Humana provides health benefit plans and related health services to more than 11 million members nationwide. Would customers feel comfortable with the data-sharing arrangement if they knew about it? Customer data come to us in many different ways. The two met several times, and, after some fevered discussions with her bosses in Ohio, Laura made the ShopSense executive an offer. Sammy will understand, the CEO told himself as he sank deeper into the love seat in his office, a yellow legal pad on his lap and a pen and cup of espresso balanced on the arm of the couch. Laura Brickman was glad she was almost done grocery shopping. Supermarkets, department stores and other retailers can now keep track of the items purchased by each customer, both online and in-store, and, if the customer … Laura saw her opening; she wanted to get back to Jason’s point about competitive advantage. But the richest and most lucrative source of information, as well as direct contact with consumers, is through information portals like Google and social networks, particularly Facebook. Does the organisation send a privacy notice when personal data are collected? She came away from a meeting with the grocer’s analytics chief, Steve Worthington, convinced that ShopSense’s customer loyalty card data could be meaningful. 15, An even greater concern is these sites' selling or other transmission of users' personal data to third parties without users' effective knowledge or consent. We want it to improve the flow of leads and sales. The vast majority of solicitations from these sources are merely intrusive and not unethical. This information can be used to personalize ads according to the characteristics, circumstances and preferences of each individual, especially when the ads are delivered directly online. Without new laws and new conversations about the ethical norms associated with social media, the disinformation, polarization, and resulting violence will continue. “But I’ll go on record as being against the whole thing,” he said. Cooper had commented to Jason after the meeting. Now that so-called big data is providing access to information that would not previously have been discovered, what are the ethical boundaries around companies use of this data? Regardless of your industry, you have to start with that. They need room to experiment, explore and, inevitably, make mistakes. We then suggest ways they can reduce their health risks or treat their existing conditions more effectively. Know the origins of your data and the rules surrounding it. However, like data collection and targeting, the biggest risk in unethical influencer marketing is the loss of consumer trust. In those one-on-one conversations, only Alan Atkins, the grocery chain’s chief operations officer, had raised any significant issues, and Steve had dealt patiently with each of them. 2 | ETHICAL USE OF CUSTOMER DATA IN A DIGITAL ECONOMY Introduction Recent regulation of data protection constitutes a good start, but a holistic view of data ethics covers more than … There was always the chance an employee would let something slip, but even if that happened, Steve doubted anyone would be shocked. The two were attending a wine tasting hosted by a friend. Both CEOs are subjecting their organizations to a possible public relations backlash, and not just from the ShopSense customers whose data have been dealt away to IFA. David Norton (dnorton@harrahs.com) is the senior vice president of relationship marketing at Harrah’s Entertainment, based in Las Vegas. Once the register printer had stopped chattering, the cashier curled the long strip of paper into a thick wad and handed it to Laura. She is the co-author of. Occasionally, we’ll buy demographic data to fine-tune our marketing messages (to some customers, an offer of tickets to a live performance might be more interesting than a dining discount, for example). It was able to steal a march on its rivals simply by recognizing that not all motorcycle owners are created equal. “Do we need more sunscreen?” Laura wondered for a moment, before deciding to go without. For instance, we know that if somebody buys a travel guide to France, that person might also be interested in reading Peter Mayle’s A Year in Provence. However, the policies are generally very long and complex. It’s not just about what the information can do for you; it’s about what you can do for the customer with the information. Laura noted that as Archie’s presentation wore on, CEO Jason Walter was jotting down notes. 28. Or so he thought. ... Keep in mind that by not addressing ethical use of data … Read the Ethical Use of Customer Data … This is a serious attack on the autonomy and dignity of the individual subject. “It wins all the business with the safe set by offering low premiums, and it doesn’t lose its shirt on the more dangerous set.”. In the article, analytics chief Steve Worthington described how the organization employed a pattern-based approach to issuing coupons. Technology-driven and information-intensive business operations are typical in contemporary corporations. “Even if a correlation doesn’t hold up in the medical community, that doesn’t mean it’s not useful to us,” someone else suggested. This violates one of the fundamental principles of privacy, that a person must be able to control how much personal information is revealed to different parties, depending on the nature of the relationship and level of trust with each one. “Point taken,” Steve replied, although he knew that Alan was aware of how much positive attention those articles had garnered for the company. If access to and use of customer data are to remain viable, organizations must come up with ways to address customers’ concerns about privacy. They use collective data, along with sophisticated statistical analysis techniques and psychological models, to predict peoples' purchasing preferences and behavior and to identify those factors that most strongly influence consumers' loyalty and choices. Firms utilizing Big Data combine information from diverse sources to create knowledge, make better predictions, and tailor services. Is it written in … 1 | ETHICAL USE OF CUSTOMER DATA IN A DIGITAL ECONOMY Foreword The ethical use of data, and the extensive use of AI in day-to-day customer interactions have been an area of … It has the potential to get specific information about products to those who are most likely to use it and to craft it in a way that is most appealing to them. “You know, this deal