Retailers are facing a myriad of challenges, from tightening budgets, smaller profit margins and financial constraints to clunky legacy infrastructure and increasing competition from major online stores. This is before they even address the issue of managing customer data.
Customers are also becoming more wary of the way retailers are storing their data. Businesses need to be transparent about their data protection approach and adapt existing procedures in line with digital innovation and regulatory expectation. Strong data protection vision and strategy, brought to life in clear practices, create a sense of trust and enhance customer loyalty.
With increased personalization becoming more important to consumers, how can you strike the right balance between creating a bespoke experience and respecting your customers’ right to privacy?
Balancing Privacy and Personalization
The pandemic significantly shifted the way people spend their money, with many switching their shopping from in-store to online over the past two years. Ecommerce sales in the U.S. alone accounted for $870.8 billion in 2021, an increase of 14% on the previous year.
Retailers are looking for ways to optimize their business and build brand loyalty — while, crucially, keeping data privacy front and center. When it comes to consumer attitudes, 71% of consumers in the U.S. now expect personalization, with 76% admitting they get frustrated when they don’t find it. Moreover, 78% are more likely to make a repeat purchase from companies that offer a personalized experience — according to a McKinsey report on customer intimacy and personalization.
Loyalty programs are designed to encourage repeat buying and enable a strong way to obtain direct marketing permissions while giving a personalized experience. Customers voluntarily give their data when they sign up for loyalty schemes, and if the scheme is clear enough, they also understand they are allowing the businesses to contact them about their products.
On the other hand, however, businesses must make conscious decisions about what personal data they want to collect, why they want it and what the commercial benefit of having it is. For example, date of birth details can be exchanged in return for a birthday gift — which boosts affinity with the brand.
These programs can be much more efficient than traditional email marketing in building relationships, creating a feeling of exclusivity for the consumer who wants to know more about the company and the brand. Consumers become part of a club that will give them rewards in return, and it allows the business to have transparent relationships with customers and communicate with them on a more personal and individual level.
Implementing an Effective Loyalty Program
To build and implement an effective loyalty program from the perspective of the privacy of customers targeted, it’s critical to first define the vision and end goal for the loyalty program. It’s also important to look ahead and predict what this will look like in one, three, and five years’ time – and whether you can build your program flexibly to allow for that evolution.
From then, retailers should allow the marketing, privacy, legal, product, Data Protection Officer (DPO) and IT teams to work together to build a transparent and commercially effective offering, giving them the space to think creatively about how to ensure customers’ choices are respected, data is protected and the commercial goals are ultimately achieved.
Why it’s a Win-Win for the Business and the Consumer
Data privacy practices should work seamlessly to enhance the individual experience. Organizations that get privacy right improve trust, operational efficiency, and top-line and bottom-line results. In fact, 35% of organizations surveyed by Cisco reported benefits 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 flip side, customers receive the best personalized recommendations for them, exclusive offers and other benefits and perks to redeem, which leads to an overall better buying experience.
Creating value for consumers through loyalty schemes creates a reason for them to share their data — as opposed to giving up their data for an unknown reason. Consumers gain something in the process and feel that their needs are being met. Not only this, but the transparency of how that data is being shared forms 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 critical in designing a privacy and customer-centred approach to personalization, especially for companies that operate across jurisdictions. Part of the process is demonstrating that enough thought, or due consideration, has been given to any concerns around the potential risks to the rights and freedoms of individuals. This includes anything from the risk of security breaches and unfair exploitation to unwanted services or certain groups being excluded from opportunities to participate in initiatives and offers.
To make sure your process is as tight and effective as possible, you need to complete a data protection impact assessment — which looks at all of the above risks and how to minimize them. Working with an external DPO enables businesses to continuously review and evolve their processes, in turn demonstrating a robust and trust-building approach to personalization — a win-win for the business as well as the consumer.
Dyann Heward-Mills isFounder and Data Protection Officer of HewardMills. She has over 20 years of experience working in the area of data protection and cybersecurity, and has recently been appointed as an ethics expert for the European Commission in research and innovation. She works extensively at C-suite level helping to build robust privacy and data protection programs and has embedded a culture of good governance, trust and transparency within organizations. As well as advising on all areas of data protection law and compliance, Heward-Mills is particularly known in the data protection arena for taking clients through the complexities and onerous process of Binding Corporate Rules (BCRs). Before founding HewardMills, she was a Partner at Baker McKenzie, leading the data protection and cybersecurity practice group in London; Senior Privacy Counsel for GE Capital; and Senior Privacy and Communications lawyer at Linklaters.