all corporate data transfers. Crackers, and others with an interest in illegally acquiring such information, are constantly scanning corporate networks for weaknesses. Security measures are often inadequate, because companies need to update systems frequently to protect against new threats and they need to monitor their networks against intrusion on a 24x7 basis, which can be very time consuming. Companies are spending a great deal of money on security, however, there is limited security expertise, and so results are varied.

Countries outside the United States have already taken steps to protect the consumer's privacy. Companies that wish to do business in the European Union, for example, have to meet more stringent privacy protection requirements than they do in the U.S. Therefore, taking steps to proactively protect the consumer makes it easier to meet global requirements for business operations.

Existing privacy legislation compounds the problems identified above. This legislation has neither enhanced consumer confidence nor delivered protection to the consumer. It is also onerous to businesses that to obey the law. Each new privacy regulation brings additional cost to businesses, and frequently, very little benefit to the consumer. The United States needs to eliminate existing laws and replace them with simpler regulations that not only provide more protection for the consumer, but make it easier for businesses to comply.

The benefits to business are substantial. First, if privacy laws reduce spam and other forms of unwanted communication, consumers will have less junk to sift through, and they will be more likely to read your company's communications. Companies that have legitimate reasons to contact their customers can benefit from doing so, without irritating them. Ultimately, businesses will gain additional benefits because consumers will be more amenable to direct marketing. In addition, good privacy laws will reduce customer complaints, thereby reducing customer service costs. Finally, companies that really stand out in their efforts to protect customer privacy will enhance their brand and benefit from increased customer loyalty.

On the other hand, if companies violate the consumer's trust by using information in a manner for which it was not intended, customers will be less enthusiastic about conducting business with that company in the future. Furthermore, they will be less willing to provide information to that company. Ultimately, this will hurt the company's ability to track demographics, because customers will feel uncomfortable and less confident providing the necessary statistical information.

In the United States we need federal privacy legislation that combines or replaces what exists today, while being straightforward, clear, simple and pre-emptive. This will stem the flow of new privacy laws and avoid the patchwork of different legislation in various states. Revamped laws will make it easier for companies to comply, enable greater privacy protection and reduce the cost to business.

Companies that are currently protecting their customer's privacy should advocate strongly for privacy legislation, because after all, it will simply mandate what those responsible companies are already doing. Such legislation will not be painful or costly to those companies if it is crafted properly and does not create endless new documentation tasks. Hopefully, it will make a difference by eliminating the abuses of privacy that exist today.

In my next column I will describe some simple steps you can take to protect your customer's privacy, and thereby enhance the quality of your brand. It's as easy as 1-2-3.

Bill Van Emburg is COO of Quadrix Solutions (www.quadrix.com), a custom systems integrator and managed co-location solutions provider.

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