isn’t really as much of a stretch as you might think.” He pointed out that the company had for years been buying from information brokers lists of customers who purchased specific drugs and products. Of course, the gridlock made him a few minutes late for the early morning meeting with ShopSense’s executive team. 9 Also the conditions are often all-or-nothing. A big hole in these data, though, is that people buy food for others besides themselves. Although the customer, at least tacitly, consented to the collection, use, and transfer of her purchase data, the real issue here is the unintended and uncontemplated use of the information (from the customer’s point of view). “Correlations, no matter how interesting, aren’t conclusive evidence of causality,” someone said. Her expertise is in the areas of customer equity, customer management, and customer-based marketing strategy. However, in many cases it is questionable whether these conditions have been properly met. Then O.Z. “No data set is perfect, but based on what we’ve seen already, the ShopSense info could be a pretty rich source of insight for us,” Archie Stetter told the handful of executives seated around a table in one of IFA’s recently renovated conference rooms. Gray Ethics CRM raises some disturbing ethical issues that fit into a grayer, more unregulated arena. For years, IFA’s regional manager for West Coast operations, Laura Brickman, had been championing the use of customer analytics—drawing conclusions about consumer behaviors based on patterns found in collected data. “Some poor soul puts potato chips in the cart instead of celery, and look what happens.”, “But what about the poor soul who buys the celery and still has to pay a fortune for medical coverage,” Donna argued, “because the premiums are set based on the people who can’t eat just one?”. Looked at another way, analytics enable firms to understand how poorly they can treat individual or groups of customers before those people stop doing business with them. Laura was about to rein in her stats guy when Rusty Ware, IFA’s chief actuary, addressed the group. This is a serious point of tension between online retailers, search and information services and social networks, and those who care about privacy. Customers should have a transparent view of how our data is being used or sold, and the ability to manage the flow of their private information across massive, third-party analytical systems. With top management’s blessing, Steve and his team had agreed to provide IFA with ten years’ worth of loyalty card data for customers in southern Michigan, where ShopSense had a high share of wallet—that is, the supermarkets weren’t located within five miles of a “club” store or other major rival. You mention the importance of ethics in data. 27, The heavy reliance on electronic communication also leads to greater possibilities for outsiders to tap into sensitive personal information. It would be a different story, however, if the company wanted to do more business overseas. Some of this information, though it may seem innocent enough in context, such as pictures taken at a party, can compromise the subject's professional identity. “Imagine what that guy could do with an even larger data set,” O.Z. If one wants to connect with people, and increasingly institutions, who are on Facebook, which now encompasses most of the U.S. population and an increasing percentage of the rest of the world, one has to be on Facebook. There are plenty of examples of unethical … No one else has the historical data we have.”. She wheeled past the ShopSense Summer Fun displays. PHOTO: Netflix As marketers, we’re hungry for data. Donna Greer gently swirled the wine in her glass and clinked the stemware against her husband’s. How can these companies leverage the customer data responsibly? Casinos, credit card companies, even staid old insurance firms were joining airlines, hotels, and other service-oriented businesses in gathering and analyzing specific details about their customers. Then Steve began distributing copies of the spreadsheets outlining the five-year returns ShopSense could realize from the deal. “Besides, it’s not like we’d be directly drawing the risk pools,” he said. Donna couldn’t keep her mind off the IFA deal. 2 Employers can also obtain credit records, medical and insurance records, and histories of workers' compensation claims. This is limited information at best and inaccurate at worst. Every ShopSense customer who hears about the deal, loyalty card member or not, is going to lose trust in the company. We tell customers the value proposition up front: Let us track your play at our properties, and we can help you enjoy the experience better with richer rewards and improved service. When that happens, the reaction is often that of Rep. Velazquez, who said she felt "violated" when her medical history became public knowledge. We want the CEO to look at the ROI number and feel we’ve met and … If the holders of the information provide it to an employer or sell it to a marketer without authorization, they are violating the intent of the subject and committing a breach of trust. (We would try to find a way to build positives into it, however, so customers would look at the interchange and say “That’s in my best interest; thank you.”) But Humana certainly wouldn’t enter into any kind of data-transfer arrangement without ensuring that our customers’ personal information and the integrity of our relationship with them would be properly protected. Ethics matter to your customers and your partners. Customers’ information needs to be protected. Transparency is a critical component of any loyalty card program. But as the firms in the case study are realizing, there are also plenty of risks involved with using these data. The focus was on varieties from Chile and other Latin American countries, and Donna and Peter had yet to find a sample they didn’t like. As one critic put it, "too much is made of consent in this context. With every visit, we get a read on our customers’ preferences—the types of games they play, the hotels and amenities they favor, and so on. Rain was in the forecast that afternoon for Dallas, so Steve Worthington decided to drive rather than ride his bike the nine and a half miles from his home to ShopSense’s corporate offices in the Hightower Complex. An insurance company finds some intriguing patterns in the loyalty card data it bought from a grocery chain—the correlation between condom sales and HIV-related