How A Tiny CRM Glitch Might Start A Privacy Revolution

Consumers gladly reveal scads of personal information to retailers in exchange for benefits such as discounts and free products. But what happens when the promised benefit doesn't materialize, potentially because of a site glitch? Should the retailer offer other compensation and promise the person's information will be erased and never used?

Clearly, the nature of information-sharing with major retailers makes the erasure claim silly, generally because it's not practical—and sometimes not even possible—to get all partners to surrender the data. As the cliché says, it's impossible to get the data back into the toothpaste tube.

This issue is raised, in a pointed legal context, by this week's GuestView column by Mark Rasch, the former head of the U.S. Justice Department's High-Tech Crimes Unit who today serves as principal of Secure IT Experts. Rasch said he supplied personal information to Microsoft and AT&T hoping to get, in return, discounts toward the purchase of some Apple iPhones. Something went awry during the transaction and Rasch didn't get the discounts. What bothers him more than the lost money is that the deal fell through after he'd dutifully typed his personal information into the online forms and clicked "send."

The issue is an interesting one, as few retailers have felt the need to come up with any backup offers. Given that returning the data is ridiculous, what about replacing the gift? With another item? With cash? Should E-Commerce sites dole out "we're sorry" gifts as easily as airlines offer flight vouchers?

But we're getting ahead of ourselves. First, do retailers even have a business need to do this? There are two primary groups of consumers at issue here. Younger consumers, say roughly 29 years old and younger, and the rest of the population. Younger consumers tend to have little concept of privacy and certainly no expectation of it, so they tend to offer up privacy info as though it had no value. For younger consumers, little compensation is truly needed.

But for those in their 30s and older, there still is a very strong sense of privacy and the older the consumer, the stronger that privacy sense gets. Given that the older consumers tend to spend—and have—much more money online, the prudent business course is indeed treat consumer data as valuables that demand compensation.

If no radical changes are made, retailers will start to see a sharply declining amount of cooperation with such programs. Consumers are highly tolerant of privacy abuses, but that patience has a limit.

Most members of the general public _ the young in particular _ are apathetic. That apathy works well for retailers. The young rarely consider the consequences as they spread their personal information far and wide. If a site crashes after they entered their names, addresses, phone numbers, email and payment card data, they'll just as soon move-on to another site, barely caring.

But apathy isn't the best friend of retail here. That's it's cousin, ignorance. As Rasch argues, if consumers knew what was in their CRM files with their favorite retailers, their apathy would quickly evaporate.

And although there is little risk of that today, it wouldn't be a stunner if Congress or some state legislatures passed laws granting consumers the right to access retail databases about them. If that day comes, the retail environment—especially E-Commerce—could change radically.

As far as promises to delete information are concerned, that they can get complicated, as was shown in a recent case involving a shuttered airport security kiosk system, companies can play word games. They can delete sensitive information from some systems and preserve it on others. Or they can simply sell the stuff as it arrives, meaning they can truthfully tell worried consumers that the info is completely gone from their databases.

Retailers that gather personal information and promise something in return should go above-and-beyond when it comes to living up to their side of the deal. Raising the ire of consumers who are now blissfully ignorant and happily apathetic might make Pandora's Box look like a Whitman's Sampler.