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How Retailers Can Make Ethical Use of Customer Data

03/11/2015 05:32 pm ET | Updated May 11, 2015

Retailers are constantly on the hunt for their customers' data, but all too often, the technology they choose collects information solely for the benefit of the business. Instead, retailers should use technology that provides customers with clear benefits in exchange for handing over their personal data and gives them the choice to opt in versus having their data captured and used without their permission. Below, find some helpful lessons to help you stay on the correct side of the customer privacy line.

Give the Customer Clear Benefits for Opting In

Consumers are getting "opt-in fatigue," as they are bombarded with opt-in tracking requests all the time. Checkout clerks now routinely ask for contact information, Amazon requests permission of payment information to enable its one-click ordering option, and retailers ask for permission for SMS notifications. However, in each of these examples, the customer is being offered a clear benefit. They ultimately retain control, and can make the choice as to whether or not to participate.

Loyalty programs are ideal for retailers, because they give consumers discounts and exclusive offers that are truly tailored to their preferences and behaviors. In return, retailers get detailed data and better customer retention. Transparent systems such as these have an obvious quid pro quo nature and consumers are often willing to hand over some private data in exchange for clear, immediate benefits.

Never, Ever Penalize the Customer for Not Participating

Recently, AT&T's GigaPower service created quite a bit of buzz due to customer data and privacy issues. One tier of the service tracks subscribers' online activities in order to better tailor ads for them, and another does not -- but costs $29 more. Conflicting reports are now surfacing that argue that the private tier will cost in excess of $40 or even $60 to maintain the secure, high-speed service.

In contrast to programs that offer customers a positive benefit, the GigaPower service forces customers to opt into a data-sharing program in order to avoid paying an extra fee every month. This negative tactic has rubbed many customers the wrong way. Customers don't want to feel that they will be penalized for not sharing their own data. This puts the customer in a position of weakness instead of empowerment, and can generate distrust toward the brand.

Avoid Designing Selfish, Retailer-Centric Systems

If you install the Apple store app on your iPhone and hand over your credit card number, Apple will let you walk into one of their stores, scan product barcodes, check out on your phone and walk out the door with your new purchases, without ever talking to an associate. Customers without the app don't have the same privilege -- they have to find someone to help them check out. Meanwhile, satisfied customers with the app will have already left the store.

Obviously, Apple benefits tremendously from this system as well, but the customer has a better in-store experience too. When a company designs a "selfish system" where all of the benefits go to the retailer, the relationship between the brand and the customer isn't strengthened. Before implementing any system in which businesses are considering using a customer's data, they should ask these questions: "What benefit will the customer receive?" "Will this increase customer satisfaction?" "Will this lead to a better experience for the customer?"

Focus on Improving the Overall Customer Experience

TimeTrade recently published Retail Reality Check, a study based on a survey of 1,000 consumers about their experience with retailers. The findings of the study reveal that there are plenty of opportunities for retailers to make better use of customer data to drive a better overall experience. For example:

  • 93 percent of customers can't find the right person to help them when they walk into a store
  • 90 percent leave without making a purchase when they can't find the right person
  • 85 percent buy more when a knowledgeable associate helps them
  • 75 percent of customers would book a personal appointment in advance of walking into a store if given the chance to do so

In other words, retailers have only just begun to do all that is possible to leverage customer data in ways that will truly benefit the customers and solve their problems. Imagine if retailers were to harvest the power of customer data in ways that would help an associate and customer quickly find each other so they could make their purchase and have a much more positive, personalized shopping experience.

Retailers are always trying to find new ways to get more data, and in today's digital and mobile age, developers are constantly coming up with new ways to enable them to do so. Offer customers something of real and tangible value, safeguard their data, and make sure that they give you permission to use it. Focus on solving your customers' problems first. If you do that, the benefits to your business -- in the form of increased sales and customer loyalty - will naturally follow.