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If a form looks too daunting people won't fill it out. If the form is forced on them when they aren't ready to share they will be likely to fill it and in with false information. Several years back I worked closely with the Hotmail email team. When people registered for a Hotmail account, they had to give their ZIP code. This was mainly to help Hotmail target adverts. It was amazing how many users of the service apparently lived in Beverly Hills, California. Obviously, they didn't really. But lots to people who entered the ZIP code 90210, because they knew it from a popular TV show called Beverly Hills, 90210.
Basically, they circumvented the form with false information because they didn't see the value in providing their real data. The way to avoid these issues is to make the form as concise as possible and to make sure people realize the reason you are asking for each piece of information. Sometimes it might even be better to hold off on asking for some information until you have a better relationship with your customer. How do you make sure people give you the data you need? Well, first make sure you're asking sensible questions. Just like the other pages on your site give the form a descriptive heading and a summary line of text explaining its purpose.
If the form asks for more than one type of data, you can use subheadings within the form to separate the areas. Again, these subheadings should be descriptive telling users what you are asking for and why. Then make sure that the labels you use act as instructions to help people fill out the form. For instance, just putting the label password next to a field doesn't help people as much as if you add the context of Enter a new password. Now anyone filling out the form knows exactly what you want from them. A new password rather than spending time worrying about whether they already had a password set up for the site.
As an aside, let me just point out that it doesn't really matter whether you put the labels above the fields or to the left of them. If you're using instructional style labels, they're going to end up a bit longer. That suggests putting them above the fields. If you have a longer form, putting the labels to the side will make it appear a bit shorter. Left aligning all the labels makes it slightly harder for people's eyes to scan between the label and the associated field. So I'd suggest right aligning and the aligning all the items in the form along the left edge of the form fields. Whatever style you end up choosing, above or to the side, stick to it throughout your form and use the same style on every form on your site.
That keeps the interface consistent and helps visitors quickly learn the layout of your forms. What is important is to only use a single column of fields. If you put two columns side by side it makes the form harder to scan and often people will completely miss filling out the right-hand column.
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