The traditional business case for creating a single, accurate and complete view of a customer is stronger than ever. That capability results in a more satisfied customer, a more profitable relationship and a competitive advantage.
At the same time, few deny the immense risks of clumsily integrating and using customer data. Customers ignore irrelevant offers and feel harassed by duplicated contacts. They grow frustrated by being asked to repeat information on the phone or on a Web site. Ultimately a customer is lost.
For those in a company responsible for integrating customer data, the challenge has only grown with the emergence of e-customers, global expansion and unprecedented mergers and acquisitions.
As if the job was not difficult enough, the stakes have grown. While it has been a good business practice for companies to educate customers about how their data is used and to provide choices regarding the use of the data, Congress has passed laws that establish mandatory requirements in the management of customer information by financial institutions.
The law (the Gramm-Leach-Bliley Act) is considered a harbinger for all businesses that collect and use customer data. In large part because of the dynamics of e-commerce, the privacy issue will continue to force examination by customers, lawmakers and the media; and no business sector will be immune to the results.
Businesses are becoming more aware of the dramatic impact of privacy legislation on financial institutions. The law requires full compliance in July 2001. The American Bankers Association estimates that the industry will spend billions of dollars to comply with the privacy law.
Compliance requires that companies provide notice of their privacy policies to their customers disclosing the type of information the company collects, the type that is shared with third parties and more. Additionally, companies are required to honor customer preferences about how the data is used. A company with a single customer represented in 5, 10 or 20 databases faces a tremendous challenge.
Violations can be costly. There are substantial consequences for institutions that don't or can't comply with Gramm-Leach-Bliley legislation. Each violation can result in substantial fines and penalties. These same institutions face the threat of class-action litigation that could produce huge settlements and staggering legal expenses. Consumer confidence and trust are a competitive advantage and privacy violations are potentially disastrous for brand image.
Attention to the issue is gradually, but surely, rising. Thatcher Thompson, an analyst with Merrill Lynch, recently stated in Investor's Business Daily, "Companies in the U.S. and worldwide are woefully unprepared to deal with (such customer requests)."
There is mounting evidence that financial services companies are eager to learn more and attempt to comply with the new privacy laws. And there is anxiety. In November, Acxiom completed a Privacy Symposium series in San Francisco, Chicago and New York City, with a focus on discussing the new legislation. Attendance was greater than could have been imagined, with standing-room-only audiences in two of the venues.
More Than Compliance
In question- and-answer sessions and side conversations at those symposiums, it was clear that forward-thinking companies are taking a hard look at their consumer privacy policies and compliance plans. They are recognizing that, in reality, the compliance challenge truly represents a significant opportunity for businesses to improve customer loyalty, boost retention and increase market share.
Most large companies have several different databases which are often incompatible. For example, the marketing division may maintain data files for its own purposes and have very little idea what data exists in the retail sales department or the e-commerce department.
With data scattered among functional units that have little or no integration, how can an enterprise possibly comply in a reasonable amount of time with consumers' legitimate requests to learn what information the company has on them?
The fact is that most companies simply can't respond. A consumer could correct faulty personal data with one company division on Thursday but receive a solicitation containing the old, incorrect data from another division on Friday. It happens all the time. Not surprisingly, it fosters customer annoyance and distrust.
This provides an extraordinary opportunity for companies to identify tools to link consumer data quickly and completely across the enterprise. It creates the opportunity for a company to move from being merely concerned about consumer privacy to becoming an aggressive consumer advocate and to use consumer advocacy to its competitive advantage.
One looming possibility is that companies may be required to create some form of full data access. Full access may be a desirable goal, but it constitutes a major challenge. Clearly, some form of open access arrangement will be a necessary part of doing business in the future. Companies that choose to be at the forefront of this movement will benefit significantly in two important ways:
- First, by showing consumers what information they have throughout the enterprise, businesses demonstrate responsibility and integrity, thereby improving customer loyalty and retention.
- Secondly, consumer input helps assure the accuracy and currency of the data a company has on file. Once consumers are given access to the information stored in their data files, their level of suspicion and distrust drops significantly, and they tend to focus on correcting or supplementing the data rather than asking that their files be eliminated entirely. Naturally, this helps the company by improving effective contact therefore, boosting overall sales.
The bottom line is that companies can and should become strong consumer advocates. The benefits to consumers and businesses are simply too great to ignore.
Preserving the Economic Benefits
In addition to allowing customers to participate to a greater degree in deciding how their information is used, it is also imperative that companies do a better job of educating them on the benefits of a free information flow.
Most consumers tend to regard such databases as necessary, benign and impersonal. But show them a database that contains their personal information and some may become uncomfortable unless they know precisely what's in those files and how the data will be used.
Obviously, businesses need to be sensitive and responsive to such concerns. At the same time, no one wants e- commerce to be shackled by regulations that impede growth and drive up costs for everyone. This is particularly true considering the direct economic benefits that database information generates for consumers.
For example, the ready availability of real property data in the United States has resulted in significant savings for American consumers. Specifically, real property financing costs in the United States are lower than in countries with restrictive data policies. Why? Because access to accurate information leads to accurate lending decisions. No one wants to return to the era when it took more than a month to get a response to a mortgage loan application.
Furthermore, companies are increasingly finding that if consumer data is not readily available for business use, the negative impact on sales could severely stunt company growth.
Moreover, increased marketing costs could force retailers to substantially raise the price of their merchandise to maintain effective margins. The result would be higher prices, fewer customers and fewer jobs.
There's no question that protecting consumer privacy is important and should be done. At the same time, however, we cannot ignore the fact that the free flow of information has a positive impact on consumers' pocketbooks.
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