Imagine you’re at a party and you’ve met someone new. They ask for your name. That’s normal. But then this person asks for your home address, phone number, and relationship status. Even if there was a legitimate reason to ask, most of us would call this bad social etiquette. Either this person has failed to explain and justify why they need the information, or they are trying to obtain information they simply don’t need.
The same concept of etiquette applies to our data. Data scandals and global regulations have pushed privacy to the forefront of consumer awareness, giving consumers pause and forcing companies to rethink their practices around customer data.
As a result, the key question for every business is: What is proper data etiquette? How can businesses gather and leverage data to move customer relationships forward without compromising the individual’s privacy rights or—worse–their trust?
Data etiquette means gathering and using data in an ethical and respectful way. This requires distinguishing between the data that your company wants and the data that it needs, then using the latter to build great customer relationships through great experiences. For example, a bank needs your phone number—a data point—in case it needs to contact you quickly when its security team detects possible fraud. If businesses base their strategy around these values, they will be able to effectively navigate the privacy versus personalization paradox we now find ourselves in.
Having nearly a decade of experience in helping thousands of companies build better customer relationships using data this way, here’s why I think data etiquette will be one of the most important new elements of business strategy moving forward.
Data etiquette puts the customer first
Being a customer-first company means continuously meeting the needs of your customers, even as they evolve. However, customers today increasingly hold companies to higher standards when it comes to social responsibilities and ethics.
One thing has become extremely clear: Customers are asking companies to stop buying, sharing, or selling their data. A 2018 survey from eMarketer found that 80% of consumers are comfortable sharing personal information directly with a brand, but only about 16% are comfortable sharing that information through third parties.
Data etiquette, therefore, should be a crucial part of a company’s customer-first strategy and something that should be clearly communicated to consumers, to build and maintain their trust. A recent survey from PwC found that nearly 90% of consumers agree that the extent of their willingness to share personal information depends on how much they trust a given company.
Data etiquette = better customer experiences
Subscribing to a new ethical code is more than just a trust-building exercise. The single greatest thing you can do to advance your business with data while maintaining user trust is to actually deliver on the promise of better experiences.
If you can’t explain why you have a certain set of someone’s data, then you probably shouldn’t have it.”
The key to fulfilling this need is through first-party data, which is how your own customers use your own products and services and not third-party data that has been collected by an entity that doesn’t have a direct relationship with the user. (I call the latter “data gossip.”)
Unlike third-party data, first-party data is extremely accurate, making it much more feasible to provide highly relevant, contextual experiences for customers. First-party data is also collected with user consent, allowing companies to build customer relationships that are based on trust.
The Amazon.com experience is a great example of first-party data in action. It has a cohesive customer data infrastructure that delivers users a consistent experience no matter where they interact (online, mobile, over the phone), and thanks to the accuracy of first-party data, product recommendations are extremely relevant to your tastes and preferences. No experience is better than one based on your wants and needs.
Data etiquette is the clearest way to navigate the regulatory privacy gap
Regulators are heeding the growing outcry from consumers demanding more control over their data. As a result, for the first time in the history of the internet, companies are being held to more stringent legal standards around data usage.
Groundbreaking new privacy legislation such as the European Union’s General Data Protection Regulation (GDPR) and the new California Consumer Privacy Act are just the beginning of government oversight. Politicians are increasingly calling for more regulation and transparency, be it around data collection practices or putting together a federal privacy law in the United States and around the world.
Businesses can expect to see more compliance demands, furthering the necessity of implementing proper data etiquette. The best approach is to take a strong, early stance on data etiquette and put it into practice. Companies must establish good habits.
For example, implement a strategy where you collect information that will actually help deliver your customers a great experience. It’s the idea that if you’re in the business of selling footwear, you need to know someone’s shoe size; however, you don’t need to know all of a customer’s online purchases. Helping establish your business as a consumer champion will garner the trust you need to provide your customers the experiences they expect.
While Apple has its detractors, the company has served as a model example of good data etiquette. Already, its powerful actions in support of user privacy are winning the hearts and minds of consumers and investors alike.
High stakes for bad actors
While it may be impossible to predict exactly how legislation will turn out or how cultural norms will precisely evolve, we do know which way the wind is blowing. The consequences of not practicing good data etiquette are serious and we’ve already seen them in action.
The GDPR has already forced some advertising companies to shut down their European lines of business, while other businesses have shut down entirely. Many of these businesses likely relied on third-party data or other questionable practices. Had these companies followed good data etiquette, they may have been able to survive GDPR and retain access to the European market, with its half a billion potential customers.
Simply surviving GDPR and similar legislation may not be enough in the future. Violation of GDPR could cost your business fines of up to 4% of yearly revenue. But the social cost of not following good data etiquette will likely be much worse going forward. Public scrutiny will almost certainly continue to intensify.
After all, consumers are now reaching out personally to companies that purchased third-party data, demanding to know why they have their data or what they know about them. Going forward, the new rule of thumb should be: If you can’t explain why you have a certain set of someone’s data, then you probably shouldn’t have it.
That’s just good manners.
Peter Reinhardt is the cofounder and CEO of Segment.