claims, for instance. Some of this information is no doubt relevant to employment decisions. And IFA was among the best in the industry at evaluating external sources of data (credit histories, demographic studies, analyses of socioeconomic status, and so on) to predict depression, back pain, and other expensive chronic conditions. Customer analytics are effective precisely because firms do not violate customer trust. But we think the internal transactional data are much more important. Copyright © 2020 Harvard Business School Publishing. Using CRM Data Given that much of the customer data for CRM is sensitive, ethical companies ensure the data … The downsides include socio-t… ... internally. But now that her company’s fate was intertwined with that of the Dallas-based national grocery chain, she had less motivation to peruse the magazine racks and more incentive to evaluate the scanning and tallying going on ahead of her. Companies use employee data to outline a network of relationships among employees, customers, vendors, and others, identifying subject matter experts. We use proprietary data-mining and analytical capabilities to help guide consumers through the health maze. Instead of pulling back the reins, organizations should be nudging customer analytics forward, keeping in mind one critical point: Any collection, analysis, and sharing of data must be conducted in a protected, permission-based environment. Maybe the company should formally position Smart Choice and other products and marketing programs developed using the Shop-Sense data as opt in, he wondered. The challenge for the insurer, however, is that there is no proven correlation between the purchase of certain foods and fewer health problems. The record of these companies in defending user privacy against government intrusion has been mixed at best. Lots of people get arrested for all kinds of reasons, most of which have nothing to do with their employability. inappropriate use of data as defined when the data was initially collected I honestly don’t think these companies have hit upon a responsible formula for mining and sharing customer data. The risk of consumer backlash is lower for IFA than for ShopSense, given the information the insurance company already purchases. When the data is sensitive and personal, however, this can lead to serious abuse, because it opens the way for the data to be used for purposes quite different from its intended use. If IFA came up with proprietary health findings, would the company have to share what it learned? “Your CEO needs to hear only one thing,” Steve had told her several days earlier, while they were comparing notes. At Harrah’s, we have less than most because our customers may not want others to know about their gaming and leisure activities. Data ethics and its role in providing better customer service. Laura had read a profile of ShopSense in a business publication and learned that it was one of only a handful of retailers to conduct its analytics in-house. Some companies have more leeway than others to sell or trade customer lists. 7. At that point, Archie begged to show the group one more slide: sales of prophylactics versus HIV-related claims. Moreover the study found that young adults are even more careful about what they reveal about themselves online and with whom than older users. Some … This is a "market failure," because consumers really have no power to negotiate and are therefore forced to accept whatever terms the companies set. The lines at the local ShopSense supermarket were especially long for a Tuesday evening. They understand exactly what we’re capturing, the rewards they’ll get, and what the company will do with the information. So would it be useful for our company to look at grocery-purchasing patterns, as the insurance company in the case study does? The marketing department understood, for instance, that after three months of purchasing nothing but Way-Less bars and shakes, a shopper wasn’t susceptible to discounts on a rival brand of diet aids. The benefits of this trend are that, among other things, the marketplace is more transparent, consumers are better informed and trade practices are more fair. 19, Defenders of the unconstrained collection, storage and use of users' personal data claim that in this networked world, where everyone is living online and putting their personal lives out there for everyone else to see, people no longer care about privacy, especially teenagers and young adults. Through customer analytics, the company can know the expectations of the customers towards their product. Laura had finally made it to front of the line. We use a range of industry standard security measures, including encryption and firewalls, to protect our members’ privacy and medical information. What the companies are proposing here is very dangerous—especially in the world of retail, where loyalty is so hard to win. There are some advantages to this kind of targeted marketing. The CEOs in the case study need to take the “front page” test: If the headline on the front page of the newspaper were reporting abuse of customer data (yours included), how would you react? Many public figures have been victimized in this way. Digital trust is a focal point in the modern age — but it can be tricky to balance respecting customers’ privacy and crafting new customer … Now, with the development of mobile apps that track a user's location in real time, the ads can even be adapted to the recipient's current location. He says it is essential that no one is harmed related to the use of data… “Oh, paper, please,” she replied. He was pretty confident he had majority support; he had already spoken individually with many of the top executives. The company had even been experimenting in a few markets with what it called Good-Sense messages—bits of useful health information printed on the backs of receipts, based partly on customers’ current and previous buying patterns. We carefully control the content and frequency of even our own communications with Rewards members. Laura nodded in agreement, silently cheering on the insurance company’s uberanalyst. The company should explore whether there are some customer data it should exclude from the transfer—information that could be perceived as exceedingly sensitive, such as pharmacy and alcohol purchases. Commenting on this fictional case study are George L. Jones, the CEO of Borders Group; Katherine N. 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