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Security, Privacy & Other Non-monetary Forms of Currency

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November 1, 1999 *2,600 subscribers* Volume 1, Issue 10
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ECnow.com 1999 trend #01: "While consumer-based security concerns continue to decrease, privacy concerns will increase leading companies for focus on the non-monetary forms of currency (time, attention, trust and convenience)"

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Privacy Practices Help Build Trust, Get and Retain Web Customers
By Dave Steer
Director of Communications, TRUSTe
October 29, 1999

As e-commerce businesses vie to generate traffic to their Web sites, the bigger challenge is how to retain that traffic. While the industry at-large is taking a "build it and they will come" approach, many savvy Web businesses understand that in order to be successful, they must first create an environment of trust.

The urgency to achieve critical mass and Web site "stickiness" is driven primarily by Wall Street. In lieu of real earnings by which to gauge the value of public Internet companies, investors are betting that sites with extraordinarily high numbers of registered users will catalyze the growth of the new Internet economy. Often key factors are not only how many users a Web site has, but also the quantity and quality of information the company has about each user – information that helps to market and sell to that user and other similar buyers.

The insight that a company has on its customers can be viewed as "non-monetary currency" because of its value. As many companies quickly discover, the first step to learning more about their customers is to establish a trusting relationship by addressing the most prevalent consumer concern on the Web: privacy.

Building trust and addressing privacy may be perceived as nebulous. But in 1998, Studio Archetype and Cheskin Research attempted to quantify the trust issue by proposing a hierarchy of the components that contribute to trust. Unveiled in a widely publicized study entitled “The Elements of Trust,” the hierarchy included elements such as ease of navigation, product fulfillment and third party validation. Not surprisingly, the study found that Web privacy and security topped consumer fears, and that these fears can have a resounding impact on the ability of a Web site to build a trusting relationship with a potential online customer.

Invasion of privacy is a fear that emanates from a variety of sources. First, the experience of shopping online is fundamentally different than the experience in the brick and mortar world. In a physical store, a cash-paying customer can remain totally anonymous; other customers may remain anonymous until they write a check or present a credit or debit card. In stark contrast, Web sites have the ability to identify consumers from the moment they log on.

The advent of new technologies such as personalization and online profiling make this fact all too clear to the consumer, sometimes uncomfortably so. To illustrate with an analogy, if Norm walks into his neighborhood Cheers restaurant in Boston, he expects his friends there to call him “Norm.” If he walks into a strange bar in Chicago and strangers call him “Norm,” he may feel uncomfortable and leave.

Consumer fear of the Web can also be traced to the rash of scare-oriented media coverage. A recent study by Jupiter Communications linked the level of consumer fear of privacy invasion to the rise in CNET coverage of the issue.

The fear of privacy invasion, however, is real and has been on the rise since the boom of the Internet economy. A Spring 1998 BusinessWeek/Harris Poll found that privacy was the number one concern on the Web. In its report, BusinessWeek pointed out that 59 percent of respondents would never provide a Web site with registration information and that 97 percent of respondents were hesitant to share any type of personal information on the Web.

The Internet industry has spawned an antidote that cures part of this problem: privacy seal programs. Similar to the Good Housekeeping Seal of Approval or the Underwriter’s Laboratories Seal, Internet privacy seal programs seek to provide an effective and trustworthy communications medium between consumers and businesses on the Web. The role of privacy seal programs is multifaceted. They (1) ensure proper disclosure of a Web site’s privacy and security practices; (2) monitor compliance with those stated privacy policies; (3) provide recourse for the online consumer; (4) boost consumer confidence in the Web; and (5) educate consumers about how to best protect themselves on the Web.

Privacy seal programs ensure that Web sites do what they say and say what they do. As a result, they represent a powerful road sign that consumers can look for when deciding whether or not to trust the Web sites they are visiting.

(In the spirit of disclosure, I am the Director of Communications for TRUSTe, one of the leading online privacy seal programs.)

TRUSTe, a Silicon Valley based non profit organization, launched its privacy seal program more than two years ago with the mission of raising consumer trust and confidence in the Web. Its strategy is straightforward: increase the level of industry privacy practice disclosure by targeting the most trafficked sites on the Web. These sites, in turn, lead the masses to other sites on the Web.

By every metric available, this approach is working. Today more than 800 Web sites have been certified by TRUSTe – this includes all of the “portal” Web sites, more than 50 percent of the top 100 sites, and over 15 of the top 20 most frequented Web sites. In all, approximately 90 percent of the U.S. Web community is impacted by the TRUSTe privacy seal each month. If proliferation is a leading indicator of success, then the introduction of the Better Business Bureau and the AICPA’s WebTrust seal programs are a clear signal that privacy seal programs are raising industry awareness and addressing consumer concerns.

For the Web business, the value proposition offered by third party oversight programs surpasses the ability to display a privacy seal on a Web site. For example, TRUSTe operates as part privacy seal program and part services and consulting by emphasizing industry education and guiding prospective licensees on appropriate and legal data gathering and dissemination practices. As a result, there tends to be a high return on the licensee’s privacy investment.

The urgency to gain -- and retain – a critical mass of Web site users has placed an increased emphasis on establishing trusted relationships online. Privacy fears can significantly jeopardize the ability for an e-commerce site to be successful. Web sites should post statements that clearly articulate their privacy policies and practices, and seek the endorsement of third party oversight programs. Privacy seal programs are utilized by enough highly visible sites so that displaying a recognized privacy seal – and thus living up to the standards upheld by the privacy seal program – becomes a necessary tool in a competitive environment. In all, it is not only good business to address consumer privacy concerns; it’s smart business.

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