View/Review : Privacy

CRM & Privacy: How much do companies need to know about their customers?

VIEW: Bill Miller

VP Partner Marketing, Travelocity Business

Privacy……..customer lifecycle……..relevance…….compelling offer………know your audience………SPAM……….customer experience

Words and phrases like this pop into our heads as we think about CRM – that is Customer Relationship Management. CRM has been around for a long time, but really came into vogue as the Internet became mainstream. And, as the Internet rapidly entered our lives, we began to think more seriously about the effects CRM could have on consumers as well as on our business processes.

This three letter acronym can be a very powerful tool for businesses and a great boon for customers, as long as businesses understand the power of CRM, respect their customers, and have standards for how CRM will be deployed,. And, as e-commerce continues to grow (holiday e-commerce sales were up 25 percent this past December), CRM will become even more important to businesses and consumers. That is because CRM is ideally suited for e-commerce. As households continue to switch to broadband, their shopping experience will become even better. The Internet can always be “on”, like a TV, radio or telephone. Additionally, web shoppers can take advantage of more intense graphical images, 360 degree views of products, virtual tours of cruise line cabins, the ability to custom build a car online and many more CRM applications.

Most businesses have three common goals:

1. Increase revenues through differentiated products and services

2. Decrease costs, usually via better execution

3. Provide a better customer experience to improve loyalty

CRM touches all three, especially the third item on the list above. As businesses grow, it’s not unusual to have varying business unit goals that conflict with each other, disparate customer databases, call centers specific to products or services, and the list can go on and on. The point is, as businesses grow, they can easily lose focus on customers across all of their business lines. To move someone from an occasional buyer to a loyal customer takes a lot of effort and very strategic use of CRM.

What are some CRM tactics businesses can employ to improve their revenues while simultaneously improving the customer experience? To some this may sound contradictory — businesses pushing more product in the face of consumers to improve revenues won’t make for a more loyal customer. If you review the list of words and phrases at the beginning of this article, it’s easy to focus each one and expound upon its importance in the triangle of Corporation – CRM – Customer.

Relevance. It’s not too much of a stretch to say that consumers won’t care how many times they are contacted with offers, so long as the relevance of that offer is very high. At Travelocity we have a CRM campaign called “Good Day to Buy.” With volumes and volumes of shopping data available to us, one of our brighter thinkers and statisticians figured that consumers may want to be alerted to the exact time when it’s a very attractive time to purchase an airline ticket. Airline pricing and inventory management systems are incredibly complex and prices for one airline can literally change thousands of times a day. This “Good Day to Buy” campaign is an email sent to a customer that has been shopping in a specific market. The email tells the customer it is now a great time to buy a ticket for this market based upon the current sale price.

Know your audience. I’m an avid cyclist. I purchase most of my cycling gear from an online store. This particular store gets repeat business from me because they “know me.” Last fall, it had been three years since I purchased my last winter riding jacket. Low and behold, I received an offer from them for a new winter jacket at a great ice. And, if I bought a new box of Clif bars (energy bars) with the jacket, I could get free shipping. They also know I’m a frequent purchaser of Clif bars. I wasn’t yet out of my supply of Clif bars, but I went ahead and bought them because of the free shipping.

SPAM. We all abhore this form of marketing. Some of us purchase software to block it. We get carpel tunnel symptoms from all the pops ups and unders we have to close. We seek out Internet Service Providers or email programs that will block SPAM for us. Companies who want to build lasting long term relationships with their customers will have strict guidelines regarding SPAM and its prevention.

Compelling Offer. Consumers won’t ever get disenchanted with compelling offers – it doesn’t matter if a consumer needs it, wants it or has simply noticed it while doing some online shopping. If Talbot’s were to send a 50 percent off offer for that Summer outfit that someone thought was “so cute,” I don’t know many women who wouldn’t fire up the computer and make that purchase immediately or for that matter tread through rain, sleet or snow to the retail outlet to make that purchase.

Consumers should not view CRM as a bad thing. It can be a great benefit to them. As you begin to build a relationship with a store, whether it be online or brick and mortar, seek out how that retailer deploys CRM. Check out their privacy policy. See if they are members of the Better Business Bureau. Ask what kind of Customer Service Guarantee they may have. Companies that care about their customers and want to foster long lasting business relationships with them will pass the test on all these. Done right, CRM can be a good thing for consumers.

REVIEW: Paul Greenberg

Author of the best-seller “CRM at the Speed of Light: Essential Customer Strategies for the 21st Century” and CRM Fellow for the European Institute for Responsible Information Management (EIRIM) and co-chairman of Rutgers University’s CRM Research Center.

There is one thing about every human that you or I know – all of us are consumers. All of us. We are not just any consumers now that the 21st century is rollicking through its years, but in fact, we are exceptionally bright consumers who are knowledgeable, technology savvy, and know that we have instantaneous information on services and products from trusted sources online. We also know that critical to our consumer lives is control over what content we are provided and what information we are asked to give.

