What's in a Name?

0 Comments | Insight on the News, July 30, 2001 | by Donna De Marco

Consumers are concerned about online privacy, but traditional retailers have collected information from customers for years, storing it and using it to gain a competitive edge in business.

John Doe buys a fisherman lamp from a home store. A month or two later, he is inundated with the likes of "Ships and Sea," "Lighthouse Depot," "Murray Brothers," "Home Decorators" and "Whales & Friends" catalogs. He has never ordered from these companies before, nor even seen their catalogs, so why the sudden interest in him?

Simple: The retailer sold or exchanged his name and address with the catalog companies, which have similar databases full of potential new customers. It's a practice that has gone on for decades. But the growing concern about online privacy is prompting privacy advocates and shoppers to wonder exactly how much personal information is being collected, saved, swapped or sold.

"Everything that's happening in the e-world is magnifying what's happening in the traditional retail world," says Catherine Bartholow, president of RTC Direct, an advertising agency. "Consumer awareness is much higher because of what's going on the Internet."

Thousands of retailers, from department stores to catalog companies, collect information. It varies from Bed, Bath & Beyond asking for a customer's ZIP code as he buys merchandise at the counter, to Sears, Roebuck & Co. collecting names, addresses, household income and purchasing patterns through its store credit card. By knowing a customer's ZIP code, Bed, Bath & Beyond can target its advertising to a certain geographic area. Sears, on the other hand, can send relevant sales fliers to customers on the basis of their previous purchases.

In addition, retailers share, exchange or even sell their customer databases (usually just addresses and names) to other companies looking to augment their own. That results in dozens of catalogs or solicitations to customers who may have some interest in them but never asked for them.

"People have become accustomed to the practice of information use off-line," says H. Robert Wientzen, president and chief executive of the Direct Marketing Association (DMA), which represents catalogers, Internet retailers, magazine publishers, book and music clubs and financial-service providers, as well as direct-marketers. "Online there's significant concerns [about privacy] causing people to have concerns about offline privacy. That's never happened before."

Online marketing is the most sensitive issue for consumers, while telemarketing, seen as an intrusion of their personal time, is their next biggest concern, according to Alan Westin, president of Privacy and American Business a nonprofit think tank that researches and analyzes business-privacy issues. About two-thirds of American consumers don't mind getting direct-mail marketing pieces, according to studies done by the Hackensack, N.J., organization.

Nevertheless, many consumers still express their frustration over their lack of control of the use of their names, addresses and demographic profiles, says Beth Givens, director of the Privacy Rights Clearinghouse, a privacy-advocacy group based in San Diego.

Something as simple as filling out a warranty and product-registration card, donating money to clubs or charities and listing a name and phone number can result in unsolicited mail and telemarketing calls, according to Givens.

"The American consumer has little control over what is done with his or her personal data if he or she completes consumer surveys, fills out warranty cards, purchases items from a mail-order catalog, subscribes to a magazine or joins a book or music club," Givens says.

Calling 800, 888 and 900 numbers is risky as well. When dialing numbers with these prefixes, a customer's phone number can be recorded by a system called Automatic Number Identification and then sold to marketers for mail and phone solicitations.

More consumers are taking steps to reduce the amount of junk mail or unsolicited phone calls they receive, as well as protect their personal information.

The DMA gets 60,000 to 150,000 requests per month from consumers who want to be taken off mailing and telephone lists. The DMA's Mail Preference Service has about 3.5 million names, and the Telephone Preference Service has about 4 million names. Both lists had 1.5 million names five years ago. "Consumers are fearful," say Pat Faley, DMA's vice president of ethics and consumer affairs. "I think consumers get privacy and security mixed up in their heads."

Why do consumers have such little control over their personal information? "That's how business is done in the free world," Westin says. "There are no laws against it, and the amount of harm to a person is minimal. The worst that can happen is you get a stuffed wastebasket."

The industry for the most part is self-regulated. Reputable companies have spent years building their businesses to safeguard customers' information.

There are regulations governing such practices, including the Fair Credit Reporting Act, which protects credit information from being sold, and the Gramm-Leach-Bliley Act, which established standards for safeguarding customers' financial information.