From: szabo@netcom.com (Nick Szabo)
Date: Wed, 25 Oct 95 18:31:43 PDT
To: cypherpunks@toad.com
Subject: Privacy Marketing
Message-ID: <199510260058.RAA27936@netcom.netcom.com>
MIME-Version: 1.0
Content-Type: text/plain



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