For good reason, we are increasingly worried about identity theft. We read stories about Lexis-Nexis and 310,000 stolen social security numbers or Bank of America “losing” 1.2 million customer records. The annual updates we get from companies on their privacy policies aren’t really much of a comfort for those fears of stolen data are they? Truthfully, do you even read them? I said, truthfully. I don’t. What I expect of a company is that if I deal with them, I can trust them to protect whatever information I gave them in return for something they gave me. And that goes to the crux of the matter. Customer data privacy isn’t really the concern of the population as much as trust in dealing with it is.

With all the concerns about privacy and its breaches you read of in the media, in fact, that hasn’t stopped the 21st century customer from being forthcoming with enough personal information for someone else to establish a new identity complete with photos from what is publicly available online – and made public by the customer themselves. In fact, these neo-customers from Gen X and Y are surprisingly relaxed about providing tons of data well beyond the transactional and are also quite lax its public exposure – as long as they are in control of the decisions for the exposure and feel that they can trust the institution they gave it to. For example, in a study done in October 2005, by Ralph Gross and Alessandro Acquisti of Carnegie Mellon Institute on “Information Revelation and Privacy in Online Social Networks” they found that the survey respondents, members of the primarily college student social networking site Facebook (www.facebook.com) chose to reveal enormous amounts of personal information including their home addresses, IP addresses, data related to their personal relationships including partner data, political preferences, hobbies, music, books, movies, you name it. In fact, the social tags that are there to slice and dice customized knowledge of individuals are mind-altering. What is even more astounding is that this data is available to any member of Facebook at all – most who are clearly strangers to other members. But when queried, 50% of the member-respondents worried about the data being seen by someone they actually knew. In virtual (but not actual) anonymity there was trust.

But get this. Facebook’s privacy policy, states that they are allowed to continue to collect personal data from other sources like Instant Messenger conversations and newspapers “regardless of use of the website.” Additionally, they can use that data to supplement the personal profiles of the members and to give it to Facebook service providers. But because of the rather naïve trust the Facebook members have in Facebook, this incredibly fast and loose privacy policy was simply “not believed” by 60-85% of the respondents, according to the Carnegie-Mellon survey. They chose to believe what they wanted based on their innate trust in Facebook the cyber-institution.

What this implies is that institutional trust is the primary concern of customers, not privacy per se. Even though there have been dozens of high profile customer data breaches from Lexis-Nexis, Bank of America, ChoicePoint, ad nauseum, ad infinitum, and fear of being individually victimized by identity theft has grown from around 42% in August 2004 to 65% in December 2005 (Ponemon Institute, 2006) it doesn’t stop the customers from purchasing things with their credit cards online, because they trust the means to do so. 2005 saw $143 billion spent (up 25% from 2004) online – not exactly an indication of fear of cyber-theft as a whole. The overall level of “in the Internet and our business partners we trust” remains pretty high.

But it is a fragile high. The Ponemon Institute, what I consider the world’s best privacy management firm, did a significant study released in January 2006 on the “Most Trusted Retail Banks.” They came to some very significant conclusions. First, it takes two breaches of privacy at a banking institution to destroy trust and lose the customer. Second, that 68% of the customers believe that the bank will protect their customer data and privacy and will inform them should there be a breach. Only 14% weren’t sure that their bank would. The study found that immediate response to a breach is important via phone or written notice (less electronically, oddly enough). They trust their banks to protect their information but 68% would transfer to another bank if they didn’t. Also that 63% were as confident of the protection of their data online as they were at the local branch. But that is a decline of 11% since the last study.

So what kind of conclusions can we draw from all this? Privacy, while a significant issue, is actually less the issue when it comes to 21st century customer/company relationships. The real issue is trust in the handling of that data, not the fear of its revelation. Most customers are willing to give the data if they can trust the institution they can give it to. That is the true value of a privacy policy.

But actions speak louder than words. So what do you do to improve that trusted relationship? The Ponemon Institute study found that the three most important trust factors are:

1. Don’t sell or share the information with other organizations

2. Don’t use it to aggressively market back to the customer

3. Keep the customer posted on the status of their information

And I would add

4.Inform them honestly and immediately of any breach

In other words, the more open about how you handle individual customer data, the more trust you engender. The more transparent you are with your customer, the more trust you will gain. There are very few of us who mind giving out personal and transactional information in exchange for something that is valuable. But to keep the trust and thus the business of that customer means that the more control they have over their data’s fate, the more trusting they will be. That means transparency, honesty and quick resolution of problems, not just an annual updated privacy policy for them to not read. That doesn’t seem too hard, now does it?

Baylor Business Review, Spring 2006



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