How to Collect Your Customers’ Data—Without Scaring Them Off

 

In the age of NSA scandals and IT security breaches, the way companies collect data about their customers has, to say the least, become a delicate subject. Consider, for example, Target being scrutinized for directing pregnancy ads at a teen (and her unknowing parents), or data brokers being exposed for selling information that helps distribute predatory loans.

The potential for a company’s data collection practices to be publicized and to damage the brand is an increasing risk. With so many possible landmines out there, what’s a business intelligence professional to do when embarking on a data collection project?

Software Advice recently set out to find the answer by surveying a random sample of 385 respondents in the US, to learn what impact a company’s data collection practices have on both existing and potential customers—and in what ways, if any, you can get your customers on board with your own data collection.

Key Findings

1. Over 70 percent were in favor of stronger laws and regulations governing how companies collect and use customer data.

2. While nearly 75 percent of respondents opposed their data being collected, younger respondents were more open to collection and personally-targeted offerings.

3. Nearly half of the respondents said they would be less bothered by having their data collected if companies told them exactly what they were collecting, and why.

Respondents Overwhelmingly Aware of Data Collection Practices

Among the people we surveyed, nearly 78 percent said they believed it was either “extremely common” (54 percent) or “somewhat common” (24 percent) for companies to collect customer data such as purchase histories, their ages and their likes and dislikes.

How common is it for companies to collect data about customers?
Google-Survey1
Another 13 percent of respondents said that they believed customer data collection was only done by some companies, while less than 10 percent of respondents said that they believed it was “extremely uncommon.”

These numbers were more or less in line with information provided by Stephanie Miles, who covers data collection vendors for Street Fight, an online publication that provides technological insights for small businesses.

Miles says that today, it’s “very common” for businesses to collect basic information about their customers, meaning email addresses, contact information and purchase histories. And the idea that companies are collecting data about their customers appears to have permeated the consciousness of the majority of American consumers. They already know that it’s being done—and as the next point shows, they overwhelmingly want it to be regulated.

Vast Majority Favor Stronger Laws and Regulations

The results also show that most of our survey’s respondents favor tougher laws and regulations governing how companies collect and use data about them.

Fifty-three percent of respondents said they “strongly agreed” that there should be stronger laws and regulations governing how companies collect and use customer data, while another 17.6 percent of respondents “somewhat agreed” with this statement.

There should be stronger laws and regulations governing how companies collect and use data about you.
Google-Survey2
Meanwhile, respondents who “somewhat disagreed” with the statement only amounted to 3.6 percent, while even fewer—1.8 percent of respondents—said they “strongly disagreed.”

Interestingly, 24 percent of respondents said that they either “didn’t know” or “didn’t care” about the issue, making up a sizeable portion of responses to this question.

Dave Jackson, the CEO of Clicktools, which assists companies with collecting customer data, says that the sentiments reflected in this question likely speak to bad experiences customers have had in the past.

“Regulations tend to happen when people don’t trust the institutions they’re dealing with,” he says. “And I think companies deserve the regulations they get. If they have the right mindset and the right attitude and approach [in dealing with their customers and their data], I don’t think it [will] be a major issue for people.”

However, Jackson says he does believe regulations such as these will become more common in the future, and that because of this, he’s seen more and more companies take it upon themselves to put their own regulatory frameworks in place.

“I think they see the writing on the wall,” he says, “and that if they don’t do something, the law is going to step in, and they might not like what they get.“

Younger Respondents More Open to Data Collection

When asked what types of data they were comfortable with companies collecting, storing and using, nearly 75 percent of all respondents said they preferred that their data not be collected or used at all.

All respondents: What data are you comfortable with companies collecting, storing and using?
Google-Survey3
However, while that represents an overwhelming majority, drilling deeper into those numbers provides some added insight.

Broken down by age, respondents between 25 and 34 years old answered “none of the above” with the least frequency (52.5 percent), while selecting the other data types with the most frequency (respondents were able to select multiple answers). Chief among the data types they were comfortable with companies utilizing was “likes and dislikes,” at 29 percent, followed by “demographic data” (22 percent) and “purchase history” (15 percent).

Age 25-34: What data are you comfortable with companies collecting, storing and using?
Google-Survey4
Conversely, older respondents appeared far more adverse to any type of data collection, with 81 percent of 55- through 64-year-olds responding that they preferred none of their data to be stored or put to use.

