The effects of privacy policy statements on customer behavior

The Internet has provided new channels for companies to gather behavioral and personal information about their customers. But is this a good thing? Bruce Spencer explores what customers think about their privacy.

A recent Information Data Corp . survey of 100 highly successful e-commerce companies indicated that 94 percent of the top 100 sites post privacy policy statements. These companies clearly believe privacy is the number one concern of most Internet users, and it's easy to understand why.

No technology has ever had the capability of gathering information (with or without the user’s knowledge) as effectively as the Internet. No information technology has ever had the potential of targeting precise marketing demographics as well as the Internet. And no technology has ever been able to disseminate information as widely and quickly as the Internet.

For an e-commerce company, these capabilities are a shining promise. But for the consumer, Internet technologies spell out a great potential for abuse. To feel comfortable with Internet technology, consumers need to know how their personal information is used. Let's take a look at how Web site privacy statements affect customer actions.

Information gathering
The information gathered on Web sites has a big effect on how users react to privacy issues. And companies go about collecting information and posting privacy statements in different ways. The Georgetown Internet Privacy Policy Study showed that 92.8 percent of sites collect at least one type of personal information (name, e-mail address, or postal address).

This data is supported and expanded upon in the FTC’s 1998 Report on Consumers' Online Privacy . The FTC report broke its findings into Web sites covering the following subjects: commercial, children's, health, retail, and financial, as well as popular sites.

The most interesting disparity here is in the disclosure of how information is used, with 71 percent of popular sites freely telling customers how they use information, as opposed to only 14 percent of commercial sites. The Georgetown study (which was conducted a year after the FTC report) suggested that this trend has changed quite dramatically. In that study, 65.7 percent of surveyed Web sites posted statements explaining how collected information is used.

There are two likely forces responsible for this change. The first is the threat of government regulation if companies don’t respond to consumer complaints about privacy online. But an even more powerful force is the voice of consumers themselves.

Consumer concerns about privacy
Internet consumers are adamant about how Web sites should handle private information. This attitude is evident in The 10th annual GVU (Graphic, Visualization, & Usability Center ) WWW User Survey , as the following statistics show:
  • 77.5 percent think that privacy is more important than convenience
  • 71.5 percent think that there should be new laws to protect privacy on the Internet
  • 84.3 percent said that content providers shouldn’t have the right to resell user information
  • 90.5 percent believe that users ought to have complete control of demographic information

Other privacy surveys show similar results. For example, The BCG consumer survey , published by TRUSTe/BCG, found that 70 percent of users have concerns about privacy when making purchases online, and 76 percent of users express concern over sites monitoring their browsing on the Internet.

A recent NUA Internet Survey showed that 58 percent of buyers cite personal privacy issues as a concern when considering an online purchase. According to Michele Slack of Jupiter Communications , “It’s not just about having legislation or privacy policy postings. There is a general nervousness about giving personal and credit card information on the Net. Sites need to actively promote their efforts among consumers to start pushing back their fears.”

The power of privacy statements
The good news about dealing with consumer concerns about privacy is that policy statements on information use have a very positive effect. In survey after survey, consumers report the same findings: Show me a privacy policy statement, and I’ll freely give you information.
  • BCG Survey : 78 percent say privacy assurance will increase their comfort in providing personal information over the Internet.
  • Harris/Westin Survey : 63 percent said they would have divulged information if the site disclosed clearly how the information would be used.
  • NFO Interactive Survey : 69.4 percent of the 1,944 online consumers say they would purchase goods online if given assurance that their privacy was protected.
  • AT&T Lab report : 84 percent of respondents said they would provide their ZIP code and answer questions about their interests in order to receive customized information if the data was confidential.

The AT&T Lab report went on to show that some types of data are more sensitive than others, but, although Internet users are generally uncomfortable with the way data is gathered over the Internet, they would provide information if given assurance that they are not identified. The impact of disclosing information usage policies with a privacy policy statement is quite clear: It will significantly encourage users to provide information and conduct transactions online. The BCG Consumer Survey estimated that companies that disclose their information gathering and dissemination practices have a 200 to 300 percent better chance of transacting with the customer and getting repeat business.

Setting up your own privacy policy statement
If you’re interested in creating a privacy policy statement for your company’s Web site, there are some good resources on the Internet that can help. TRUSTe’s Privacy Statement Wizard will automatically generate a document—all you need to do is provide a series of information policy factors. We’ve listed some other resources below.

Additional resources
Online Privacy Alliance


The Privacy Page

Yahoo!’s Privacy Policy page

Bruce Spencer is a freelance technical writer who has been working in the information industry since 1983 and writing about the Internet since 1995.

Editor's Picks

Free Newsletters, In your Inbox