NFIB

Understanding Privacy: How Small Businesses Can Protect Their Customers
05/ 31/ 2002

In recent years, much has been said about consumers' right to privacy. As a small business owner, you may wonder what responsibility you bear in protecting your customers. Though some states have specific laws regarding use of consumer information, there is no "right to privacy" written into the U.S. Constitution. But businesses that carefully consider their customers' concerns and fears will benefit from the increased trust that comes with such protection.

Establishing a privacy policy can present a worthwhile business opportunity. A recent survey by the pro-business Privacy Leadership Initiative (PLI) underscores the challenges to small businesses as they expand their revenue online. Only 31 percent of online users are willing to provide personal information to companies that they only know over the Internet, as compared to 70 percent of consumers who are willing to provide personal information to well-known, brand companies.

This makes it difficult for small businesses to gain the confidence of consumers online and thus inhibits consumer spending on smaller sites.

The survey does reveal, however, that there are several actions a small business can take to increase consumer trust and confidence. The same survey found that 86 percent of online users believe it is important for a Web site to contain a privacy policy, regardless of size.

A second action that small businesses can take is to participate in "privacy seal" programs, such as TRUSTe and BBBonline. The survey found that 47 percent of online users are more willing to provide personal information to a Web site that participates in such a program.

Whether your business already has a written privacy policy, or if you've just begun to consider the idea, the Privacy Leadership Initiative is an excellent source for information on the broad aspects of consumer and business privacy. Found online at www.understandingprivacy.org, the group helps large and small businesses develop and maintain responsible privacy practices.

Developing a privacy policy shouldn't be an intimidating task. PLI has developed a guide, Privacy Made Simple, to help business owners analyze their current practices. Located in the site's Privacy Manager's Resource Center, the Privacy Made Simple guide offers easy-to-read information on what it takes to manage privacy policies within your business. The guide is divided into three sections, ranging from introductory to in-depth material. A quick 10-question analysis will help you determine your "privacy quotient."

Privacy 101 walks you through creating a privacy policy that's easy to read and explains the importance of educating your customers on the policy. One common misconception is that a privacy policy is only needed for businesses with an online presence. If your small business collects any personal information from customers, then you must have a privacy policy that informs customers of how you use the collected information.

Privacy 201 focuses on the importance of protecting children with a privacy policy. You may not be aware of it, but the Children's Online Privacy Protection Act of 1998 (COPPA) prohibits collecting personal information online from children under 13 years of age, without first obtaining verifiable consent from the child's parent.

Privacy 301 is important for small business owners with customers outside the United States. The U.S. Department of Commerce and the European Commission have developed "safe harbor principles" that address the gathering, usage and transferring of information between U.S. and European businesses.

The percentage of small businesses selling online more than doubled from 9 to 17 percent in the last two years, and that number continues to grow. At the same time, consumers are demanding more ways to feel reassured about their privacy concerns before buying online.

Don't let your business be left behind by ignoring the importance of customers' privacy. It is vital that small businesses anticipate and meet consumer concerns by managing privacy responsibly. It's just good business.

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