December 18

What are the Ethics of Customer Data Mining?

Our personal information is everywhere, whether we like it or not. Businesses collect email addresses and more during registration for rewards cards and store promotions. Hobbies, interests, and day-to-day routines are captured from social media posts, search engine queries, and GPS tracking. Businesses are figuring out new ways to use this customer data for their marketing efforts and to improve their services. The latter is an evolving landscape where the line between appropriate and inappropriate is still murky.

“The ethics around gathering customer information are at best gray,” says business growth expert Meridith Elliott Powell. “Given that this is a new, somewhat unchartered area, there is still a lot of leeway companies have in the methods they use — and perhaps lines they cross — when gathering data.”

The methods of data collection are often subtle and sometimes controversial. In June, Facebook made headlines for performing “mood tests” on users. Data scientists altered users’ news feeds and analyzed how their updates and posts changed depending on a preponderance of positive or negative content. Customers were not pleased to learn the social media giant was performing tests on them.

“It put a black mark on customer information gathering techniques,” says Powell.

Transparency Is Key

Most customers accept that their data is collected and analyzed, often for their own benefit — it can help save time and money and lead them to products and services they want. They just don’t like when this research is done without their knowledge.

“Customers should be informed specifically what their information will be used for, and how and by whom it will be used,” says Powell. “That includes not sharing the information with other companies, competitors or publicly, unless express permission is given by the customer.”

Some companies do notify customers, but the message often gets lost in fine print or a person’s email inbox. The key is finding a way to be transparent about how the information is used — and making sure the policy is seen by everyone.

Trust Is Everything

There is a lot of promise for using customer information in marketing and promotion. Something as simple as a phone app sending a notification about a restaurant recommendation or product sale when a customer is in the area could be beneficial to both sides. (Apps such as Swarm already do this.) However, that kind of automated service could also be perceived as intrusive or annoying, damaging the business-customer relationship. “Trust is everything,” says Powell. “When customers feel they cannot trust you, you have lost a major opportunity to grow and expand the relationship.”

Heavier Regulation?

As online data mining tools get more sophisticated, new guidelines and even laws will be formed to protect both customers and businesses. The biggest question is, can the rules keep up with the technology?

“I believe ethics will be established for every industry, and I see eventually heavier regulation will be put in place to further protect the customer,” says Powell. “Companies would be smart to not wait for their industry or the government to establish their policies, and instead do this themselves.”

Meridith Elliott Powell

Voted one of the Top 15 Business Growth Experts to watch by Currency Fair, highly engaging corporate motivational keynote speaker Meridith Elliott Powell delivers a cutting-edge message, rooted in real-life examples and real-world knowledge. Meridith’s presentations are full of powerful content, highly interactive, and fun. She helps her clients learn the leadership development, sales and business growth strategies to turn uncertainty to competitive advantage.

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  • Taking into account that “The ethics around gathering customer information are at best gray,” the consumer has a way to voice their displeasure as Facebook found out.

    Some people say that they expect to get an acceptable percentage of unsatisfied customer shouting their outrage, some businesses have had negative, bad reviews showing online about their business for years.

    The purpose of the negative review is to cut profits right from the bottom line, by telling others about their bad experience in hopes that they would persuade others to avoid doing business with that business. So over the year or years in some cases how much business was lost because of that single negative review? It could even happen to a giant like Facebook.

    It surprises me how business owners miss how powerful the trust factor works, and that it works both ways. Business owners place so much emphasis on traditions, formalities, privacy and trust as it relates to connecting with them and they do not see the connection when it relates to their customers and growing their business.

    It would be an easy thing to argue that point with me that the message is there, that their customers trust them, but when one looks at their marketing message, or checks their web presence, is that trust “displayed” there?

    Some business owners are educated on that point and know how their customers shows their trust in a business online and I fear most do not. It is a simple question.
    How do customers show trust in a business online?
    The businesses that know the answer are crushing it.

    Far be it for me to imply that I can tell what a person knows or thinks but if trust is perhaps the largest factor in securing new business B2B or B2C, one would think that more businesses would “show” that they are trustworthy to potential customers to attract more customers rather than wait until the prospect becomes a customer.

    Reviews and ratings are how people show their trust in a business online, if a customer feels they have been wronged and do not trust a business they will go online to review sites and directory sites and show their trust in a business. A far smaller number go online and show their trust as a positive review and rating.

    Business owners do not ask their customers to go online and leave a review and rating for the most part because they don’t know what the person would say, so it is understandable why they don’t ask but as “Trust is everything,” says Powell. “When customers feel they cannot trust you, you have lost a major opportunity to grow and expand the relationship.” So is the reverse.

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