Social media has revolutionized the way people share information. Social media users are posting information about themselves on a plethora of networks, creating a record of their likes and dislikes, their habits and interests, places they visit, and more. And according to Nielsen research, four out of every five active Internet users visit social networks and blogs. That adds up to a bounty of customer insight waiting to be harvested.

Increasingly companies are doing just that: using social networking sites to learn more about customers and prospects, so they can deliver more targeted marketing. However, these firms must tread carefully and respect customers' privacy, or risk a customer backlash.

A recent Poll Position survey reveals that nearly 70 percent of U.S. Facebook users are comfortable with the personal information they share on the network. Yet, research by Barracuda Labs found that more than 50 percent of social media users in 21 countries are unhappy with Facebook's privacy controls; and 30 percent and 29 percent of respondents are displeased with the privacy controls on Twitter and Google+, respectively. Although LinkedIn appears to be the most trusted social network, 25 percent of respondents voiced unhappiness with its privacy controls. The discrepancy in consumers' willingness to share personal information with their concern for privacy is where the challenge lies for marketers.

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Organizations that use customer data to proactively build trust with their customers are the ones that will have the most success. In their upcoming book, Extreme Trust: Honesty as a Competitive Advantage, Peppers & Rogers Group founding partners Don Peppers and Martha Rogers, Ph.D., argue that because of the rising volume and speed of interactions, people's standards of what constitutes trustworthy behavior are increasing. Thus, it's no longer sufficient for companies to simply respect the terms published on their website. "Now, you have to proactively protect the customer's interest," Peppers says. For example, Amazon uses customer purchase data to alert customers when they try to order a book that they've already bought from the company.

Once companies show that they care about their customers' privacy and have their best interests in mind, clients are more likely to share information because they know it will be used responsibly, says Dennis Dayman, chief privacy and security officer at Eloqua. Peppers adds that privacy as we viewed it in the 20th century is dead. Social has made personal information more public than ever. "But this doesn't mean that people won't be worried about protecting their security," he says.

According to experts, companies can take a number of precautions to ensure that they don't overstep their bounds when using customer information available via social media. Here are five recommendations:

  1. Be transparent and fair: Many companies require customers to agree to a privacy policy, which outlines how the information they share will be used or communicated to third parties. However, most of these policies are long and fraught with legal terms, meaning that even the customers who bother to read them don't always understand them. Dayman says companies need to communicate information in a way that customers will find easy to understand. Moreover, businesses should regularly inform customers how they're using the information they have provided.

Andrew Walls, security, risk, and privacy research director at Gartner, says it's essential to give customers the ability to both update information about themselves and opt out of receiving marketing messages. Just because something is legal doesn't make it right, Walls notes. Companies will displease or even anger customers by using information inappropriately, especially when customers have agreed to privacy policies they don't understand. "Use common sense," recommends Raghu Raghavan, Act-On's CEO. "If you don't want something to happen to you, then don't do it to a customer.

 

  1. Put the customer in the driver's seat: Customers want to feel that they have control over the information that companies have access to and how it's used. This includes giving customers a choice about the frequency of contacts they have with a particular company, for example, how often they receive a newsletter or other marketing material. Peppers of Peppers & Rogers Group argues that allowing customers to feel in control will lead to increased trust in that company. Subsequently, customers will be more likely to share more about themselves with that particular company.

 

  1. Education is essential: Despite using social media on a daily basis, many customers are unaware of how the data they're sharing can be seen and used by third parties—and, consequently, may feel that their privacy is violated when they're contacted by a company for marketing purposes. Eloqua's Dayman says companies have an important role in educating customers, starting with giving straightforward information about their policies.

 

  1. Only collect what you need: Social media has made more detailed customer information available than ever before, so some organizations are accumulating as much social data as possible, even when they don't need it. This "just in case" mentality can work against a company. "The easiest way to secure information is not to have it in the first place," Gartner's Walls says.

 

  1. Be relevant: Companies need to keep in mind that every customer is different and tailor any marketing information to their preferences. "The only way to use data is by making communication relevant," Act-On's Raghavan says. For example, customers don't want to see an advertisement about a completely unrelated product pop up when searching online for something specific, nor receive information related to their profession on their private email address. Raghavan says using information out of context constitutes misuse.

Despite its challenges, social media gives companies a unique opportunity to build trust, says Rick Mans, social media strategist at Capgemini. By using publically available customer data, companies can improve the relevancy of their marketing. However, if they misuse that information companies could lose their customers' trust, and their business, and are unlikely to regain either quickly, if at all.