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Data-driven
personalization
and trust: Finding
the right balance

Author: Mike Elgan

Data-driven personalization is the practice of delivering relevant content to your customers based on the information you've gathered about them. Before data and personalization, brands had to generate demand for their products or make assumptions about their audiences using generalized data. But thanks to the internet and mobile devices, it's possible to communicate with heightened awareness about your market.

A data-driven approach enables you to collect data and use that data for a better customer experience throughout the entire customer life cycle. More importantly, it allows you to communicate the right message at the right time, based on where the customer is in that cycle, increasing engagement and conversion rates.

But the secret to making this personalization work is trust, which is earned through responsibly managing your customers' data. You have to strike the right balance between data and personalization, and your customers' privacy.

Data and personalization: What about privacy?

Though data-driven personalization offers clear benefits, many consumers are also concerned about the collection and use of their data.

Verizon surveyed 6,000 consumers in 15 countries to find out how consumers feel about sharing their data with brands. Less than half (48%) said they're comfortable sharing personal data with brands. One-quarter said they're not comfortable with the practice at all.

Some consumers feel they have no choice; 24% of those who expressed discomfort or ambivalence feel there's no good alternative to sharing data.

That perspective is important. But it's not the whole story.

Data-driven personalization: The privacy paradox

The privacy paradox is the inconsistency between consumers' concerns expressed (in, say, surveys or opinion polls) about personal privacy and their actual online behavior. People may say they oppose sharing data with brands but often willingly and knowingly share it for personal benefits. They say one thing but do another.

So, do consumers want to share their data in exchange for personalization benefits? It depends.

Most consumers prefer and expect data-driven personalization, but it depends on how you use their data for personalization. For example, a consumer may welcome a message that highlights a big sale at a nearby store. But if the message pops up as the consumer walks in front of the store (indicating that the company "knows where they are"), they may find this unsettling. In both cases, the key data is the consumer's location. What's different is how the company uses their location data.

Many consumers also object to receiving advertisements for products they recently browsed online. This is especially true if they actually purchased the product. (This advertising practice is called "retargeting," whether it happens before or after a purchase.) In fact, Google deemed this practice so objectionable that the company recently decided to stop doing it with its ad system.

Consumers' concerns about sharing data isn't just about what your brand does with the data, but what criminals could do with it should a breach or hack occur. According to an RSA survey, 64% of US respondents would blame the companies, not the hackers, for any theft of their personal data. Make sure you have strong security and data protection, then communicate that to your customers.

Sharing data with brands has changed over the last 20 years. For example, according to the Verizon report, some technologies, including artificial intelligence and facial recognition, can collect a customer's personal data without any prompts from them. That means it's more important than ever to be transparent about the data you collect and how that data will be used.

How to find the right data and personalization balance

The sweet spot is to find the right balance between data-driven personalization and privacy. Customers usually appreciate personalization if you do it right. Follow these best practices:

  • Foster a customer-centric culture.
  • Maximize the quality of data you collect and use.
  • Favor anonymized or aggregated data in cases where that kind of data is just as effective. Don't gather data you don't need.
  • Give consumers control over how their data is used.
  • Make sure personalization is used for high relevance.
  • Get help, if necessary, from compliance, public relations and legal advisers to craft the right balance between personalization and privacy.
  • Make sure your data-driven personalization policies and practices are consistent with your overall data privacy efforts.
  • Treat customer data with the highest priority for data security, using best practices and technology for right-sizing access and protection against data exfiltration.
  • Operate under the major privacy requirements, such as the European Union's General Data Protection Regulation (GDPR)—even if most of your consumers aren't in Europe. Embrace both the letter and the spirit of the law.
  • Be transparent but clear and concise. Don't communicate with a large amount of legal jargon and an exhaustive account of what happens with the data. Emphasize the benefits so consumers can make an informed choice.

By embracing these best practices and handling customer data and personalization with competence and sensitivity, you'll earn the trust that makes data and personalization a powerful element of great customer service.

Discover more ways to establish and maintain trust with your customers in A Matter of Trust.