Personalization and Privacy… Beware the Dark Side

Which is it? Personalization is good, giving each customer the individualized treatment they deserve. Personalization is bad, infringing on our privacy and allowing companies to invade our privacy.

Here’s a simple principle that separates good from bad:

Enlightened companies remember information for customers, not about them.

It’s easy to determine whether you are remembering information for customers. Ask yourself: Does the customer want us to remember this information? This isn’t just an interesting mental exercise, because your privacy policy must disclose to customers the type of information your company remembers about them.

We say “must” not because of legal requirements, but because this is the only way to keep your company honest and your customers’ interests protected. Requiring your team to reveal what they remember about customers and how they use it is the best way to ensure they are remembering information for customers.

Far too many companies confuse personalization or 1to1 relationships with supercharged, highly targeted advertising. If your end game is increasing the response on your ads, and you are using technology for the wrong purpose, then the odds are increasing that technology will betray you.

To help you understand the difference, we’ll use author Steven Haeckel’s description of “make and sell” companies versus “sense and respond” enterprises.

Make & Sell Companies

Make and sell firms are driven by the products they sell, and they use technology to increase their ability to sell these products. Unfortunately, given the growing power of technology to remember individual level data, it’s hard for such firms to avoid using customer information for the benefit of the company, instead of the customer.

Make and sell is a good business model for situations in which change occurs gradually. Until recently, well-managed companies were able to accurately predict next years sales and identify customer needs two and even three years ahead of time. But now management has two problems.

The first problem is that the pace of change has accelerated rapidly, and companies have a hard time keeping track even of their major competitors, never mind their customer needs. Firms struggle to figure out what business they are in: Manufacturers are becoming retailers, distributors are being forced out, new types of intermediaries are being born.

The second problem is personalization itself. Once firms start to build 1to1 relationships with thousands or even millions of customers, it becomes impossible to predict ahead of time what individual customers need. The implication of this is that companies will have to develop the capability to adapt instantly to a customers feedback. It is impossible to build 1to1 relationships when all you have is a rigid set of products and services.

But this is hard, so the temptation for many firms is to apply personalization only to marketing and sales activities, and to use new technologies to simply automate their existing business approach. Instead of true 1to1 relationships, they deliver highly targeted marketing and sales programs.

We are starting to see serious issues arise around privacy, because if you give powerful personalization tools to traditional make and sell enterprises, you get an entity capable of invading personal privacy without even realizing the damage it is doing.

As one direct marketer said to me earlier this week, Weve been collecting individual level data for decades. Why is there such a fuss about it now? But the difference is huge between keeping a mailing list of people who bought books by mail and following individuals around in real time.

Sense & Respond Enterprises

In contrast, sense and respond enterprises are focused on being able to adapt to meet the needs of each customer. They use technology to benefit the customer, since they are not obsessed with selling a certain set of products, but instead are capable of customizing a wide range of products or services for particular customers.

True 1to1 relationships require a “sense and respond” business model.

The truth is that technology has evolved much faster than most enterprises. While the principles of the sense and respond enterprise have been beautifully outlined in Haeckel’s new book, Adaptive Enterprise, few companies have fully embraced them, yet.

Fortunately, the public is increasingly sensitive to privacy issues, and this should motivate leading companies to recognize that they must adopt a sense and respond business model. This model is naturally biased towards customers, and any firm that seeks to build true 1to1 relationships needs to understand and embrace it.

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