03/ 29/ 2002
Although it's being propelled by the Internet, proposed privacy legislation could affect all small business owners, whether online or not
A customer walks into your shop and through a glance at your files, you instantly recall what they last bought from you and their color or size preferences. While this kind of personal service helps you stand out from your competitors, public fears about deteriorating privacy could make it more difficult in the future. Even if you're not online, concerns over information security could threaten a major advantage you as a small business owner have in customer service, by restricting any type of data collection by business owners, from customer phone numbers to email addresses.
It's a decisive time in the ongoing privacy debate, as dozens of new pieces of legislation are expected to make their way through Congress this year. Although most agree that protecting personal information is inherently a good thing, especially when it comes to medical and financial records, some of the proposed legislation is so broad it could restrict your ability as a small business owner to provide personalized customer service or market to your existing customer base. Yet privacy advocates fear lack of legislation could result in a Big Brother-like invasion of privacy.
For small business owners, privacy legislation needs to balance protection of personal information with the ability to deliver the personal service that sets them apart from their competitors.
What's at stake
Besides raising the specter of an additional regulatory burden on your business, much of the proposed legislation could change your ability to "touch" your customers, whether through postcards, email or even targeted advertising. The way public debate is going, it's an issue that will affect you and your business, even if you don't buy or sell online.
While most people want some degree of privacy protection, the federal and state government has shown its willingness to go far in safeguarding privacy. Last year over 50 pieces of privacy legislation were proposed at the state and federal level, covering everything from direct mail to junk email. And privacy concerns are expected to remain high on the congressional agenda this year.
Privacy fears are very real. The Federal Trade Commission reports that 92 percent of Americans are concerned about the misuse of their personal information on the Web. An NFIB study found that 75 percent of business owners who use the Internet were hesitant to buy online because of fears about the integrity and capabilities of the companies they were buying from.
Public concern about privacy violations is quickly moving from theory to reality as stories of inappropriate use of online information and stolen credit card numbers begin to surface. Yet an unanticipated result of some of the robust legislation is that companies not online will also be forced to monitor their data collection policies.
"Cashiers at Radio Shack will have to tell you what will be done with your ZIP code when they ask you for it at the register. Catalog retailer operators will need to offer a good reason for why they need your email address to deliver a sweater to your home," predicts Forrester Research, a technology research firm.
Online vs. offline surveillance
First, a little perspective. It's unsettling to know that our online movements can be known and recorded, without our knowledge. But collecting customer data is nothing new. Credit card companies and businesses have long compiled such information as a way of offering one-on-one service. This can range from keeping a database of customers' names and addresses to notify them when it's time for a seasonal service to the inundation of catalogues your mailbox undergoes anytime you order anything through the mail.
So why all the concern about companies being able to "watch" you online? Despite all the hype, it's not because the Internet is more invasive. Or that online spying methods are less obvious. It's been publicized for years that shopping centers regularly videotape shoppers to determine how long they spend in a store, or hire undercover shoppers to record what shoppers pick-up and touch.
The difference is, the Internet has made it possible for even the smallest company to compile, sell and use customers' personal data more quickly and easily than ever before. And e-commerce is still new enough that many shoppers might not realize what's possible. Plus, there are few legal constraints to prevent the abuse of this personal information. So privacy advocates fear a slippery slope—allow business owners to collect emails today and tomorrow anyone can gain access to your bank account.
Consumer groups—and state and federal officials—have grown impatient with industry efforts at self- regulation. The Federal Trade Commission has already taken steps against e-commerce firms such as Amazon.com and eToys to ensure that consumer data isn't being misused.
But what's often lost in this debate is the incredible usefulness to the customer in revealing some of their personal information to a business. Keep in mind that the goal of much of the data collection by small business owners is to make a customer's shopping experience as easy and inviting as possible, whether online or in a physical store. Especially today, with customer's time at a premium, anything a business can do to better serve their customers—simplifying a Web site, decluttering their physical store, keeping an office open later hours—will help both the customer and the business.
The bottom line is it makes good business sense now for you to talk to your customers about the information you're collecting from them and how you intend to use it, either online or in person.
