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Guest blog: privacy issues damage brand trust

April 19, 2005

Polo Ralph Lauren confessed last week to compromising credit card data on 180,000 of its customers. It is the latest in a string of revelations over the past two months from companies like ChoicePoint, LexisNexis, DSW Shoe Warehouse, and Bank of America that have outraged and startled consumers.

Given the punishments meted out to offending companies – ChoicePoint has lost almost a quarter of its stock value and is facing several class action lawsuits, brand stewards would do well to ask what protecting customers identity now means and how they should respond.

Data mismanagement and theft isn’t new, of course, but the scale of the recent problems has definitely gotten the attention of consumers.

Consumers expect protection:

60% representing 120 million consumers have chosen not to shop with a company because of concern over handling of their personal information.

What’s more, if there is a problem, consumers offer few second chances. Almost 57% of those who use online banking say that they will stop after just a single privacy breach

While the downside in all of this – loss of customers, plummeting stock prices, protracted lawsuits, clearly suggests the need for strategies to avoid data theft or loss, smart companies will react to recent events by doing even more. Data protection and privacy is becoming an issue that can distinguish leaders, and brands that understand this can be well rewarded.

A UC Irvine professor showed that online shoppers bought 33% more often if they were shown a clear privacy policy. They were also more willing to give their personal information to companies and rated the perceived benefit from doing so higher.

A study just released by the Ponemon Institute showed that
customers who trust their bank are more inclined to use the more profitable online services and are more loyal.

Royal Bank of Canada research has even suggested that good data practices account for 7% of the bank’s overall shareholder value.

The first and most important step in getting to the head of the pack is to make customer privacy a part of corporate culture. Some companies offer data protection related benefits, like help getting credit checks, to employees. Others make sure that privacy messages come from the very top. Last Christmas, an Earthlink executive emailed employees and customers with 10 steps they could take to protect themselves from identity fraud.

Once the people actually working with your customers are on board, the next step is to examine what information you track, how you get it and who you share it with.

In an ongoing assessment of consumer reaction to privacy’s impact on brand, determined that Truste/Ponemon a company’s trustworthiness was driven largely by placing limits on collection of customer’ personal information and making sure that customers feel in control of any advertising or solicitation contact. SunTrust Bank has taken this to heart: the $159 billion company shares data with only one affiliate and customers can opt out of even that.

The final step is clear communication to customers of the value placed upon privacy and data protection. This might happen through customer outreach as Earthlink did or through a privacy policy and seal on the company website, being a member of privacy organization or a Safe Harbor member.

Of course, the simplicity of providing three steps is something of an illusion. There are very real challenges in developing a brand with a strong commitment to privacy. A study by Accenture last year showed that what executives thought was important was very much out of step with consumer priorities . And consumers themselves can behave in contradictory ways. There is often a clear gap between their expectations and what they are willing to endure. Customers want increased identity protection, for example, but have little patience for identity authentication mechanisms.

Despite the difficulties created by privacy and data protection needs, recent events have forced the issue. Brands can either rise to meet the challenge or watch their competitors take the day.

And in case you’re wondering who is currently winning the war for customer trust, the top 10 most trusted companies for privacy are:

1. eBay
2. American Express
3. Procter and Gamble
4. Amazon
5. Hewlett Packard
6. U.S. Postal Service
7. IBM
8. Earthlink
9. Citibank
10. Dell

source: Truste/Ponemon

At the very bottom of the list – below even the Department of Homeland Security – were grocery stores.

Amanda Welsh, Ph.D.,research director and privacy issues consultant at Antics Online, Inc. and author of The Identity Theft Protection Guide

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