Using CRM to Enhance Privacy

It is no secret that customers like personalized service and will reward it with continued patronage. But aren’t customers leery of firms that ask them for lots of personal information?

Growing concern about the collection and use of personal information by businesses and government has been documented in numerous surveys. In a 1999 IBM/Harris survey, 94 percent of Americans said they were worried about “possible misuse” of their personal information, and 80 percent agreed that “consumers have lost all control over how personal information about them is collected and used by companies.”

All of this means firms that have set out to implement customer relationship management face a dilemma: Consumers want personalized service, but they harbor general suspicions about the data collection that makes this possible.

The concept of “know your customer” is at once ancient and revolutionary. The 19th-century shopkeeper built long-term relationships with his customers. The store owner could anticipate his customers’ needs and keep them coming back.

In today’s markets dominated by large corporations, relationships cannot be built around a customer contacting the same company employee every time. Instead, technology allows firms of all sizes to collect and store information about customers at every opportunity, and to make it available to company employees in order to personalize service whenever they have contact with customers. In essence, today’s organization knows its customers through its database.

Relationship marketing on a large scale did not become practical until the late 1990s as information technology made it possible to capture, store and retrieve customer transaction patterns and preferences. In the past, the store owner tapped the database in his head. Today, technology lets firms tailor personalized service to existing customers by keeping past transactions and communication in a computerized database. The big difference between then and now is that today’s firms can use CRM-enabling technology to “remember” the preferences of thousands, even millions, of customers and are no longer constrained to market only to consumers located near brick-and-mortar stores.

By investing in information systems that capture the relationship electronically, today’s one-to-one marketer “knows” the customer, much as the 19th-century shopkeeper did. The insight gained from continual dealings is the source of competitive advantage that allows the seller to keep the customer returning. That personalized service, which is carefully cultivated over time, creates a barrier to customers switching to other providers.

But what about those studies indicating that customers are jittery over the use of their personal information?

At first glance, the intensive data collection that underpins CRM strategies would seem to fan the flames of privacy fears. Fortunately, a growing body of empirical evidence suggests that well-executed CRM actually reduces privacy fears. As market researchers have delved more deeply into the privacy issue to identify more precisely the basis for consumer unease with data collection, they have found conditions under which those concerns may be alleviated.

Researcher Alan Westin, publisher of Privacy & American Business, observed: “Harris-Westin surveys from 1978 to the present have found the driving factors behind privacy attitudes, both in general and in specific consumer areas, to be a combination of two orientations: the individual’s level of distrust in institutions and fears of technology abuse.”

Though some consumers view privacy as an absolute right, the majority of consumers do not. Most consistently show a willingness to give up some information about themselves if they are comfortable with the requesting party, think they will be treated fairly and perceive benefits in return. In Westin’s words, “Most consumers are shrewd privacy balancers.”

Familiarity fosters trust. The importance of an established relationship has been demonstrated in online and offline settings. Consumers’ experience with any type of organization is one of the main reasons for trusting it with their personal information. For reducing privacy fears, one recent study concluded that improving trust by signaling a genuine intent to build a lasting relationship was even more effective than letting the consumer set limits on how information would be used (e.g., offering consumers the ability to opt out of sharing data with third parties).

The message to marketers is simple: Know your customers, anticipate their needs and heed their preferences. More frequent communication with customers (not just a one-way exchange of product offerings, but a two-way interchange) engenders greater trust, just as it does in the physical world with personal relationships.

Thus, paradoxically, acquiring more information and showing greater interest in customers can reduce privacy concerns. Research has built a case that stronger CRM efforts by firms can ameliorate the privacy issue, thereby boosting consumer patronage and sales revenues as well as reducing the call for privacy legislation that could kill the golden goose.

Companies that harness these communication touch points to construct a single, enterprisewide view of each customer gain a necessary tool for offering a personalized relationship that the customer will perceive as sincere and trustworthy.

Through this “rehumanizing of marketing,” consumers actually want their business partners to know them better so they can receive better products and better service.

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