Privacy Concerns

In October 2001, Harris Interactive released a survey showing privacy concerns sky-high on consumers’ radar. The survey found more Americans are concerned about loss of personal privacy (56 percent) than health care (54 percent), crime (53 percent), or taxes (52 percent).[3]

While announcing the naming of IBM’s first chief privacy officer in November 2001, IBM Chairman Louis Gerstner, Jr. said, “We know that one of the great conundrums of e-business is that it gives enterprises a powerful new capability to capture and analyze massive amounts of customer information so they can serve individuals more effectively. Yet this very capability troubles some people, who see it as a means to disclose or exploit their personal information. These are legitimate concerns, and they must be addressed if the world of e-business is to reach its full potential. At its core, privacy is not a technology issue; it is a policy issue. And the policy framework that’s needed here must involve the technology industry, the private sector in general, and public officials.”[4]

Some in the private sector take the position that honesty and integrity in the collecting, using, and even sharing customers’ personal information is not merely good business, but is actually a customer service. Privacy is an important part of Royal Bank Financial Group’s customer relationship management. Employees explain Web cookies to customers. The bank shows its concern for security by offering cell phones with special encryption chips for wireless transactions, and it has a pilot program through which it offers free firewalls and other security products to customers.

Peter Cullen, chief privacy officer at the Toronto-based bank, says, “There’s profit in privacy. It’s one of the key drivers of a customer’s level of commitment and has a significant contribution to overall demand [for our services].”[5]

Protecting Your Customers

A consumer’s view of how a business should be able to use and share customer information does not always agree with the business’s view. The action of two major companies illustrates some of these issues.

In August 2001, put out a new privacy policy acknowledging that it uses customer data to let partners send e-mail marketing pitches to consumers. Amazon’s view was that such a practice isn’t an invasion of privacy; it’s the grease that lubricates the wheels of e-business. A spokesperson explained, “We want to make it as easy as possible for our customers to find whatever they want to buy online. The way to do that is by using recommendations or their buying histories.[6]

Not good enough, say privacy advocates. The Amazon privacy policy dropped the ball because it also dropped the customer’s option to tell Amazon, “Never sell information about me.” The company has been lambasted for that policy switch by privacy advocates such as Jason Catlett, president of Junkbusters Corp., a privacy group in Green Brook, New Jersey.

Sean Carton, managing partner of Carton Donforio Interactive, said, “Amazon is making a stupid decision. Their belief that they own the data is understandable, however keeping the consumer in control is paramount to running a successful e-commerce business.”[7] Amazon isn’t the only dot-com resisting the tide toward greater protection of online customer privacy, and one reporter says, “It’s not surprising that some e-businesses will resist limiting their use of private customer information. After all, telling e-marketers that they shouldn’t use customer data to cross-sell, up-sell or personalize their sites is like telling kids that candy’s not for eating.”[8]

When DoubleClick acquired offline direct marketer Abacus Direct in 1999 there were plans to merge Abacus Direct’s vast database of consumer buying habits, culled from 1,100 merchandise catalogs, with DoubleClick’s websurfing information. When privacy groups complained, DoubleClick backed off. That was not enough to stop the FTC from investigating and consumer groups from instigating lawsuits. Finally, in 2001, the FTC closed its probe concluding that the firm had not violated its own privacy policy and had not engaged in deceptive practices. But a California state court ruled a California class action could go forward unless the parties settled.

DoubleClick announced a settlement in March 2002. As part of the settlement, the company agreed to include in its privacy policy easy-to-read explanations of its online ad serving services, and promised no new personal information the company collects will be merged with previous information it has on the user without an opt-in approval from the user. The company also ensured that users’ online data will not be used in ways different from what is outlined in the settlement, even if the privacy policy under which it was collected changes.

The company agreed to launch a consumer education effort, serving 300 million consumer privacy banner ads, asking consumers to learn more about how to protect their online privacy. The company agreed to have an independent accounting firm conduct annual reviews for the next two years to assure compliance.[9] One can only hope others in the online advertising industry will see this case as setting a standard for the future.

Interestingly, most of the discussion of privacy in the trade press concentrates on privacy as an e-business issue. As we examine the process of turning the management of relationships over to the customer, we must address the issue at all business levels if, to paraphrase Louis Gerstner, any business is to reach its full potential. The consumer’s concern for privacy isn’t going to go away.

Gathering Information

The Gartner Group predicted, “Adequately addressing privacy concerns will be a top business priority as part of customer relationship marketing in 2002. Enterprises will be forced to rethink how information is gathered, how customers access and control it, and how enterprises can safeguard it from parties who might want it, but shouldn’t have it.”[10]

Microsoft had to rethink a technology that Bill Gates had described as “probably the most important … building block service” of the company’s history, due to resistance from customers. .Net My Services, previously known as HailStorm, was described as a network of services controlled and managed by Microsoft and linked over the Internet that could be automatically accessed by enterprise consumers. As it has developed, it has included more than ten basic services such as calendaring, alerts, and an electronic wallet, all hosted by Microsoft’s Internet service.

The only problem is that the firm’s enterprise customers don’t want to have their customer data stored with MSN. Microsoft has also gotten some heat from consumer groups and privacy advocates for its concept of having vast amounts of user data stored in a single warehouse. The enterprise customers interested in developing .Net My Services asked Microsoft to offer a packaged version of the technology that they could purchase to build and host services on their own. Even though they swore up and down that they would not make any of the information available to third parties, Microsoft caved under the pressure and changed direction.[11]

Admittedly, attitudes about privacy have changed a bit since 9/11. Some say the October 2001 signing of the USA Patriot Act into law, which gave government antiterrorism investigators more authority to collect information, meant privacy is dead. Consumers continue to fight back. Call-reject software to foil telemarketers is selling at a record pace, and the fact that consumers can delete unwanted e-mail doesn’t lessen their annoyance with it and their insistence on not being bombarded by unwanted advertising.

[3]Lisa Vaas, “Customer Privacy Lockdown,” eWEEK, October 16, 2001, p. 2.

[4] “Privacy Guru Joins IBM,”, November 30, 2001, p. 1.

[5] “Profitable Privacy,”, February 18, 2002, p. 1.

[6]Lisa Vaas, “Customer Privacy Lockdown,” eWEEK, October 16, 2001, p. 3.

[7]Kate Kaye, “Could Price Personalization Be Next?”, January 26, 2002, p. 2.

[8]Ibid., p. 4.

[9] “DoubleClick Settles All Class Action Privacy Lawsuits,” DigitalCoastReporter, March 29, 2002, p. 2.

[10]Alex Simmons, “Opinion: Say ‘So Long’ to The Wild West,” CRM-Forum, April 5, 2002, p. 1.

[11]Matt Berger, “Microsoft Recasts .Net My Services to Allow Customer Control,”, April 12, 2002, pp. 1, 2.

Why CRM Doesn't Work(c) How to Win by Letting Customers Manage the Relationship
Why CRM Doesnt Work: How to Win By Letting Customers Manage the Relationship
ISBN: 1576601323
EAN: 2147483647
Year: 2003
Pages: 141

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