Few Direct Marketers Protect Consumer Privacy, Says UMass Amherst Professor

AMHERST, Mass. - Many consumers aren’t told that telephone and direct mail marketers who contact them selling products and services are also collecting, using, and sharing personal information about them. This raises serious privacy issues for both the industry and its customers, according to a new study co-authored by a University of Massachusetts professor.

The study found that only 38 percent of marketers notify customers they are gathering information such as names and addresses, incomes and occupations, credit card numbers, and buying habits; just 26 percent ask permission; and only 33 percent tell consumers how the data will be used, says George R. Milne, associate professor of marketing.

He wrote the study with Maria-Eugenia Boza, a doctoral candidate at UMass. "Collecting information is not bad," Milne says. "But it does raise some privacy issues. It’s the sharing of that information that is a concern for consumers." Milne and Boza surveyed 365 organizations that belong to the Direct Marketing Association (DMA), a national group with 3,600 members including some of the largest companies in the U.S. They wanted to find out how marketers view privacy issues, how they protect customer privacy in their electronic databases and marketing efforts, and what differing attitudes firms have regarding privacy practices.

The study was commissioned by the Marketing Science Institute (MSI), a Cambridge, Mass.– based not-for-profit organization that funds scholarly research on the marketing profession. It was also partially funded by the DMA. The study will be published by the Marketing Science Institute in early July. The work has been criticized by the DMA, but Milne says the research is academically and scientifically sound.

"The questions I asked were very straightforward and basically required yes or no answers," Milne says. "The study also has gone through a review process at the Marketing Science Institute where it was examined by a committee of academics and professionals." Milne says the direct marketing industry should work to improve privacy protection systems – a move that would boost sales, consumer confidence, and loyalty. He says this is the fourth project he has done for MSI, the last being another study of privacy in marketing.

Milne, who has been a member of the UMass Isenberg School of Management department of marketing since 1992, says results suggest that database marketing can be done in a way that protects consumer privacy, and that companies that make the greatest use of customer information were more likely to have strict privacy practices in place. Overall, Milne says, the direct marketing industry needs to work harder at self-regulation.