StrateScapes - Walking the Privacy Tightrope


		Supplement to StrateScapes – Volume 4, Number 2

Walking the Privacy Tightrope

Consumers are worried — they think you know too much.

Lawmakers are worried — they're working hard to keep you from knowing too much.

But to get the right message in front of the right customer, you need to be in the know.

A vexing 50 percent of consumers feel that businesses cannot be trusted with personal information* — yet 78 percent say they’re willing to give companies the 411 on themselves if it leads to personalized products and services.** And so goes the conundrum: How do you get consumers to trust you with the personal information you need in order to give them what they want?

To build customer databases, marketers traditionally relied on tactics such as credit card reverse append and sharing information with affiliate companies. But the task has become more challenging. New privacy legislation like Gramm-Leach-Bliley (see GLB Explained) requires you jump through hoops before using personal data. And wary consumers are declining to divulge personal information. Still, there are ways to get the data you need to deliver on customer expectations without raising the ire of your customers or the law.

Data-Collection Tactic: Create a Loyalty Program
Ranked the second most critical source of customer data by retailers,^† loyalty programs present a great opportunity to collect data while giving customers something they want. Boston-based researcher Quadstone reports that more than half of all consumers prefer shopping at stores and Web sites that offer rewards programs over those that do not. And 60 percent of consumers are willing to share personal information in return for a quality rewards program.

Privacy-Friendly Tips

Give ’em the WIIFM.
Tell the consumer what immediate value they're going to receive for giving out personal information. If people perceive they'll receive special rewards, they’re more willing to reveal personal information. Rewards may include exclusive member discounts, a free gift after signing up, advance notice of sales, a print or e-mail newsletter, or special shopping privileges. Explain to customers that the more you understand about them, the better you can provide them with products and services suited to their individual needs.

Put them in control.
Giving consumers control over how much data they provide is key to building trust and strengthening relationships, say CRM experts Peppers and Rogers Group. So offer graduated levels of opt-in. For example, you may ask them for contact info to join your loyalty program and receive a basic package of benefits. You can then entice them to give you more information — maybe household composition or their favorite products, services or departments — by offering additional benefits or discounts. Be sure it’s clear that the more they tell you, the more they’ll benefit. Also, make it easy for them to opt-out of your program at any time or change their program parameters, such as preferred contact channel or frequency.

Flaunt your privacy policy.
Why are consumers worried about giving you personal data? According to an American Demographics survey, 64 percent believed they would be bombarded with solicitations. And 58 percent felt their information would be used against them in some way. On the other hand, 60 percent of consumers polled by Market Facts agree that the mere existence of a privacy policy on a Web site makes them feel more confident — even if they never actually read it. So build your customers’ trust by clearly displaying or providing access to your privacy policy in as many conspicuous places as possible — on all marketing collateral, on your Web site and even at the customer service desk in every store or branch.

Explain where the data goes.
Within your privacy policy, tell consumers who you will share with or sell their information to. Include a complete list of all the affiliates within your holding company — regardless of whether or not you’re required to under the GLB Act. If the information will be used by your company’s affiliates or entities acting on your behalf (for marketing and quality assurance purposes), tell consumers that, too.

Data-Collection Tactic: Maximize points of contact.
Take advantage of the myriad ways you come into contact with your customers every day. Supply CSRs with questions to ask as customers call in. Ask for e-mail addresses on a coupon in return for an additional percentage off. Include a survey in your newsletter. Add a poll to your Web site. Add one lifestyle question to the remittance portion of each month’s billing statement. Every contact is a prime information-gathering opportunity if executed correctly.

Privacy-Friendly Tips

WIIFM? Tell ’em again.
Every time you ask a customer to share information, remind them what they’ll get in return. For example, explain the bonus or reward they’ll receive for including their e-mail address on a dollar-off direct-mail postcard: perhaps e-mailed product updates or offers? Or maybe discount coupons or links to best -customer Web pages? In other words, how will providing their e-mail add relevant value to their life?

Direct them to the details.
If you’re collecting information on the fly, such as at the POS or during an intercept survey, you won’t be able to disclose your full privacy policy. But you can at least give consumers the gist and make it easy for them to get the full details. For example, on a cramped direct mail piece you can simply say, “We value your privacy. Read our full privacy policy at www.yourwebaddress.com.” Give them an 800 number where they can call to request a full statement be mailed to them. Or include privacy policy brochures at the customer service desk or POS.

Data-Collection Tactic: Execute a One-Time Campaign
When asked what would make them give up personal information, consumers polled by American Demographics were drawn to free services (such as bill pay), cash incentives (spend X dollars, get X dollars off), or discounts on products and services. So develop a survey, sweepstakes or promotion with compelling prizes or offers that entice consumers to give you personal information.

Privacy-Friendly Tip

Tell them how you’ll use it.
Even though the consumer opted in by participating in your promotion, it’s still important to inform them on how, when and where their information is going to be used, sold or shared.

Data-Collection Tactic: Enhance Your Database with External Data
Append and reverse-append products are still a common way to get the consumer information you need to build up your database. In fact, third-party data is the second most popular source of consumer data (legacy data ranked first)^† because of its high accuracy rate, easy accessibility and cost-effectiveness.

You can start building your customer database by adding a basic level of geodemographics with products such as Claritas’ PRIZM or P$YCLE. Geodemographics help you begin to understand things like service usage or shopping patterns, types of products and services used, and the margin on those products and services. Although this type of information can add some dimension to basic transactional data, it does have its drawbacks. Since it segments your audience by geographic area or ZIP code, it can be misleading — after all, not everyone in the same ZIP code will have the same income or household composition.

Psychographic products, such as Looking Glass’ Cohorts product, append your database with actual, self-reported, household-level data, rather than geographical-level data. By using household-level segmentation, you can begin to get a three-dimensional view of your customers. This type of data can tell you about your customers’ household composition (kids at home vs. empty nesters), their lifestyle (outdoorsy, theater buffs or dog lovers) and their median age, income and likely profession. It can also offer insight into your customers’ motivations, preferences and attitudes about your company, your products and your services.

Privacy-Friendly Tips

Know who you’re dealing with.
Data aggregators are already up-front about where they get their data, because they want to guarantee its accuracy. But what they may not be addressing — or even know — is whether that data was obtained from its original source with consumer permission. So ask. If they know, they’ll tell you. And if they’re unsure, go somewhere else. By finding out and disclosing all sources of your data, consumers will feel as though you are sensitive to their privacy concerns — and they’ll want to continue doing business with you.

Show consumers you’re in it together.
Although they’re not always happy about it, consumers do understand that companies track and analyze transactional data, according to Direct magazine. But what they may not realize is that you’re buying data from outside sources. Tell them. You’ll be demonstrating respect for your customers — respect that will build trust and lead to stronger, more profitable relationships.

*	Meridien Research
**	American Demographics
†	Deloitte Research

STRATESCAPES and STRATESCAPES SUPPLEMENTS are published by Customer Communications Group, Inc., a full-service agency specializing in relationship marketing and customer communications. Our comprehensive, turnkey services include data analysis, customer segmentation, strategic consulting, account management, creative execution, print production and multimedia solutions.