Don't follow in the NSA's footsteps. How to mine data and keep your customers.
The media and public have raked the National Security Agency over the coals over its collection and use of data. Even so, surveys show that consumers are fine with private companies harvesting huge amounts of data for marketing purposes.
How is that possible? What do companies do that the NSA didn't to get the support of the American consumer? From my research deep into the minds of consumers, there are four major lessons the NSA can learn from industry leaders and innovators in the area of data collection and use.
Lesson 1: There must be a benefit to the consumer.
When a consumer visits a website, makes a purchase or inquires about a product or service, they know the company they are interacting with is tracking their experience. They're okay with it because they expect the company will use the information collected to make the experience better for them.
Very few benefits speak louder than money, and consumer-savvy brands have found great success in the use of loyalty programs or shopping cards. Grocery chain Kroger's successful loyalty shopper card provides a deep discount (or dramatic penalty to the non-user) in exchange for the ability to tie purchase behavior to individual households. Kroger uses this information to sell promotional programs to the brands that line their shelves, which ultimately benefits the consumer again in the form of coupons or deeper discounts. Contrast that with the NSA--an organization that hasn't sold its utility to the public.
Lesson 2: They must be allowed to correct the conversation.
From its roots as an online bookstore, Amazon has always worked to make its shopping experience a little more useful and personal than on other sites. The company does a great job of learning about the consumer as they go through the buying process. Amazon provides recommendations of other items that might be of interest based on a customer's purchase or viewing behavior and suggests additional items for a shopping cart at the time of purchase.
But more impressively, Amazon has built an easy way for the consumer to correct the conversation if it gets off-track. My teenage daughter was using my account to buy some books for a recent trip. This dramatically changed the recommendations and e-mail campaigns I was receiving. When I attempted to turn off some of the e-mails, the site allowed me to turn off just "teen romance," while retaining my previous selections. Many companies miss the mark in this area by assuming too much. They end up losing the consumer altogether because they choose to completely turn off the communication. NSA must quickly find ways to listen to and learn from its "consumers," the American public, to repair the tarnished relationship.
Lesson 3: To gain the greatest reward, you must share data back.
Data can be a powerful tool for engaging a consumer and strengthening the relationship. Most companies collect data for their own benefit--why not benefit your customer, too? Many local power companies have started sending monthly reports to homeowners showing their electric use and comparing their use with other similar homes. Companies are using the big data they are collecting to help homeowners use less energy and save money, rather than using it to find more ways to charge users more. The NSA claims its data collection supports national security, but it must find ways to prove that claim to an increasingly skeptical and critical audience.
Lesson 4: You must be open about what you're collecting.
The Nissan Leaf collects information about drivers' habits and vehicle performance and sends the data back to a central location. Sound a little like Big Brother? What makes the Nissan implementation unique and consumer friendly is the car asks for permission to send data every 30 days. Instead of covertly collecting data and hiding the fact that they are doing it, the folks at Nissan put it out in the open. Nissan reports the information back to the drivers so they can see how their performance compares with other Leaf owners. The practice engages the consumer and helps Nissan learn lessons about its car that can be applied to making future models better.
Many companies want to ask once and then hide the feature, or worse, opt you in to data collection without asking and make it very difficult to find how to turn it off. At best, these practices ignore the importance of consumer engagement; at worst, they betray consumers' trust --the NSA's problem. The NSA must revisit its outdated "secrecy-above-all" model.
ERIC V. HOLTZCLAW is a serial entrepreneur who has founded multiple startup companies, including one of the first profitable Internet enterprises. His last company appeared on the Inc. 5000 list three years in a row. Eric advises clients on the “whys” of business – why customers buy, why teams work and the all-important “entrepreneurial why”. He is the author of Laddering and his weekly radio show, The 'Better You' Project, shines a spotlight on entrepreneurs' individual business journeys and successes. Learn more about Eric at www.ladderingworks.com or e-mail firstname.lastname@example.org. @eholtzclaw