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Data ethics and the impact on customer service

Posted February 20, 2019 - Updated June 10, 2021
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In the wake of sweeping digital privacy changes, such as Europe’s General Data Protection Regulation (GDPR), consumers have gained more control over the personal data they provide to organizations. An additional benefit of this newfound power is the ability to hold organizations accountable on how their data is used.

According to digital security software company Thales, the majority of consumers say companies are responsible for protecting them from data breaches, with 64% reporting they’re “unlikely to do business with a company where their financial or sensitive data was stolen.” Data stewardship and protection, therefore, is an issue that affects your enterprise’s reputation, customer trust and overall business health.

“With so much data available on consumers and so many examples of companies selling and misusing that data, customers are wary of sharing information with brands,” says Blake Morgan, author of More is More: How The Best Companies Work Harder And Go Farther To Create Knock-Your-Socks-Off Customer Experiences.

The mishandling of data can have lasting negative impacts on brands, but take heart: The solution to keeping data and its owners happy lies in the adoption and implementation of data ethics. Tweaking the way you view data management and being transparent about your methods and approach can result in a better customer experience and stronger brand image.

How transparency translates into trust

As we know, data is the engine that fuels the personalization of shopping experiences, marketing messages and customer service interactions. There’s no turning back that clock.

However, policies such as the GDPR, Japan’s Act on the Protection of Personal Information and California’s Consumer Privacy Act are designed to give consumers more control over their data.

In reaction to these policy shifts, many companies have established data governance teams tasked with evaluating how transparent they’re being with their customers on data collection and usage, assessing data risk and identifying where to make improvements.

“Data transparency is the foundation of customer trust in our modern world,” says customer-service expert, Morgan. “Companies that are transparent and ethical with how they use customer data not only build trust, but also have a competitive advantage.”

With this in mind, companies have posted privacy notices on their websites that explain their data processing and security practices; outlining, in clear and unambiguous language, the intended purpose of their data collection; and disclosing the possibility of a data transfer or the use of third-party data where relevant.

“Customers are more open to sharing their data when they understand how a company will use it, and are confident their information is protected and won’t be sold or shared,” Morgan explains. Whatever amount or type of data customers are willing to volunteer, she encourages organizations to maximize it to deliver the “amazing” customer experience consumers crave.

Data ethics and its role in providing better customer service

Digital trust is a focal point in the modern age — but it can be tricky to balance respecting customers’ privacy and crafting new customer experiences.

Companies are trying to navigate this relationship gracefully. An executive survey conducted by NewVantage Partners revealed that 55.7% consider data ethics to be a top priority in their organization. Meanwhile, research from Edelman found that “trusted companies are much more resilient in the face of a crisis or risk,” a timely conclusion during the global pandemic.

As businesses apply data ethics to their management of sensitive customer information, they must consider it in the context of their overall customer service strategy. Caring for your customers’ personal information is just as important as ensuring they experience short response times and quick query resolutions when they call, text or chat.

How can companies be more ethical with their data? The answer may lie in understanding quality over quantity. Peter Fader, professor of marketing at the Wharton School at the University of Pennsylvania and co-author of The Customer Centricity Playbook: Implement a Winning Strategy Driven by Customer Lifetime Value, believes that if you use only the data you really need, ethics come naturally.

“There’s a misconception out there that the more personal data you have, the better it will allow you to understand a person. That if we can just get enough data and throw it into our machine-thinking model, we’ll know everything about the customer. But that’s not true,” says Fader.

According to Fader, the data he relies on most is “rather bland” and doesn’t include media habits, social media or even geolocation. “Our forefathers in direct marketing did their homework really well and handed us the rubric of RFM — recency, frequency and monetary value,” Fader says. When it comes to building effective predictive models, he adds, “That’s all I want to know.”

Every organization is eager to improve their customer experience, but it shouldn’t come at the expense of data privacy and customer trust. Being thoughtful about what customer data you collect and how you use it demonstrates a commitment to the customer – an approach that will translate into increased loyalty and revenue.

Knowing that our society is at a pivotal point in time when consumers are watching to see how enterprises will choose to handle the information they’re given, data ethics isn’t just a good idea — it’s a must. “Businesses are all claiming to offer awesome customer service,” Fader says. “But, we are now at the point when they will be held accountable for how they achieve it.”

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