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Key Takeaways: Data Privacy Policy Best Practices
- A transparent data privacy policy builds customer trust and ensures legal compliance.
- A Data privacy policy should include data collection methods, usage purposes, retention periods and user rights.
- Review and update your privacy policy quarterly to maintain compliance.
- Data minimization reduces breach risk and improves customer confidence.
A transparent data privacy policy is a clear, accessible document that explains how your company collects, uses and protects customer data. When customers share their personally identifiable information (PII) with your business, they're placing enormous trust in you — especially considering that data breaches and compromises impacted more than 1.35 billion people in 2024 alone.
Today, AI has made cyberattacks an even more critical concern for customers and organizations alike. In fact, recent research found that nearly 75% of IT security leaders believe their organization is already under attack from AI-powered cyberthreats.
Creating a comprehensive data privacy policy isn't just about legal compliance; it's about building the foundation of customer trust that drives long-term business success.
Table of Contents
- Why Your Business Needs a Transparent Data Privacy Policy
- 5 Essential Elements Every Data Privacy Policy Must Include
- Data Privacy Policy Checklist
- How Should You Build Your Data Privacy Policy?
- 5 Data Privacy Policy Mistakes That Kill Customer Trust
- What Should You Do With Your Data Privacy Policy When It’s Finalized?
Why Your Business Needs a Transparent Data Privacy Policy
Once upon a time, people gave up personal information in exchange for almost nothing and had no concerns about customer data protection. Those days are over. When people share personal data with you — email addresses, physical addresses, financial information, health information or their photos or online activities — they are careful. They know they need to trust you to keep sensitive data safe, delete it when you no longer need it and not share it or sell it to anyone they don’t want to have it.
To gain this trust, it is essential that you are clear and transparent about your intentions and your ability to house and manage data. Demonstrating this fosters trust. It also empowers your customers to make smart decisions about their data and privacy.
“People are not against sharing their data,” said Hone John Tito, co-founder of Game Host Bros. “They just want to know what is happening with it.”
This might feel like a legal document, or something dull that should be hidden deep somewhere on your site. But hiding your data privacy policy does not build trust. “No one wants to dig through walls of text to get the details,” noted Tito. “If users see that you are consistent and honest, they trust you more. It is all about being upfront, without hiding behind jargon.”
Related Article: Protecting Enterprise Data in the Age of AI: A Business Leader's Guide
5 Essential Elements Every Data Privacy Policy Must Include
Your data privacy policy should offer full data collection transparency, including information like:
- How you collect it
- Tools used to collect it
- Why you need the data
- What the data will be used for
- How long you intend to keep the data
You should assure people that you won’t expand your use of their data without notice and that you have systems in place to keep your promises.
In some way, your policy should allow people to opt in or out. Perhaps they can reject the use of cookies or refuse to offer information that might feel too sensitive. There are a number of ways to accomplish this, but offering control over the data you collect ensures you have customer consent.
“We found it essential that players must understand our data collection purposes otherwise they would fear the worst,” explained Marin Cristian-Ovidiu, CEO of OnlineGame.io. “We decided to compose a data policy that engages players in dialogue. Players tend to approve of data collection when they see direct advantages for themselves instead of excessive benefits accruing to the company.”
You will also need to explain how you intend to handle the data you have collected. For many industries, this data privacy policy will have to align with data governance regulations. You will also need to take measures to protect the data you collect against breaches. Consumers will want to know what those measures are.
You also need to specify what customer data will be used for and commit to not exceeding that use without prior consent.
“Draw a data map,” suggested Beth Fulkerson, partner & privacy, data and cybersecurity practice chair at CM Law. “This exercise will highlight situations in which different parts of the company are collecting the same information, and how they are sharing it with third parties. This is essential, because if one department promises that data will be used a certain way, or deleted, and another has no idea about this, the consumer will believe they were deceived by the company.”
As you define your policy around data storage and retention, you might want to rethink it. Do you really need to collect and keep all that data?
“The less data you have the better,” said Fulkerson. “In the old days, data storage was costly in terms of warehouse space and then hard drive space. With cloud storage, companies no longer have that check on excessive data retention.”
Data Privacy Policy Checklist
Required Elements:
- [ ] Types of data collected (personal, behavioral, technical)
- [ ] Data collection methods (forms, cookies, analytics)
- [ ] Purpose of data use (marketing, service improvement, legal compliance)
- [ ] Data retention periods (specify timeframes: 2 years, 5 years, etc.)
- [ ] Third-party data sharing policies
- [ ] User rights and opt-out procedures
- [ ] Data security measures
- [ ] Contact information for privacy inquiries
Compliance-Specific Requirements:
- [ ] GDPR consent mechanisms (for EU customers)
- [ ] CCPA opt-out options (for California residents)
- [ ] COPPA protections (if serving users under 13)
- [ ] Industry-specific requirements (HIPAA, PCI DSS, etc.)
How Should You Build Your Data Privacy Policy?
Writing your data privacy policy is about documenting what you do and ensuring you do what you say.
