Personalization versus Data Security: Three Questions to Answer

By Tom Schoen, President, BTM Global

BTM Global Image 1

If you’re wondering whether your customers would trade some of their personal data for a more personalized shopping experience, it’s likely that the answer is yes. Multiple studies and surveys have revealed this, including a recent survey by Salesforce Research in which more than half of respondents were willing to share personal data in exchange for personalized shopping experiences.

This isn’t a slam-dunk win for retailers, however. Yes, you want a better understanding of your customer base in order to shape a personalized shopping experience. But consumers’ willingness to give you their data – beyond basic contact information – comes with the expectation that you’ll do everything in your power to safeguard it.

When high-profile security breaches are common in the headlines and consumers’ skepticism about data security is growing, how do you strike a balance between collecting, analyzing and storing the data while securely handling it? Is it best to store it within your company rather than in the cloud? Who do you share the data with, if anyone? What about your customers’ perceptions of how you’re using their information?

There isn’t a one-size-fits-all answer to any of these questions, but thinking about each one can help shape how your organization thinks about and balances the needs of data collection and security.

Begin with your business model

A good way to start tackling these questions is by looking at your business model. Your business model can serve as a valuable resource by helping you explore the value of personalization versus the risk of keeping it safe. How much value can you potentially get out of personalization? What data do you need to collect to maximize that value? What are the risks associated your approach? What could mitigate those risks? Can you honestly justify the cost of personalization?

With your business model as a starting point, you can determine the value and needs around customer data, along with the resources required to help make it happen.

Where should you store customers’ data?

Do you host this sensitive information yourself or let your third-party vendor – which perhaps has more security expertise and resources – receive, analyze and store it in the cloud? How will the data be transmitted? If you keep it with you, how do you coordinate and decide on the security measures for safeguarding it? 

Whether you choose to store the data on premise or in the cloud, there are benefits and drawbacks to each scenario. For instance, one benefit of the cloud is that it enables smaller retailers (that may lack adequate IT resources to host it themselves) to collect information and learn more about their customer base. In addition, you can rely on the security and data expertise of your partner and trust them to handle everything properly. The flipside is that the cloud can be a security liability; someone else (your partner) is receiving and managing your customers’ data. The more transactions that the data goes through and the more entities that touch the data, the greater the risk of a security breach.  

If you host the data within your four walls, you have complete control over it, so security questions are usually more straightforward. Depending on the information you’re sending, the integration with your existing systems could potentially be easier as well. On the other hand, you need adequate resources – talent and money – to support housing customer information. If you’re not confident that your IT team has the knowledge and capacity to adequately support the new technology piece, you will either need to build up your team or turn to a partner.

Should you share customers’ data?

When we think of data sharing, we often think of exchanging lists and data with marketing firms or third parties that want to sell something to your customers. But the question of sharing data can pop up during routine business operations.

For instance, there are many tools to help you collect and analyze data for better personalization, including ones that can be bolted onto your existing transactional systems. A third-party partner may be brought in to analyze your data and provide you with a host of business intelligence information, depending on the quantity and quality of the information you’re gathering. That partner may ask for additional data to further segment their work for you.

Just because they ask for more data doesn’t mean you have to share it. Providing this extra information to your third-party partner may trigger the need for you to ask customers’ permission to do so – in other words, they will need to opt in or opt out of allowing you to share their information with other companies. This could raise red flags in the minds of your customers (“Why are they collecting my data? Is my data safe?”), as well as potential security risks due to the greater quantity of sensitive data being handled by your partner. Again, the more times that data is transferred or handled by different parties, the greater the risk.

What will your customers think?

Weighing public perception is no small factor. Even asking customers to agree to a privacy statement may get them thinking “How exactly are you using my data? Should I be more worried about data being stolen or misused?”

As I noted above, there’s a heightened sensitivity to security threats among all of us. So the right answer to your customers’ questions can only be determined by you. The key here is to consider what you already know about your customer base and their perception of and trust in you. The better understanding you have of your customer base, the better you can gauge how requests or agreements regarding their data will be received. Weigh the business outcomes and ROI that you get from gathering personal details with the customer perceptions that could result.

Striking the balance

Gaining a better understanding of your customer base can help foster more loyalty and help your organization operate more profitably. With willing consumers and appropriate sensitivity around security considerations, you can strengthen customer relationships while safeguarding their privacy.

---

Tom Schoen 1About the Author

Tom Schoen is president of BTM Global, a provider of retail system integration and development services. Through strategy, development, implementation and support, BTM Global approaches each project as a partnership that helps clients become more seamless, efficient and profitable. For more information, visit www.btmglobal.com.

---

Other Point-of-Sale articles of interest:

Holiday Fraud Prevention: 7 Tips From the Pros
This Diwali, Boost Retail Sales with Digital and Artificial Intelligence 
Revel's User Conference 2017 - Revelry! 
Matthew Lee Richardson (1957-2017) Dies at 60, Leading POS Reseller
Five Point-of-Sale Changes to Make Today For Better Results Tomorrow
Lightspeed POS Announces US $166 Million of Investment 
Bluestar’s VARTECH Shows A Thriving POS Channel

 

 

 

 

 

 

Get The Point of Sale News once a month, once a week or once a day. Subscribe here.

Tagged under customer data