Collecting Customer Data While Maintaining Trust: The Personalization Privacy Paradox

In the customer experience domain, the way to the customer’s heart is through their personal information.  It sounds somewhat questionable.  The fact is, customers’ information allows for companies to create a more personalized, low-effort customer experience that ultimately leads to higher satisfaction.  Though over the years, customers have grown to be skeptical towards the collection of consumer data.  Salesforce’s 2018 “State of the Connected Customer” report revealed that 62 percent of customers are more afraid of their data being compromised now than they were two years ago. [1] Trust is a key component of loyalty, so how can businesses continue to provide an excellent customer experience without jeopardizing the trust between them and their customers?

The Personalization Privacy Paradox

Despite rising skepticism, research shows that customers are willing to offer up their information in exchange for an improved experience and increased personalization. This contradiction between customer expectations has been coined the personalization privacy paradox.

The personalization privacy paradox is not as simple as customers wanting increased personalization while also wanting privacy. For example, it also delves into the correlation between personalization and skepticism.  An in-depth study on the subject hypothesized that not only is personalization positively related to the perceived benefits of information disclosure, but also the risks.  I.e. customers grow more skeptical when they are provided with a custom shopping list based on their previous purchases or when an ad appears on their social media feed based on items they have viewed on other sites–even if this is the exact kind of personalization that will improve their experience. [2]

The phenomenon has led to ambiguity on both the customer side and business side.  How far is too far?  What will please customers and what will creep them out?  Though tricky, with the proper precautions and practices, a happy medium appears to be more attainable.

Be Honest

Honesty is the best policy.  We are not talking about sneaking a small, hard-to-read phrase into the fine print of a tedious terms and conditions agreement, but rather a clear and concise statement that lets customers know how, and why, their data is being collected. As previously mentioned, customers are willing to share their info as long as they feel that it is for reasons that will benefit them. When you actively notify customers of that ways that their data is benefiting their experience, there is no room for confusion or opportunities for them to fill in the gaps with unfavorable assumptions. 

Though a majority of consumers are worried about the circulation and use of their personal information, an alarmingly low number of them are actually properly informed about it. The same Salesforce research shows that half of consumers are confused about the ways that their data is used; especially about the specifics. [3] When asked, 25 percent realized that their location was noted,17 percent knew that their IP addresses were collected and only 14 percent of customers understood that their web-surfing history was being tracked.  [4] While secrecy may be comforting for companies who fear accountability, lack of transparency will inevitably lead to loss of customer trust and decreased spending.

Use Data for Good

Rooted in the core of the paradox, customers want companies to use their data with good intentions.  While the selling of customer information to third parties has become quite common, it often counteracts with the process of building loyalty.  Additional Salesforce’s research noted that over half of customers surveyed believe that companies do not have their best interests in mind. [5].  Doing what brings in the most money may seem tempting in the short term, but placing the customer and their expectations at the center of your actions will benefit you in the long term. 

Collect customer data to create a great customer experience.  Use the information to make shoppers’ lives easier.  In the end, while personalization help to enhance the customer experience, it also gives businesses the opportunity to increase customer spending.  Companies can use the information to suggest additional products based on previous purchases and searches to cross-sell at various touch points. In this case, the customer’s experience is seamless and companies can profit–it is a win win.

Keep your Data Safe

Security breaches severely damage the trust between customers and businesses.  Additionally, according to IBM’s 2018 “Cost of Data Breach Study”, consequential losses have risen by six percent compared to the year prior. They estimate that average cost of a breach involving 1 million records is $40 million dollars. [6] Breaches hurt your character and your bank.

Ensure that  your business has protective measures in place to keep customer data safe.  Stay up to date on new technologies that may compromise your current system or help to increase the safety of data. When customers believe that companies are doing everything they can to protect data, it cushions the threat of a security breach. When it could have been avoided, it communicates a lack of accountability and care towards customer well-being.

As the world becomes more digitized, the tension between personalization and privacy will become more stressed.  While there is no exact formula, taking the necessary precautions and actively working to ensure the safety of information will help to maintain customer trust. 

[1,3] https://c1.sfdcstatic.com/content/dam/web/en_us/www/documents/e-books/state-of-the-connected-customer-report-second-edition2018.pdf

[2]https://www.researchgate.net/publication/222683124_The_personalization_privacy_paradox_An_exploratory_study_of_decision_making_process_for_location-aware_marketing

[4] https://hbr.org/2015/05/customer-data-designing-for-transparency-and-trust

[5]https://c1.sfdcstatic.com/content/dam/web/en_us/www/documents/briefs/customer-trust-trends-salesforce-research.pdf

[6] https://www.nbcnews.com/business/consumer/total-cost-data-breach-including-lost-business-keeps-growing-n895826


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