Nearly 70 percent of U.S. consumers are concerned about their privacy online, but only 40 percent read privacy statements before handing over personal information to Web sites, according to a new 2002 Jupiter Consumer Survey. Moreover, only 30 percent of online consumers find Web site privacy statements easy to understand.

In the Jupiter Research report, entitled "Online Privacy: Managing Complexity to Realize Marketing Benefits," analysts advise companies to allocate dollars for consumer security and privacy education and to treat online privacy as a strategic marketing initiative, not a compliance burden.

Neither consumers nor businesses effectively address online privacy issues, according to Rob Leathern, Jupiter Research analyst. In an increasingly complex world, even legitimate businesses will suffer when consumers' perceptions of the safety of their personal information online are damaged, he says. Companies should clearly and pervasively communicate their policies on data gathering and use of data to make trade-offs between information and benefits clear to consumers, Leathern adds.

The survey shows that 82 percent of online consumers are willing to give different forms of information to shopping Web sites (where they have not yet made purchases) in exchange for something as modest as a US$100 sweepstakes entry. Consumers are most willing to offer e-mail addresses (61 percent) and full names (49 percent), and least likely to provide household incomes (18 percent) and phone numbers (19 percent). The survey data shows that 36 percent of users would provide a user name and password to Jupiter's Web site -- a potential concern considering that other Jupiter data indicates that 53 percent of online consumers use the same user name and password wherever they go online. Jupiter analysts have found that a majority of consumers seem willing to give their personal information for small benefits because it's not always clear how their information will be used or how widely it will be shared. The extent of this behavior varies greatly among different brands, Web sites, and applications.

What's the danger of not communicating your privacy policy effectively? Based on proprietary research and analysis of Consumer Survey data, Jupiter forecasts that as much as $24.5 billion in online sales will be lost by 2006 -- up from $5.5 billion in 2001. Online retail sales would be approximately 24 percent higher in 2006 if companies effectively addressed consumers' fears about privacy and security. With poor online privacy practices, many companies will experience negative effects not only in their online sales over the next several years, but also on offline sales that shift to more privacy-sensitive competitors, Jupiter says.

Early promises of privacy self-regulation by interactive firms have not materialized, and the industry has ceded the initiative to legislators. Only widespread industry commitment to privacy best practices will limit further restrictive government regulation, Leathern says.

Jupiter analysts offer the following advice to companies looking to increase consumers' confidence in conducting online transactions and sharing personal information:

• Adopt a segmentation approach to identify groups of consumers that are most likely to respond to "privacy marketing." Jupiter defines privacy marketing as sending messages that allay consumers' privacy and security fears. Businesses should proactively communicate and promote privacy and security policies and capabilities.
• Emphasize security and accountability in both online and offline consumer communications.
• Create a privacy council with representation across business units and increase awareness of privacy and data issues at both the senior executive and rank-and-file employee levels.