Once you have the more obvious data compliance issues sorted out, you must think through all the ways you collect data, why and what you use it for. This can be a complicated undertaking, and you will need to get every team and department in the company involved.
“Get all stakeholders to state why they need each piece of data,” said Fulkerson. This will help you define your policy and, perhaps, weed out the data you collect. “Data minimization is a universal standard. The less data you have, the less can be breached.”
Perhaps you are collecting customer data no one needs. Perhaps you are collecting personal data when anonymous data would serve your purposes just as well. But you might find that your data collection is all over the map.
"The biggest challenge is data fragmentation,” explained Jeremy Ung, CTO of BlackLine. “Many organizations still rely on legacy ERP systems, spreadsheets and disconnected tools that weren’t designed to work together. Even with APIs and integration platforms, there are still issues around inconsistent data formats, governance challenges and a lack of standardization.”
Related Article: Data Mongering is the Silent AI Threat to Privacy and Personal Autonomy
5 Data Privacy Policy Mistakes That Kill Customer Trust
When crafting, refining or maintaining your data privacy policy, avoid some of these common missteps:
1. Using Legal Jargon Instead of Plain English
Problem: Policies written like legal contracts confuse customers.
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Real-World Example: Disney's streaming service, Disney+, has a privacy policy that was ranked the "hardest to read" out of 50 major brands, scoring a 2.8 readability score (out of 100). The policy includes very long sentences (46 words per sentence in some cases) written at a college grad reading level and takes an average of 20 minutes to get through. On top of that, it also includes vague phrases, like mentioning that they'll share your data with third parties, but not outline who those third parties are.
Solution: Use 8th-grade reading level language. Replace "we may utilize" with "we use."
2. Hiding Your Privacy Policy
Problem: Burying the link in your footer (or having no link at all) reduces trust.
Real-World Example: A study from Penn State found that only about one-third of of websites offer any privacy policy at all. And of those, some URLs include broken links or lead to pages without a policy.
Solution: Add privacy policy links to your main navigation and checkout process.
3. Never Updating Your Policy
Problem: Outdated policies don't reflect current data practices.
Real-World Example: Gateway Learning Corp., distributor of Hooked on Phonics, used the same data privacy policy for three years (between 2000 and 2003) with no updates. Then, it began selling personal information in violation of its original terms, despite their policy still claiming they wouldn't sell data without consent. In 2003, the company revised its policy and retroactively applied the new terms to data collected under the old policy — a practice the FTC deemed an "unfair act" and which resulted in a settlement that required Gateway to surrender certain profits to the US Treasury.
Solution: Review and update quarterly, especially after adding new tools or services.
4. Collecting Data Without Clear Purpose
Problem: Asking for information "just in case" violates data minimization principles.
Real-World Example: Grindr's privacy policy stated that sensitive user data could be shared in "public" contexts, but it did not clarify why such highly sensitive data was collected or how it would be used beyond loosely framed "optimization" or "tooling" functions. Later, users discovered that the app was sharing its users’ HIV status with two other companies, a move that completely eroded user trust.
Solution: Only collect data you actively use and can justify to customers.
5. Not Providing Real Opt-Out Options
Problem: Making it difficult to opt out frustrates customers.
Real-World Example: Sephora agreed to a settlement $1.2 million for failing to disclose sales of personal information and not processing opt-out requests — violations of the California Consumer Privacy Act (CCPA).
Solution: Offer one-click unsubscribe and clear preference centers.
What Should You Do With Your Data Privacy Policy When It’s Finalized?
House your data privacy policy somewhere where customers can access it, understand it and — if necessary — consent to it. But don’t make promises that you have no system in place to keep.
“Once policies have been finalized, it's crucial to ensure that they are seamlessly integrated into the organization's operational workflows and systems,” said Shuai Guan, co-founder and CEO at Thunderbit. “This means embedding the policy requirements directly into the actual processes and technologies used to manage customer data.”
Once your policy is integrated with your operations, place it somewhere that’s easy for customers to find and, if possible, demonstrate that you have a system in place to manage it.
“Users can find our ‘Data Preferences’ tab easily,” noted Cristian-Ovidiu. “The adjustments a player makes to their preferences result in specific experience modifications, which we display. When tracking is disabled, for example, game recommendations become less personalized.”
Creating an effective data privacy policy requires ongoing commitment to transparency and customer trust. Whether you're running a small business or managing enterprise-level data operations, the principles remain the same: be clear about your data collection practices, honor customer preferences and demonstrate consistent follow-through on your privacy promises.
Frequently Asked Questions About Data Privacy Policies
A privacy policy specifically explains data collection and usage practices, while terms of service outline the legal agreement for using your website or service.
Review your policy quarterly and update it whenever you change data collection practices, add new tools or when privacy laws change.
Yes, if you collect any visitor data (including through contact forms, analytics or cookies), you need a privacy policy.
You could face fines up to $7,500 per violation under CCPA, €20 million under GDPR and lose customer trust.
