Verizon announced its plans to place a removable warning sticker on all new devices it sells, sending a loud, bold message: We plan to track you, but we are giving you a choice. A bold move, but look at the alternative as Apple found itself in hot water when consumers discovered that iPhones and iPads were collecting data about their whereabouts.
For marketers, the key to obtaining and properly using consumer data is to recognize the balance between business necessity and practice legitimacy.
1. Business Necessity
It is no secret that businesses are collecting personally identifiable information (PII) and using it to link other consumer attributes and behavior for both product development and marketing. In today's consumer-driven economy, companies' fates depend on how well they understand and satisfy consumers' wants and needs-businesses perform better when customer intelligence informs their decisions. They innovate and evolve faster and more easily, serving consumers quicker, better, and cheaper with richer knowledge.
Equipped with advanced technologies, collecting and using PII-linked information has become an increasingly important business competency. Companies lacking or lagging take a competitive hit. Meanwhile Google and Facebook's existence depend on PII-enabled advertisements targeting Web surfers and social networked friends. That noise you hear is them crunching mountains of PII-linked data for smarter ways to make visitors stay longer and click more.
But some companies have been evasive or secretive about their data practices, worrying about turning customers away. Don't underestimate the mistrust of Big Brother. Consumer concerns get amplified when they lack understanding of why data is collected, what it is used for, and what potential risks are posed if data are breached. That concern propels consumers' fear out of proportion to potential phishing and identity theft.
2. Practice Legitimacy
Businesses' chief challenges are not legal compliance. Under the existing U.S. legal framework of sectoral privacy laws (HIPPA, COPPA, FACTA, etc.), the Federal Trade Commission Act (FTC Act), and business self-regulation, companies can legitimize their data practices by either consent or contract:
- By contract, an organization's data collection and use is made part of its business transaction between the organization and consumers, and thus constitutes a legitimate business trade or contract. That is why more retail companies are leveraging and expanding their existing or new loyalty programs into a data collection platform, by which cardholders trade in their PII and consent for discounted pricing or other member benefits.
Verizon's warning sticker sounds bold and risky on the surface, but may turn out to be a safe and smart move. Users get an informed choice with disclosure and some degrees of transparency, legitimizing Verizon's collection and use of location data. Apple's secrecy about its data collection on iPhones and iPads caused a commotion after two British researchers shared an open source application that lets consumers create a map of everywhere they've been since the tracking started.
But when AT&T, T-Mobile, and Sprint are also tracking, what's the risk that Verizon's warning sticker will scare their customers away? My vote is for Verizon, which has recognized the importance of balancing business necessity with practice legitimacy.
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About the Author:
Jundong Song is vice president of marketing intelligence technology at 89 Degrees