With his master thesis, our consultant Tobias Klumpp looked at the balancing act between personalized communication and the customer’s comfort level concerning privacy. In this blog entry, he asks the question: where do our customers draw the line and what can we do about it?
Big Data and privacy: how much do we need to know?
We’re in the middle of the great age of information and the importance of big data grows every second. At the same time, privacy concerns of how much control we have over our own data are being dealt with on a political, social and private level.
As part of my master thesis, I have developed a theoretical model to find out which conflict potential can arise regarding personal data between companies and customers. I collected all data via an online questionnaire with the following questions:
- Which factors influence the personal gradient in the context of big data?
- How does the gradient of personalization impact customers’ concerns when they are online?
- How much does personalization and privacy impact the behavior of individuals?
The study results: context matters
1. Customers evaluate costs and benefits of providing their information in exchange for content and/or other services
Privacy concerns can have a huge impact on the decision to register with an email address or submit other data.
Companies therefore have to think about how they can contextualize data collecting measures like forms or registrations by showing why the customer should leave his or her data at this point. It should be clear to the customer what the benefit of these measures is. Furthermore, I recommend giving the customer more influence on which data can be used for which personalization measures (the use of a phone number, for example, could be restricted to support calls only, if the customer wants that).
2. Personalized offers result in better conversion rates
Personalization in itself can be a good thing if the customer sees the value in offering private information. Personalized content and individual offers can lead to success and customer loyalty and customers are more likely to submit personal information if they know that they will profit from it.
3. Data sources play a big part in personalized content
Customers view different data sources in a different light. Whereas the buying history, preferred products and previous searches have no negative impact on the customer relationship, highly technological data like the IP address, the connection data, etc. are viewed as too invasive.
If the customer has the feeling that the collected data has been given freely and for service-related purposes, he/she will be comfortable with the use of it. However, companies need to be aware that personal data must be transparent concerning the procurement measures and should not feel invasive.
Using customer data for a better customer experience can get you higher conversion rates, more retention and less churn. Find out more with our fact sheet on predictive analytics.