Age 55-64: What data are you comfortable with companies collecting, storing and using?
Google-Survey5
Here, Jackson says the disparity is primarily because younger people have grown up with the Internet, and are more used to sharing personal information with third parties.

“It’s a natural part of what they do,” he says. “But I think there’s another piece, which is that [younger respondents] have been less exposed to some of the scandals and bad practices that organizations have put people through in the past. Therefore, they don’t have that bad taste in their mouth.”

The older age groups, Jackson adds, base their trust in a company primarily on its reputation and its actions. Therefore, he notes, it’s fair to believe that these younger age groups represent the possibility of a greater shift in public perception of data-collection practices.

Younger Respondents More Receptive to Personalized Rewards

When asked what would be acceptable ways for companies to use data they’ve gathered about customers, 71 percent of all respondents again answered “none of the above.”

All respondents: What are acceptable ways for companies to use your data?
Google-Survey6
But as with the previous question, drilling into the data by age group does reveal some disparities in this otherwise-overwhelming response. Nearly 84 percent of respondents who were 65 years old and above said that there were no acceptable ways for companies to use their data.

Age 65+: What are acceptable ways for companies to use your data?
Google-Survey7
However, younger age groups were less likely to provide this response: 56 percent of 18- to 24-year-olds and nearly 60 percent of 25- to 34-year-olds answered this way.

Age 18-24: What are acceptable ways for companies to use your data?
Google-Survey8
These age groups were also the most receptive to different ways companies could use their data. For example, around one-quarter of each group said that personalized customer rewards would be an acceptable way for their data to be put to use.

Similarly, 24 percent of 25- to 34-year-olds said that offering personalized deals and discounts would be an acceptable way for companies to use their data, while 23 percent of 18- to 24-year-olds said the same.

Age 25-34: What are acceptable ways for companies to use your data?
Google-Survey9
Here again, Jackson points to differences in attitudes across age groups. The preferences of younger groups, he says, reflect a common sentiment: “I’m a name, I’m a person, not a number.” In other words, personalizing what you offer your customers communicates that you value them as individuals, and don’t just see them as part of your company’s bottom line.

Transparency Allays Some Customer Concerns

When asked if they would be less bothered if companies told them exactly what data they were collecting and why, nearly 30 percent of respondents answered that they would be “a lot less bothered,” while another 16 percent said they would be “slightly less bothered.” Together, these responses made up a sizable 46 percent—showing that transparency, at least for some customers, can go a long way towards creating goodwill.

“That’s because it builds trust,” Jackson says. “It’s not just about what information I’m holding, it’s about how I’m using that information. And if you can show someone that you’re using that information for mutual benefit, that will build trust and benefit both parties.”

Would you be less bothered if companies told you what data they collected, and why?
Google-Survey10 That said, nearly 25 percent of respondents said that they would still be “extremely bothered” by a company’s data collection practices, regardless of such transparency, while another 16 percent said they would still be “somewhat bothered.”

Surprisingly, 14 percent of respondents were apathetic, answering that they “didn’t care” if a company used their data or not.

Conclusions

The most clear takeaway from these results is that consumers are highly opinionated about how their information is collected and used: It’s fair to say that the vast majority of our survey’s respondents did not hold favorable opinions of how companies operate within this space. But the deeper insights gleaned from both the breakdown of respondents by age and the introduction of transparency into the equation provide some hope for companies practicing data collection.

As Jackson says above, customers want to be treated as a name, not just a number. By acting in good faith with the customers whose data you collect and store, sentiments around this practice can change—particularly when customers are treated as the individuals they are, through such offers as personalized deals and discounts.

“When we often talk to some of our customers about customer data and customer sentiment,” he notes, “we say that one of the first questions should not just be, ‘how can I use this information to improve my business?’ but, ‘how can I use this information to improve life for my customers?’”

Jackson says that if data collectors begin from this stance of mutual respect, they’ll likely find that customers are a lot more willing to share.

Data Center Tech Museum San Jose California” created by Michael Gray, used under CC BY 2.0 / cropped and resized.

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About the Author

Abe Selig joined Software Advice in 2014. As the Managing Editor of Plotting Success, Abe analyzes and writes about BI trends and tools. He also writes content related to supply chain management.

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