Is Your Organization Collecting Too Much Customer Data? Why Sometimes Less Is More

useful data

The types of customer data business can collect are plentiful, including first-party identity data like email address, phone number and username or first-party behavior data like browsing activity, purchase history and communication information. A company can also buy similar customer information from data providers as third-party data. With a variety of data sources, business can know a large amount of personal information about customers, even very specific details like the name of their pet, the type of car they own, the age of their children and their favorite color.

With so much potential customer data to collect, it may be compelling to collect as much as possible, but for many reasons, this is not the best strategy for a marketing team. Many different cities and states are beginning to pass their own privacy laws, limiting what you can do. These laws include the California Consumer Privacy Act, Virginia’s Consumer Data Protection Act, Colorado Privacy Act, the New York SHIELD Act and Illinois’ Biometric Information Privacy Act.

Meanwhile, most consumers don’t trust companies with their data. According to the 2021 Gartner reportPursuing a 360-Degree View of the Customer Will Destroy Your Business,” (subscription required) 76% of consumers said that they’re concerned about how companies are collecting and using their data. Meanwhile, 72% said it makes them nervous to share any personal information online.

As Tarun Kushwaha, a marketing professor in George Mason University’s School of Business, described it, “Consumers are increasingly valuing their privacy because they have realized that consumer data is now a product that firms are cashing in on. Consumers do not want firms to be cashing in on their data without their permission.”

Related Article: Is Your Customer Experience Data-Driven? Great. Now How Good Is Your Data?

Find Purpose and Value in the Customer Data You Collect

Organizations have spent the last 20 to 30 years investing in customer data and the technology that collects it. But more recently many organizations have begun thinking more strategically on how they can drive value from these investments, said Lizzy Foo Kune, VP analyst at Gartner. She suggests that clients avoid collecting “360 degrees” worth of data on customers and instead decide a couple major factors first: the use case for the customer data and how exactly it can drive value for the business. From there, organizations can strategically decide what limited data they need and focus on that.

Organizations can easily get real value from limited customer data if they’ve considered what they actually need to drive value, Foo Kune said. She gave the example of a regional grocery store who used real-time customer location data to streamline their contactless pickup service. With only this real-time location data, they could see who was arriving the soonest to pick up their order and prepare accordingly, helping the store achieve operational efficiency.

“The more realistic we are in terms of what data we can collect and what data we need to collect, the more we can refocus on the value that organizations aim to generate using that data, and the better off we’ll be,” Foo Kune said.

Related Article: You’re Drowning in Data: Now What?

Show Customers You Can Provide Them Real Value

When marketers want to ensure customer privacy while also being able to stay relevant and give customers a positive experience, Foo Kune suggests that they lean on tailored help. This refers to the idea that you can “personalize and provide messages based on what’s going to be valuable, and then limit the number of data dimensions that are used, so that you can really balance customer relevance and privacy concerns,” she said.

For example, marketers could guide customers to a specific service that could help them solve a specific, individual problem. This is where Foo Kune sees a huge opportunity for marketers. A recent Gartner report found that only 12% of consumers experience this type of personalization from brands.

In addition to how data sharing will benefit customers, companies should explain to them when their data will be purged so it cannot be misused in future, Kushwaha said. “Once consumers see that their interests are guarded, they will be willing to share more data. Trust is a necessary condition for any such data collection exercise,” he added.

Related Article: Why Marketers Should Embrace Consumer Privacy Regulations

Create a Trusting Relationship With Consumers

The benefits of consumer trust include frequent purchases, higher loyalty and willingness to be a brand ambassador to friends or family, Kushwaha said. But once that trust is broken, it takes a long time to recover.

The Gartner report highlighted a few risks that can happen when companies break this trust. Customers may choose to withdraw from the brand by unsubscribing from emails or ignoring messages from the company. A step above that is “customer abandonment,” when customers stop doing business or making purchases with the company. The worst outcome is “customer boycott,”when customers feel so betrayed that they actively advocate against the brand.

According to Kushwaha, firms first must acknowledge that this is not their data but their customers’ data and act accordingly. Once they create this framework where consumers trust their data is safe, a stronger relationship can be built.

“For long-term success of this data-based monetization model, firms should realize that consumers are not products but rather partners in this process,” Kushwaha said. “The faster they get this, the easier it will be for them to run this model.”

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