Ethical Personalization: Weighing Benefits and Risks
Do you know how to balance web personalization and customer data usage?
In today’s digitized landscape, systems and devices generate more data than most organizations can cope with. Some estimate that more than 2.5 quintillion bytes of data are created on a daily basis.
Now, if you collect this data, you can actually put it to good use. You can learn about your users needs and desires, and serve them with customized content. Fortunately or unfortunately—depending on your moral perspective—there are rules to using user data.
This article weighs the benefits of customer personalization against the risks of data compliance and risky usage of personalized marketing.
What is Customer Personalization?
Personalization is a marketing strategy used to provide a curated experience for customers. It uses customer data and feedback to determine what a customer’s needs and preferences are and applies that information to customer interactions. Personalized marketing can be something as simple as including a person’s name in an email or as complex as notifying them that a service they might be interested in is now available.
To accomplish user personalization, organizations collect data on customers from a variety of sources. This includes data from customer profiles, behavioral data from brand interactions, and data from devices that customers use to view your website. It can also include data purchased from marketing research organizations.
Depending on the level of user personalization you’re trying to achieve, this collected data is then processed and correlated to form more specific customer profiles and strategies. Some brands are even employing the use of AI for hyper-personalization.
AI tools can enable you to create individual customer profiles which are then applied to future interactions. This hyper-personalization can ensure that customer needs are matched more closely than lower-level personalized content can achieve.
The Benefits of Personalization
When used carefully, personalized user experience can be an amazing business tool. It enables you to reflect information about a customer back at them in brand interactions and build relationships that are difficult to achieve with generic interactions. These strong relationships can then provide several benefits for customers and companies.
Increased customer revenue
Personalization can help you build and maintain customer engagement which often leads to purchases. It enables you to reach out to customers with content and offers that they are likely to appreciate and act on. For example, making meaningful recommendations for product upgrades or add on purchases. It can also help you remind customers when refillable or consumable products are running low, making it easy for them to purchase more from you.
By applying customer data, you can increase the success rate of your marketing efforts, increasing your ROI. You can also better highlight how your product meets a customer’s specific needs or wants, leading to more purchases. As evidence of this, around 46% of customers are likely to buy more from a brand or retailer who personalizes their experience.
Stronger brand image
The image that your brand presents to customers plays a key role in the type of customers you attract and the confidence that customers have in your product. Aiming to be the biggest retailer is usually not an effective strategy but finding a market niche and excelling at it is.
Personalization can help you ensure that the message you are sending to potential and current customers is consistent with this strategy. It can also help you differentiate yourself from competitors. Carefully targeting the interests of your customers and making the effort to directly connect your brand with their lives helps you stand out.
Applying personalization strategies can also help create a reputation of customer service and care that other brands may lack. For example, when a customer’s preferences are applied to communications, they are more likely to feel respected and valued.
Greater customer loyalty
Customer loyalty can make or break a brand. Loyal customers make consistent purchases, refer others, and increasingly provide free advertising through social media. This makes the creation and maintenance of loyalty a key consideration for any brand.
To increase loyalty, you need to build strong relationships with customers and keep them engaged. One way of doing this is to make sure that every communication with a customer is relevant and beneficial. For example, after a customer purchases a new product from you, you can follow up with some tips for use. This type of custom personalized content shows that you’re invested in the customer and want them to get the most benefit from your product.
The Risks of Personalization
Personalization can be great for building customer relationships, but it can also be risky or downright harmful. Personalization requires the collection of a significant amount of customer data, some of which is sensitive.
Often customers are perfectly willing to give this data to brands. For example, when creating shopper profiles or taking quizzes for product recommendations. However, sometimes customers are unaware of the depth of information they are sharing or only want that information used in specific ways. If this information is used to market to them, they may feel a brand is abusing their trust.
One of the greatest risks that come with personalization stems from the data that is collected. When you collect and store personal information about customers it is your responsibility to ensure that this information remains private and is only used with customer permission.
If you collect information without permission or sell data without notification you can be held legally liable. You are also likely to lose customer faith and business. This doesn’t mean that you need to repeatedly ask for permission to collect or use data. It does mean that you need to be upfront about data collection and use with your customers.
Aggressive or insensitive personalization
While most customers appreciate a curated experience with brands, there are limits to website personalization. If you start applying every bit of data you have about a customer to your interactions with them, they are more likely to feel harassed than pleased. Customers don’t want to feel corralled by companies, nor are they happy if they think their choices are being limited.
Additionally, if a customer has a single interaction with your brand, they do not want to then be bombarded with recommendations or communications. For website personalization to be effective, it needs to feel more likely a friendly recommendation. Not a blatant sales tactic. When personalization sites are taken too far, customers are likely to abandon a brand and some may even complain on social media, hurting your brand image.
How to Balance Personalization and Customer Rights
Using web personalization and customer data ethically can be a challenge. It may not be clear when ethical lines have been crossed. Or, customers may have different ideas from your own about what ethical use entails. To ensure that you are doing due diligence to your customers and data privacy laws keep the following considerations in mind:
- Maintain data compliance—make yourself aware of what data compliance guidelines apply to your data and how it can be used. For example, GDPR or the California Consumer Privacy Act. These regulations vary by region so you need to be mindful of who you are collecting data from, where it is stored, and where it is used.
- Establish data transparency—be transparent with your customers about how and why data is collected. This means notifying them before collection and providing an option to opt-out. Transparency should also include informing customers about how you are protecting their data and notifying them if data is exposed.
- Practice what you preach—ensure that you are using data according to your claims. If you say you are applying data in your customer’s best interest but turn around and sell that data, you are going to lose customer trust.
Despite regulatory enforcement, there are certain gaps and instances of unfamiliar terrain. Ethics are often subject to national and international laws. There are also aspects that are distinctly cultural or individual.
How you deal with these gaps will define your relationship with your users, and the level of web content personalization you are able to provide them. To ensure brand authenticity and consistency, you should define a standard policy that complies with regulatory entities, and add another layer that is uniquely yours.
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Thank you to Ilai Bavati for contributing this article. Ilai Bavati is a technology writer and editor based in Tel Aviv. He covers topics ranging from machine learning and cybersecurity to cloud computing and the Internet of Things. He is interested in the real-world application of emerging technologies, and he sees our increasingly connected reality as both disruptive and potentially life-saving.