Privacy Marketing
From TBTF for 1995-11-03

Privacy Marketing
Copyright © 1995 by Nick Szabo <szabo@netcom.com>
October 25, 1995

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 anonymous).
   
• 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, where it nevertheless had great success. (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). Used boldly and accurately, privacy marketing has vast potential to upset competitors who rely too much on 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.
   
• It is ludicrous to argue that cash transactions, which leave no identified paper trail, provide no practical privacy. In fact 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.
   
• 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.

I conclude that privacy marketing will be an important value-add for Internet commerce. It 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.

Nick Szabo, szabo@netcom.com
Consultant, Internet Commerce & Security
IBM, Sequent, DigiCash, Agorics
Nine years experience on the Internet