Fear vs. Convenience — The Customer Data Conundrum

I was in a presentation today where the presenter spoke enthusiastically and at length about how customer data is king — how companies that gather customer data (both explicit data provided by the customer, behavioral data collected about the customer, and external data acquired from third party sources) and put it together effectively can serve the customer (and prospective customers) in a more personalized fashion. Putting that data to use benefits the customer, which, in turn, benefits the company.

That’s entirely true. And, it’s a common theme in marketing these days: “one-to-one marketing” is the catchphrase that marketers use. It’s what being “customer centric” is all about. Waiting for Your Cat to Bark is based on this concept, as are countless other books, blog posts, conference sessions, classes, podcasts, and so on. My local paper ran a piece last weekend about some of the ins and outs of how Kroger uses data from its loyalty card program to provide customers with coupons that are most likely to be of interest to them (the article is actually about the company that Kroger contracts this work out to — dunnhumbyUSA). I’ve long suspected, and the article confirmed, that many grocery chains put these loyalty card programs into place and then find that it’s a lot harder to actually use the data they collect in a meaningful way than to set up the processes to collect the data…but that’s another post entirely.

What all of these specific examples miss — or at least drastically underestimate — is the fear component. And that was touched on briefly in the January 8, 2009 Slate Political Gabfest podcast. John Dickerson, the host of the gabfest, launched into a riff about electronic medical records. The initial point of the discussion was how the Obama administration is expected to be much more tech-savvy and tech-interested than the Bush administration, and how modernizing the medical record system was one possible initiative that might get funded by the economic stimulus package. This led to a discussion among all three of the gabfesters about how this seemed like a no-brainer and would lead to all sorts of improvements. But, Dickerson then explained how there is a lot of fear associated with the initiative — how members of Congress who are proponents of this sort of legislation are coached to talk about “medical modernization” rather than “electronic medical records.” We’ve all seen articles about the privacy concerns around electronic records of this sort — the prospective employer who finds out you have been treated by a psychiatrist, the health insurance company that finds out you have a genetic marker that increases your risk of contracting cancer (and thus increases your premium), etc.

And THAT is the crux of the biscuit.

For every benefit of having a centralized, comprehensive record of who you are and what your likes and dislikes are, there is a risk that that data will fall into the wrong hands and be put to nefarious uses:

• By storing your credit card information on an online retail site, you’re risking that someone could hack into their system and steal it
• By giving your social security number when registering for college, you’re risking that a hacker could get in and steal your identity
• By letting a web site store your login information in a cookie, you’re risking that you lose your laptop and someone goes back to the site and completes transactions as you

The more comprehensive the information that gets stored about you in a single location, the greater the potential for convenience and benefits to you…but the greater the damage if that information gets misused (think Orwell’s 1984 for the bleakest, most extreme example).

Which means it all comes down to the balance of fear versus trust, and how long it will be before the societal balance tips from the former to the latter.

Think about the airplane. In the earliest days of manned flight, anyone who flew had to either overcome a high level of fear or be possessed with a high degree of recklessness. Flying was risky and dangerous. The technology improved rapidly and dramatically, and air travel became increasingly safer. “Fear of flying” has gone from being commonplace in my grandparents’ generation to being rare in mine.

Comprehensive, centralized (or at least cross-referenceable), electronic data about you and me can be viewed in a similar light. Which leads me to a plea for corporate responsibility and stewardship of the customer’s trust on two fronts:

1. Protecting the privacy of your customer data is paramount. Every “lost data” story that hits the mainstream media is a backwards step towards what really is the common good
2. When using the customer data you do have, be triply sure to provide twice as much benefit to your customer as you garner for your company

It’s not going to be an immediate shift. It will take years and will rely on the overwhelming majority of companies and the government to be hyper-vigilant on both of these fronts before trust and value trump fear.