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How Privacy Attitudes Impact Companies

Michael Vidikan

CEO, Future in Focus

E-commerce companies and privacy advocates appear to be in a stalemate that could persist for many years to come. E-tailers and other websites want to know everything they can about their consumers; and the majority of consumers for the most part want to share as little as possible with companies.

In their latest report, “Privacy in the Digital Age,” Future in Focus, a foresight research firm, covers the issue of privacy, examining how data collection puts many companies in a challenging position in their relationship with consumers.

Tensions

Privacy concerns and security breaches are causing some companies’ reputations and revenues to suffer

Consumers’ uncertainty regarding the use of personal information has a negative impact on business activity. Two of three global consumers (66 percent) say that they sometimes don’t buy a product or service because of concerns about the privacy and/ or the security of their personal data. In addition, of the 23 percent of respondents who said they had suffered a data breach, three of eight (38 percent) say they no longer do business with the organization or website involved and nearly half (46 percent) then cautioned friends and family about sharing information with that website or organization.[i]

Data security policies are about more than just protecting data

Although they should definitely safeguard shared personal data, companies’ data security policies should also be about building and maintaining customer relationships. Showing respect for consumer data and communicating regularly with customers, letting them know how their information is being used, are essential to building a good relationship. Instead of obtaining one-off consent to a website’s privacy policy, EIU recommends maintaining a continuing dialogue with consumers, informing them and seeking their permission whenever their data is going to be put to a new use.[ii]

Building trust around use of personal data is critical to maintaining a good relationship with consumers

Consumer trust is extremely fragile, easy to damage and difficult to restore once lost. So in an atmosphere of consumer unease about privacy issues, it is critical for companies to build and maintain consumer trust. Developing trust on privacy issues and the use of personal data can serve as the core of mutually beneficial relationships between customers and businesses—if companies use customer data as a tool to help strengthen their relationship with consumers and clearly show their customers that they too are getting some value from the relationship. Maintaining this kind of trust can provide companies with a competitive advantage—and can encourage consumers to share more information.[iii]

Outcomes

The dynamic tension between businesses’ drive to learn as much about their customers as possible and consumers’ conflicting drives to share information yet to maintain some control over their privacy will likely lead to the following outcomes.

Devastating data breaches will continue to undercut confidence in privacy

Even a hint that data is being collected surreptitiously, used improperly, or inadequately safeguarded can, of course, result in a tidal wave of bad publicity for those guilty of these infractions. This potential damage to reputation and revenue puts even greater pressure on businesses to minimize this risk by instituting best practices in regard to privacy and data security—and to communicate regularly and effectively with their customers and respond to their concerns regarding these practices.

Countries will enact stronger privacy regulations

With the overwhelming majority of global consumers favoring stronger regulations, pressure will increase in most countries—in all likelihood first in the EU—to reassure consumers by enacting stricter laws and regulations that control how personal information is gathered, secured, and used. The EU, for example, has proposed the General Data Protection Regulation to protect consumers against tracking and targeted advertising. Companies found guilty of noncompliance may face fines of up to 2 percent of their global annual revenues.

Increasingly, however, compliance with such tighter regulations will be merely the cost of entry for businesses. Consumers will expect and demand it—and will break off relationships with businesses that repeatedly lose or misuse their data.

Companies will become increasingly transparent about how they use data

By contrast, companies that go beyond regulations to offer real assurance to customers that they will meet all of their expectations regarding privacy concerns could reap a real competitive advantage. Not only may proactive privacy efforts help forestall the harshest regulations, but they may also differentiate companies that make extra effort to protect consumer privacy from competitors as well as increasing consumers’ further willingness to share information with them.

As a result, best practices on consumer privacy and the collection and use of personal data will put more control in individual consumers’ hands, offering consumers clear options on what they do and do not want to share.[iv] To encourage consumers to share their personal data willingly, businesses need to show and tell consumers exactly what they will get from sharing. Companies can initiate a dialogue with online consumers through the kinds of pop-up dialogue boxes that Facebook has used to inform its members: boxes that ask consumers, “Would you like to know why we are asking for that information?” and follow up with “Let us know what you think about our privacy and data protection policies.” Short, clear explanations via dialogue boxes will prove much more effective than lengthy (and virtually unreadable) privacy policy statements in allaying consumer concerns and communicating the company’s respect for the consumer’s privacy.

In addition, as indicated earlier, companies observing best practices will not be satisfied with one-off consent, but will inform consumers (and again obtain consent) whenever they plan to put data to new uses.

Michael Vidikan is the CEO of Future in Focus, a company that helps organizations find clarity amid the chaos. Future in Focus’s strategic foresight and consulting services help companies see years or even decades into the future so they can make better long-term decisions today.


[i] Paul Kielstra, “Privacy Uncovered: Can Private Life Exist in the Digital Age?” Economist Intelligence Unit, 2013, www.economistinsights.com.

[ii] Paul Kielstra, “Privacy Uncovered: Can Private Life Exist in the Digital Age?” Economist Intelligence Unit, 2013, www.economistinsights.com.

[iii] Paul Kielstra, “Privacy Uncovered: Can Private Life Exist in the Digital Age?” Economist Intelligence Unit, 2013, www.economistinsights.com.

[iv] Molly Wood, “Facebook Generation Rekindles Expectation of Privacy Online,” The New York Times, September 7, 2014, http://bits.blogs.nytimes.com.

Michael Vidikan

CEO, Future in Focus

Michael Vidikan is the CEO of Future in Focus, a strategic foresight research and consulting firm. Future in Focus helps organizations see years or even decades into the future so they…

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