Retailers often define the top three criteria for success as “location, location, location.” Data-driven, consumer-focused businesses should adopt a new top-three list of success factors: “transparency, transparency, transparency.”
Consumers are spooked about how their personal data is being used. Revelations around the National Security Agency’s (NSA) Prism program, Google’s Street View mapping cars sniffing data from individuals’ Wi-Fi routers, and Facebook’s confusing privacy policies and controls are just some of the high-profile stories that are fueling their concerns.
What really scares people when they hear these stories is the sense that they are not getting all the facts. Who is the NSA collecting data on? Why is Google interested in data from my Wi-Fi network? What is Facebook’s intent with its changing privacy policies? Uncertainty drives people to assume the worst in terms of motive and what’s actually being collected. Consider these two recent examples:
• Nordstrom discontinued a program to better understand their customers using data collected via Wi-Fi from shoppers’ smart phones due to complaints. The program was designed to collect the same kind of shopper data that many e-commerce websites do routinely: How much time do shoppers spend in a given area? What percentage of people who walk by the store actually enter?
• A New York City resident hacked his E-ZPass device so it would indicate when it was being read. He discovered that it was being read in far more places than just the tolls, so he sounded the alarm that someone was collecting data on motorists. That someone was Midtown in Motion, an initiative to provide real-time traffic information.
People reacted badly in both cases because they did not have enough information. And who could blame them? Data can be misused, and the safe thing to do when you don’t have the facts is to assume the worst.
Like it or not, consumers shop and buy within a digital Panopticon whether they do it online or in a brick-and-mortar store. It’s possible to collect and quantify data on just about any consumer activity, if not at the individual level then in aggregate.
Businesses, of course, have to take advantage of monitoring and tracking technology to stay competitive and offer new services. The data helps them track customer preferences in automated ways that offer quantitative evidence.
But the success of these initiatives will depend on how well their customers accept their data collection practices. Acceptance requires trust, and trust comes from transparency.
Here’s what I think every business (or government organization for that matter) should tell consumers about their data collection programs:
• Exactly what data is being collected. In the Nordstrom and E-ZPass examples above, many people assumed that personally identifying information was being collected, but that was not the case.
• How the data collection technology works. When the NSA story broke, it was the first time many people heard the term “metadata.” Boiling down complex technical concepts into clear lay terms is difficult, but necessary.
• How the data is being secured. You need to show the steps you’ve taken to prevent the data from being hacked or misused.
• Why the data is being collected. If Midtown in Motion had gone public about how it was using the E-ZPass devices, most residents would have seen it as helping to solve a problem and accepted it.
• How the data is being analyzed and reported. For example, if the data is being analyzed in aggregate, then you should say that and explain what that means.
• Who is seeing the data. People might assume that you share their data with other businesses. Be clear about your policies.
• What benefits the consumer gets by having the data collected. This is perhaps the most important point to follow. Consumers have shown that they are willing to provide personal information if they feel they are getting equal value in exchange. For example, Nordstrom might have explained that the data would help them create a more enjoyable shopping experience.
Many businesses are still trying to grasp the newest data collection technologies and applications, yet consumers are much further back on the learning curve. Effective communication about data collection processes, policies, and purposes will help consumers understand the real rather than the imaginary risks and rewards.
Transparency will not only help you avoid a disruptive backlash to your data collection policies, it’s also an opportunity to enhance customer loyalty. If you don’t show you’ve got nothing to hide, your customers will assume otherwise.
Michael Nadeau is the publisher of Data Informed. Follow him on Twitter: @menadeau.