Followup on Privacy Marketing
Copyright (c) 1995, 1996, 1997 by Nick Szabo
permission to redistribute without alteration hereby
Most Internet businesses, especially the Web software and
payment systems providers, are severely underestimating the market
for privacy features that is out there. Consider:
- A recent general survey showed that 83% of Americans are very
concerned about their privacy on the "Information Superhighway".
One can expect even stronger figures from European customers, which
have more first-hand experience with private data, much of it
originally compiled for innocuous reasons, being used for
political repression. The vast majority of our customers are
concerned about privacy.
- Marketing surveys on privacy that are both detailed and accurate
are hard to come by, because customers who care more about their privacy
tend to dislike filling out detailed forms (even if they claim to be
- Over half the BBS, and potentially the Internet, online service market
is in controversial services, where customers are even more concerned
about privacy than average.
- Privacy, once considered merely a political issue, is now being recognized
for its more important aspect, as a market differentiator and value-add.
Marketers correctly recognize that government "privacy regulations" mean
much less privacy for businesses if it is to be enforced, and the voters no
longer expect such laws to have any teeth in the face of modern
technology. That hardly means that customers are not concerned about it,
as the numbers show.
The alternative to regulation is market solutions.
Recognize that many customers do want privacy, give them what they want,
and contrast yourself to your competitor. Making visible the ways your
competitor is violating their customers' privacy will become a powerful
marketing strategy. This strategy was used rather timidly, and inaccurately,
by AT&T against MCI. (Inaccurate because all major phone companies compile
lists of who calls whom, and use them for marketing as well as billing --
MCI was simply being more honest about it). Nevertheless, AT&T succeeded
in causing MCI's marketers to modify their "Friends and Family" campaign by
portraying them as creepy snoops. Used boldly and accurately, privacy
marketing has vast potential to upset competitors who rely too much on
identified marketing data and not enough on empathy with the human customer.
For an idea of what such a marketing campaign might be like, imagine combining
Apple "1984" Mac ads, one of the most effective campaigns in history,
with the AT&T vs. MCI campaign, to sell products and services that in
fact do protect customer privacy where the competition does not.
- Most Americans do not participate in frequent flier and similar
customer tracking programs. Many who do participate don't realize
the extent to which their lifestyle is tracked, since these actions
are performed on remote databases, well hidden from the customer.
If customers aren't concerned about their privacy, then why the need for
all the distracting gimmicks and giveaways? Why not just promote these
programs straightforwardly to the customer as "Customer Tracking
Programs"? A competitor who can provide a privacy protecting solution
can do just that, damaging these tracking programs severely.
- Cash transactions, which leave no identified paper trail, provide
a large degree of practical privacy. They prevent detailed compilation
of lifestyle habits, by (a) not depending on identity to settle the
transaction, (b) making identity tracking, where it occurs, a visible, separate
process, and (c) making it too expensive to track identity via the payment
system itself, except in extreme, very rare cases. In practice, this
means that cash customers don't get their lifestyles described in detail
in remote databases, while non-confidential electronic payers increasingly do.
Eventually this sharp difference in outcome will feed back to the
customer, greatly increasing the demand for cash over non-confidential
electronic payment. Beware of pseudo-"cash" systems such as
"Cybercash" which do not provide the crucial privacy functionality of cash.
The Feedback Effect
Subjects of information gathering tend not to respond to privacy degradation
until they get feedback on its occurrence. Thus little objection is raised to
to mailing lists until junk mail arrives. Objection to private data
in the hands of remote, hidden credit bureaus and investigators
is rare, but objection is great when this is information is distributed
widely enough that the subjects themselves become aware of the breach.
This occurred, for example, with the Lotus Marketplace CD-ROMs, which
distributed information that had been avaiable in the marketing
and investigation communities for years, but never previously
available to most of the subjects. On the Internet, Netscape removed
the REMOTE_USER field, which gave out the e-mail address of the browser
user, when Web marketers started sending junk e-mail to these addresses.
The task of a privacy marketer is to create feedback situations that
shed light on the privacy degrading activities of their
competitors. Make the customer viscerally aware of the remote,
hidden actions of competitors which are not in the customers' best
interests. Be prepared to enhance the market impact of
competitors' privacy breaches that are already public. Make
sure one's own company's products and services have been
planned with end customer privacy in mind. This reduces
vulnerability to a privacy marketing campaign by a competitor,
and lets the company take advantage of its competitors' privacy
breaches by contrasting its own offerings.
Gathering Marketing Data
can be a valuable enterprise, but violating
privacy in the process of gathering this data is self-defeating. The
most successful user tracking operation on the Internet,
prompts users to enter an alias instead of identifying information.
This makes shoppers comfortable enough to proceed with giving
out very detailed information on their personal preferences, in this case
their musical tastes. Shoppers are also rewarded with the recommendations
of new pieces of music by other nyms with tastes most similar to their
own. A remaining challenge is to convince shoppers that their
browsing alias will not be linked to their shipping information,
which with the current mail-order business methodology must necessarily
contain identifying information. The browsing and ordering stages for mail
order should be completely separated -- separate browsing sessions
with separate cookies at the very least; better still completely
separate web sites.
A big challenge for vendors value-adding privacy is to accurately
communicate these privacy features, through both the user interface and their
marketing, while debunking fraudulent claims (such as calling
non-confidential payment systems "cash") and exposing the privacy
violating actions of their competitors.
The Instinct Gap
Maintaining a sphere of privacy is instinctive when it comes to
hearth and home. What goes on behind closed curtains is not, for the
most part, for public consumption; we feel this in our gut. Our
instincts don't achieve the same function in an electronic world.
Imagine the following two different scenarios:
A stranger rooting through your home, your living room, your bedroom,
your closets, etc., making a list of most of the things you own. How
would this make you feel?
Your credit card company and bank selling and analyzing lists of most
of the things you've ever bought.
Why do these two scenarios make most of us feel differently? Is this
rational? Eventually cultural evolution, which operates much more
quickly than genetic evolution, will catch up -- and presumably the
same privacy protecting emotions will emerge in an ideological form.
Until then, only a minority will protect their electronic privacy with
the same furvor with which they protect the sanctity of their homes.
Privacy marketing will be an important value-add for marketing, particularly
for Internet commerce where privacy concerns play a major role in slowing
the growth of paid transactions and in making the ability to gather
accurate usage statistics poorer than expected. Privacy marketing will be
a terrific way to gain market share at the expense of the competition --
or to lose much of your market share, if you find yourself on the wrong
end of a privacy campaign.
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