Today's companies treat different customers differently for one basic reason: because they can. The technologies that enable personalization have only recently become practical, but the fact that personalization can occur now means that it must occur.

Customers demand it. As a result, companies everywhere are incorporating personalization into their business models in order to build loyalty and generate revenue. Bruce Kasanoff, privacy expert and author of, "Making It Personal: How to Profit from Personalization without Invading Privacy," says the widespread adoption of personalization is inevitable. "You will no more think of ignoring the differences between customers than you would think of charging a customer for a product you never delivered," he says.

Yet, we've also heard the frequently repeated maxim that protecting your customers' privacy must be the centerpiece of any effort to profit from personalization strategies. For many executives, this poses a conundrum: How do I acquire and utilize customer data -- and personalization -- to generate business while protecting my customers' privacy at the same time? Why is it that personalization and privacy seem to be at odds? Kasanoff argues the conflict exists because most companies ignore the personal side of one-to-one relationships. They collect personal information solely in order to sell whatever products happen to be in their marketing plan.

The truth is that personalization, when applied in the context of a genuinely effective one-to-one program, should not conflict with individual privacy protection. This is because relationships, to be effective, must be built on trust, but a customer's trust cannot be secured if he has any doubts at all about whether his privacy will be protected. The conflict between personalization and privacy only arises when companies view it from the "wrong end of the telescope." If you start by asking how you can use personalization to sell your customers more stuff, then privacy abuse is one likely outcome. But this is the wrong philosophical approach to relationship building. The right question to ask is how you can use personalization technologies to add value for your customers, by saving them time or money, or creating a better fitting or more appropriate product.

That said, there are several issues executives must be prepared to address when jumping into the personalization game. Just as different customers have different needs, different people have different levels of sensitivity with respect to protecting their privacy. In fact, just agreeing on a definition of privacy protection can be problematic. Do you partner with other companies to render services to your customer? If so, are you accountable for a partner's privacy policies? If you give a customer's personal information to an outside company, is that a violation of the customer's privacy? What if you give it to another division within your own firm? And just what is the damage of a privacy violation, anyway?

Getting to the bottom of these issues is critical to making personalization and privacy click. For those companies that do, the secret is out: privacy and personalization are in.

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