THE PRIVACY PROMISE

CHRISTINE BLANK

(FNS) -- Like consumers, retailers express a wide range of attitudes about privacy issues, especially regarding the use of data collected from members of their customer-loyalty programs.

At one end of the spectrum, some retailers are seeking a competitive advantage by advertising their policy of never sharing customer information with anyone.

In the middle, many retailers acknowledge that some of their customers do express concerns about how personal data is used. However, such concerns are often neutralized if customers perceive significant benefits from their membership in a frequent-shopper program.

Other retailers -- even those with clear policies about who does and does not see customer data -- believe consumer concerns about privacy have been exaggerated by the media.

"Newspapers try to raise the issue of 'Big Brother,' but we don't have time to look at [the information]. Consumers should be more worried about information on the Internet vs. the grocery store," said Ron Saurer, loyalty marketing manager at Supervalu, Minneapolis.

Although Supervalu and the retailers it supplies work with vendors on targeted promotions, mailing lists of shoppers are never sent to vendors, according to Saurer. "We don't sell data. For a couple thousand dollars, we don't want to lose the customer," he said.

Albertson's, Boise, Idaho, used its privacy policy as a selling point in radio ads that ran in several markets this summer. The ads, titled "Big Brother," touted the fact that Albertson's does not share private information on its shoppers with companies, as it claims other retailers do.

Albertson's also does not ask for personal information when organizations apply for its Community Partners Card, which tracks an organization's purchases so the retailer can donate a certain percentage of those purchases to the organization.

Industry observers have noted ads similar to Albertson's -- either stating the chain's commitment to privacy, or comparing its privacy practices to other chains -- and say most retailers with loyalty programs face concern from shoppers.

As retailers realize the value of loyalty program data, however, some believe this type of advertising will decrease. "People are coming to understand that this household-level data is extraordinarily valuable in bringing value to consumers," said Glenn Hausfater, managing partner at Partners in Loyalty Marketing, Chicago.

Many retailers limit their "commitment to privacy" messages to card applications, store signs and grocery bags.

At Food Lion, Salisbury, N.C., the application for an MVP frequent-shopper card states, "As an MVP customer, you may receive periodic mailings or offers from or on behalf of Food Lion. In consideration of your privacy, Food Lion will not release your name or address for use by any outside company."

Grocery bags at Harris Teeter, Charlotte, N.C., have this message about the retailer's frequent-shopper program printed on them: "At Harris Teeter your privacy is important to us. We consider the Very Important Customer program information to be strictly confidential. You have our promise that Harris Teeter will not sell or share your name, address, phone number or purchase information with any outside companies."

Harris Teeter shares customer data only with its mailing house, demanding a signed confidentiality agreement before every mailing. "The agreement states that those names are to be destroyed [when that mailing is complete] and are not to be used for any other reason. We go to the extreme to make sure information is confidential," said Kevin Krainer, director of VIC marketing at Harris Teeter.

Although the privacy message is not included on the VIC card application, it appears in newspaper ads and will be included in targeted VIC promotions in the future, according to Krainer. In addition, the application includes an "opt-out" section, where cardholders can choose not to be included in targeted mailings.

The application for Wild Oats Community Markets' Wild Shopper card also states that the chain will "never share" information with outside vendors. "We could do very well working with outside agencies, but it would be offensive to our customer base," said Jay Robinson, director of electronic marketing at Wild Oats, Boulder, Colo. The chain works with vendors on promotions, but only with "companies in our industry and only through us," he added.

Independents who have developed a loyal customer base face fewer customer privacy concerns, according to Marv Imus, vice president and owner of Paw Paw Shopping Center, Paw Paw, Mich. The store has 8,500 active cardholders -- and about 12,000 in its database -- in a town with a population of 3,500.

"Some customers have been here 30 years, and still see my dad, my brother and myself in the store," said Imus. "It comes down to the relationship the consumer feels she has with the retailer. If she is not feeling very comfortable with the retailer, or there are several retailers she is doing business with, she is going to be far more skeptical."

Still, Imus shares the cardholder mailing list only with Paw Paw's mailing house, and takes extra measures to protect shoppers' privacy. For example, when a lawyer handling a man's divorce case asked Imus for the wife's purchasing information, he refused. "The only person I'm going to share that information with is her," he said. Even then, the information almost never leaves the store.

Privacy has not been a concern for cardholders at Sullivan's Food, a nine-store retailer in Savanna, Ill., according to Mike Sullivan, director of management information systems. All mailings are done from the Sullivan office, and a message on its card application ensures customers that Sullivan's will "never sell your confidential information or use it to violate your confidentiality."

Most retailers help assuage shoppers' privacy concerns by making it very clear that promotions come from the retailer, not the manufacturer. "Although both supplier and retailer want to build their equity through the mail piece, the piece must look and feel like their [retailers'] other communication," said Hausfater.

When shoppers believe a mailing is from the manufacturer and that it uses their grocery card data, there is trouble. When some Paw Paw customers (and Diet Coke drinkers) received coupons from Diet Pepsi, they complained about the retailer giving their purchasing information to Pepsi.

"I wouldn't do that. I want to encourage brand loyalty," Imus said. Instead, Imus told customers, he would honor the coupons for "whatever drink you want."

Still, retailers need to balance privacy issues with the targeting opportunities available via detailed customer purchase data and demographics.

"The bottom line is to always think about data as something to use for the customers' benefit, to bring them value," Hausfater said. "When companies get a little more self-serving and [offer] less value, is when I think we get into problems."

Retailers don't have to share customer information to trigger concerns about privacy. Promoting "sensitive" products based on customer data can also raise consumers' hackles, according to Kim Du Toit, formerly director of card marketing at Grand Union Co., Wayne, N.J.

During a presentation at the Global Electronic Marketing Conference in April, Du Toit identified some sensitive product categories. "Do you want a store to know you bought condoms before a business trip?" he asked as an example, adding that items such as hearing aid batteries, low-salt products, cigarettes, alcohol, dentures, hemorrhoid treatments and nonfood ethnic products could all be considered sensitive.

"If the industry doesn't handle privacy matters well, there will be legislation passed against the industry. Public consciousness on this issue is being raised," Du Toit said.

The legislative battleground so far has been concentrated on new communication vehicles such as the Internet. Retailers venturing into the world of electronic commerce need to operate carefully in this arena, especially with anything related to children.

One problem is there are few clear-cut rules about privacy. The Electronic Privacy Information Center, Washington, recently pointed out that some government Web sites are not protecting children's privacy, even though the Clinton administration advocates protecting kids on-line.

A kids' page on the White House Web site, for example, does not instruct children to consult their parents before divulging personal information and does not specify how the information will be used.

"I don't want to market to consumers through their kids," said Paw Paw's Imus. "Children are important to the household, but they're not the decision-makers, and I don't want to cause friction."

At the same time, Paw Paw may start sending birthday cards -- without a promotion -- to its cardholders' children. "Our Christmas cards [to cardholders] go over tremendously," he said.