Data protection affects your bottom line
|
| Rosemary Smith |
|
Most business people have heard of data protection; after all, we are consumers too. We are constantly reminded of our rights with “cigarette packet” style privacy warnings when we sign up for anything from loyalty cards to e-newsletters.
So it’s just a consumer issue for big brands right?
Well no, actually, the Data Protection Act 1998 applies to processing of any personal data whether held by multinationals or SME’s and it covers business to business named contacts as well as consumers. A fair number of small companies are exempt from registration with the Information Commissioner but they still have to apply the eight Principles of data protection. Add to these the more recent rules covering email marketing and you could be forgiven for thinking the Government was trying to strangle small businesses in privacy red tape.
In fact, the bulk of the rules reflect common sense database practice and, in comparison with many other European countries, we got off lightly, retaining the right to process data provided an individual hasn’t objected i.e. opted out – a very different thing from the positive consent or opt-in required in some places.
And when it comes to dealing with data privacy, there are several business imperatives which should push you towards fair processing.
Forget, for the moment, the possibility of prosecution by the Information Commissioner’s Office (ICO), fines, imprisonment for directors or at least a public hauling over the Information Tribunal carpet.
Think rather about the relationship you have with your customers. In these days of identity theft, information “phishing” and “pharming” and widespread spam, can they really trust you with their data?
Do you make it clear to them when you collect their data what you intend to do with it? Do you maintain personal information securely and use it responsibly? Response to promotional campaigns is hugely affected by relevance of message but people are rationing their information, only handing it over to companies they trust. Gone are the days when personal data was a commodity used and abused by everyone. The Data Protection Act has seen to that.
Recent research by the DMA/Future Foundation* shows that over 50% of consumers never give information away, whilst the remainder are happy to do so to companies where they already have a relationship.
The research defines segments of the population in relation to how protective they are; pensioners in the lower socio-economic grades are most likely to be “Guarded Privatists” whereas those at the other end of the age spectrum are more likely to be “Open all hours”. Luckily the bulk of individuals are in the pragmatic middle ground, if you give them a good reason to deliver up their data, and don’t abuse it, they just might play ball.
There is a real budgetary imperative too. Everyone knows that it costs more to acquire a new customer than it does to “cross sell” an existing one. Under the current legislation your hard won customer is no more than a one night stand if you don’t get permission to market to them in the future; all that money spent acquiring them will just have to be spent over again which makes little financial sense.
Of course, many companies make good money from releasing their data to third parties. Nothing wrong with that so long as the individual has by-passed an opt-out (or, for consumer email, actively opted in). Getting the data collection right is vital if this particular revenue stream is to flow in your company’s direction.
Finally, there’s the value you can put on your customer database as an asset of the business, something you might want to consider when the moment comes to sell. However, many deals have fallen through when due diligence proves that the company’s major (sometimes only) asset is a database of customers who haven’t given permission for their information to be used. Whoops!
Like much of English Law, there are various interpretations of the different requirements of the Data Protection Act. The ICO has provided reams of paper in an attempt to guide companies to full (some might say over) compliance. The deceptively simple Principles can cause plenty of head scratching when they have to be applied in day-to-day business.
So, is data protection another burden on business or a sensible route to increasing customer trust and, finally, profit. You’re the Data Controller, you decide.
*Participation media: the consumer experience of direct marketing
Rosemary Smith is a director of Data Protection Consultancy Opt-4 Ltd
Back
to Articles
Contribute
your own articles |
|
"...an invaluable
compendium of Information on the most pressing challenge in
business today"
Sean Kelly
Comhra |
 |
"At last! Something
on data even an old Luddite like me can understand!"
Drayton Bird |
|
"...a really useful resource to understanding all issues relating
to data management"
Prof Derek Holder
Institute of
Direct
Marketing |
|
"...a down-to-earth, no-nonsense site designed to cover the
new practices and theory of Information Management"
Simon Lawrence
Information Arts |
|
|
