Transparency Is Critical to Resolve Privacy-Personalization Paradox

Marketers today find themselves in a catch-22: On one hand, customers want to be recognized and rewarded for their loyalty; on the other, they outright condemn the practices of data collection, data mining, and predictive analytics. It puts companies in an awkward position that only the nimblest among them will be able to escape, according to Forrester Research.

While many consumers will freely share their location and other personal information via social media sites, they are much more reluctant to do so directly with businesses unless they know they will receive some value in return, according to the report.

Marketers need to communicate the exchange of value, explaining in simple, understandable language exactly which data they will collect from customers, how they will collect it, how they will use it, and the value that the customer will receive in return, says report author Fatemeh Khatibloo, a Forrester vice president and principal analyst covering B2B marketing. Only by clearly explaining the value exchange will marketers build trust with customers, she says.

Privacy and personalization don’t have to be mutually exclusive, she argues.

But even if companies hold the data closely, don’t sell or share it with others, and only use it to make offers to consumers, complaints will follow if marketers send messages that are irrelevant or too frequent. They will also complain if the company seems too familiar with them. While Disney can get away with using “magic bands” to help employees gather the names of park visitors and then address them by name, it would be considered creepy for a retailer to do the same, according to Khatibloo.

Forrester categorized 23 percent of U.S. online consumers as “skeptical protectionists,” which it defined as consumers who are very informed and concerned about their privacy. People in this group are unwilling to share their personal information, despite any benefits companies might offer in exchange. On the other end of the spectrum is a quarter of the population categorized as “reckless rebels,” which Forrester defines as those who take little or no precautions to protect their personal information and share it widely.

Another 18 percent of consumers are “conditional consumerists.” They’re young, savvy, and consciously concerned about their privacy, sharing their information with companies only if they receive something of value in return.

“If you play your cards right by being transparent, offering meaningful choices, and providing some control over personal data, you’ll actually earn the right to ask your customers for zero-party data (ZPD),” Khatibloo says. Zero-party data is information that consumers intentionally and proactively share with companies and might include preferences, purchase intentions, personal context, and how they like to be recognized.

Forrester points out that while companies keep ZPD, they do not own it. Instead, consumers grant companies the right to use their ZPD for a particular intent or value exchange.

To balance privacy and personalization Khatibloo recommends that companies offer consumers a customer-facing portal that enables them to customize content and communication preferences. Doing so has been shown to reduce opt-outs by as much as 60 percent for one company, according to Khatibloo. Customers who are given the opportunity to actively manage their preferences feel more engaged, she says.

Khatibloo also recommends working with security experts within the company to ensure that the company only collects and keeps data that it plans to use, and that any personal information is stripped out for aggregated analytics. Similarly, personal information should be stripped out of older data.