Reexamine what you ask for
Until the legislation shakes itself out, it's important that you revisit the way you collect and use customer information. Do you ask your customers face-to-face for information, as they stand at your counter? Or do you request it in a form on your Web site or something you've mailed them? It's important that as you collect the data, customers know how you intend to use it.
Remember also that customers are less likely to trust a "faceless" company on the Internet with their personal information than they are to give out their name and address to you, the shop owner, in person. And some information, such as Social Security and phone numbers, customers are reluctant to reveal at all.
Think about your own concerns in giving out information, either in person or online. Chances are, if you're uncomfortable revealing it yourself, you shouldn't be asking your customers for it.
Also be sure you aren't asking for more information than you really need. A lengthy form with detailed inquiries is more likely to raise a customer's fear of privacy intrusion. And if all you really need are their name and address, either snail mail or email, why risk alienating them by prying further?
How it helps your bottom line
Being proactive when it comes to privacy could not only protect you in the future, it will most certainly reassure customers and make them more likely to leave you the information you desire, then return to do business with you instead of a competitor they don't trust.
The key is letting your customers know why giving their information to you will help them. Many customers want to get a postcard or email alerting them to your next sale, or a reminder of when it's time for your services again. Give them the choice to let you serve them better by knowing their preferences. Then reassure customers that you are aware of the value of their personal information and don't plan to misuse it.
It's also vital to stay aware of ongoing legislative action, so you're not surprised by future regulatory requirements or even lawsuits. The NFIB can help you keep up with the continuing privacy debate, at http://www.nfib.com, as can the Electronic Privacy Information Center, at http://www.epic.org.
NFIB plans to be very involved in any legislation at the state and federal level this year, and will work to make lawmakers aware of the impact proposed legislation could have on small business owners. You can share your concerns over privacy legislation by calling NFIB's Legislative Services at 1.800.552.NFIB.
Public fears about deteriorating privacy may have been prompted by the Internet, but they have the potential to affect how everyone does business. Protect the advantage you have in personalized service by talking to your customers about why and how you are using their information, even if you're not online. The result will be more loyal customers that help you strengthen your business.
Better privacy, better sales
According to a 1999 NFIB survey of small business owners on the Internet, e-commerce Web sites that reassure customers about privacy and use of information will develop a better reputation and better sales. Most e-commerce customers have fears about credit card security, the integrity of online firms, and the inability to fully check a product or service on the Internet before purchase. Here are some survey suggestions to encourage online customers:
- Process credit card transactions through SSL (Secure Socket Layer) security procedures, and make it clear to customers that their information is being handled with this high-security protocol.
- Post policies on privacy and use of personal information prominently, to help allay customer fears and show a proactive approach to security issues.
- Legitimize your site with third-party assurances. Get a seal of approval from the Better Business Bureau Online (http://www.bbonline.org), the American Institute of Certified Public Accountants or Truste (http://www.truste.com). Or partner with established firms with name recognition, become a certified dealer of an established brand, or list customer recommendations (with permission).
- Include your company phone and fax numbers, mailing address and contact names on your site so that customers can speak to your company directly if they have any concerns.
- Promote the option of online/offline shopping to get around customer fears about the Internet. Using your site as an electronic catalog, customers can shop at their leisure for products or services and then use telephone, fax, email or an in-person visit to make their purchase.
Creating a policy
Thanks to all the discussion and public awareness of privacy issues, there's lots of help available to draw up your own privacy statement.
TRUSTe, an online privacy services company, has an automated questionnaire at http://www.truste.org that can help you develop a policy to tell your customers how you plan to use their personal information. At privacy.bcentral.com, you'll find a template of a privacy statement that you can complete in 30 minutes or less.
Keep in mind that it's also important to allow customers to "opt out" of your mailings if they wish. Always give customers the option to decline materials from your company, or any third parties you deal with, when they submit their personal information.
Online, it's also a good idea to include "unsubscribe" information at the bottom of each e-mail you send to customers, in case they forget they signed up with you, or decide they no longer want to get your e-mails.
This article originally appeared in the January/February 2001 issue of MyBusiness Magazine, NFIB's member magazine.
