Balancing privacy and personalization: the key to customer loyalty

Retailers face a myriad of challenges, from tight budgets, shrinking profit margins and financial constraints to clunky legacy infrastructure and growing competition from major online stores. This is before they even address the issue of customer data management.

Customers are also increasingly suspicious of how retailers store their data. Companies must be transparent about their approach to data protection and adapt existing procedures in line with digital innovation and regulatory expectations. A strong data protection vision and strategy, embodied in clear practices, builds trust and builds customer loyalty.

As increased personalization becomes increasingly important to consumers, how do you strike the right balance between creating a tailored experience and respecting your customers’ right to privacy?

Balancing privacy and personalization

The pandemic has dramatically changed the way people spend their money, with many switching from in-store to online purchases over the past two years. U.S. e-commerce sales alone accounted for $870.8 billion in 2021, an increase of 14% over the previous year.

Retailers are looking for ways to optimize their business and build brand loyalty, while keeping data privacy at the forefront. When it comes to consumer attitudes, 71% of US consumers now expect personalization, with 76% admitting they get frustrated when they can’t find it. What’s more, 78% are more likely to make a repeat purchase from businesses that provide a personalized experience – according to a McKinsey Report on customer intimacy and personalization.

Loyalty programs are designed to encourage repeat purchases and provide an efficient way to obtain direct marketing permissions while providing a personalized experience. Customers voluntarily give their data when they sign up for loyalty programs, and if the program is clear enough, they also understand that they allow companies to contact them about their products.

On the other hand, however, companies need to make conscious decisions about what personal data they want to collect, why they want it, and what is the business benefit of having it. For example, date of birth details can be redeemed for a birthday gift, which builds brand affinity.

These programs can be much more effective than traditional email marketing at building relationships, creating a sense of exclusivity for the consumer who wants to know more about the company and the brand. Consumers are part of a club that will give them rewards in return, and this allows the company to have transparent relationships with customers and communicate with them on a more personal and individual level.

Set up an effective loyalty program

To build and implement an effective loyalty program from the point of view of the confidentiality of the targeted customers, it is essential to first define the vision and the end goal of the loyalty program. It’s also important to look to the future and plan what it will look like in one, three and five years – and whether you can build your program flexibly to accommodate this evolution.

From there, retailers must enable marketing, privacy, legal, product, data protection officer (DPO) and IT teams to work together to build a transparent and commercially effective offer, giving them the space to reflect. creatively to the way to ensure customers’ choices. are met, data is protected and business objectives are ultimately achieved.

Why it’s a win-win for business and consumer

Data privacy practices must operate seamlessly to enhance the individual experience. Organizations that respect privacy improve trust, operational efficiency, and revenue and bottom line results. In fact, 35% of organizations surveyed by Cisco have returned profits of at least 2X their investments.

When done right, loyalty programs can turn visitors into buyers, improve retention and build brand loyalty – and on the other hand, customers get the best personalized recommendations for them, exclusive offers and more. advantages and benefits to redeem, which leads to a better shopping experience.

Creating value for consumers through loyalty programs gives them a reason to share their data, instead of giving up their data for some unknown reason. Consumers gain something in the process and feel that their needs are being met. Not only that, but the transparency of how that data is shared creates a sense of trust, encouraging retention and repeat purchases.

How to Stay Accountable: Working with an Independent Data Protection Officer

Working with an independent DPO is key to designing a privacy and customer-centric approach to personalization, especially for businesses that operate in multiple jurisdictions. Part of the process is to demonstrate that sufficient thought or consideration has been given to any concerns about potential risks to the rights and freedoms of individuals. This includes everything from the risk of security breaches and unfair exploitation to unwanted services or exclusion of certain groups from opportunities to participate in initiatives and offers.

To ensure that your process is as strict and efficient as possible, you should carry out a data protection impact assessment, which examines all of the above risks and how to minimize them. Working with an external DPO allows businesses to continually review and evolve their processes, demonstrating a robust and inspiring approach to personalization – a win-win situation for the business as well as the consumer.

Dyann Heward-Mills is the Founder and Chief Data Protection Officer of Heward Mills. She has over 20 years of experience in the field of data protection and cybersecurity, and was recently appointed Ethics Expert for the European Commission in Research and Innovation. She works extensively at the C-suite level to help build strong privacy and data protection programs and has embedded a culture of good governance, trust and transparency within organizations. In addition to advising on all areas of data protection legislation and compliance, Heward-Mills is particularly well known in the data protection space for guiding clients through the complexities and onerous process of Binding Corporate Rules (BCR). Prior to founding HewardMills, she was a partner at Baker McKenzie, leading the Data Protection and Cybersecurity practice group in London; Senior Privacy Advisor for GE Capital; and Senior Privacy and Communications Counsel at Linklaters.

Joseph P. Harris