The secrets to winning customer loyalty whilst protecting data privacy
Why is data privacy important?
Customers are demanding transparency on how their data is being managed. A survey by KPMG showed that 86% of consumers feel a growing concern about data privacy. Another study shows that 48% of customers have stopped buying from a company due to privacy concerns.
It's not just about keeping your customer's information safe - it’s about building trust. If you don't have your customers' trust, you don't have their business. But when consumers feel they can trust your brand, they will keep coming back to you. In this article, we cover the different options for data collection and the ways you can respect customer privacy whilst building loyalty.
Types of customer data
- What is first-party data?
First-party data is data that you collect directly from your customers.
It can be collected in several different ways, such as by asking your customers to fill out surveys or using a loyalty program to collect information about customer activity.
First party data pros and cons
There are lots of benefits to collecting first-party data. As you’re collecting data directly from customers, it’s more accurate than third-party data. Furthermore, you can collect information on how people actually use your product or service, not just what they say they do. This allows you to make decisions based on real customer activity.
The biggest drawback to collecting first party data is that it can be complicated and time-consuming to manage and analyse yourself.
- What is third-party data?
Third party data is collected externally, such as through a research company. Data can be gathered from sources such as credit card transactions, website activity, or even social media accounts.
Another popular way to gather third-party data is through cookies. These small files are recorded in a browser and collect information about the websites you visit. Have you ever looked at a product on a website, and then seen ads for that product all over social media? Or maybe you’re listening to a song on Spotify and then see YouTube ads by the same artist.
Third party data pros and cons
The benefit of using third-party data is that it can give you detailed insights into your customers. You’re not just collecting broad demographic information like age and gender - you can get information about how many credit card transactions people with specific characteristics have, how much money they spend on what products, etc.
However, there are several issues with third-party data. Some third-party data sources may have outdated or incorrect information in their database - so it’s not 100% reliable. Third-party data is also available for anyone to access - so your competitors might have the same data as you.
But the biggest problem with third-party data relates to security and privacy. Managing sensitive data through third parties opens it up to potential hackers. Furthermore, consumers feel that third-party data invades their privacy. So much so that Google has announced the elimination of third-party cookies in 2023. This ‘cookieless future’ is a major shift in the digital landscape and it means that companies will need to depend on their own first-party data.
- What is zero party data?
Zero-party data is information that doesn’t include the identity of an individual. For example, if you wanted to collect information about who visits your website in a given month, you can only see the number of people, rather than any specific identifiers or characteristics attached to them.
Zero party data pros and cons
A zero-party data approach avoids the additional permissions or approvals required from the customer. Additionally, there are fewer privacy concerns since zero-party data is anonymised.
However, zero-party data is ineffective because it often lacks detail. When you don’t have enough information about your customers, it can be difficult to create effective, targeted marketing campaigns.
So, which form of data collection is best?
First party data is the best option for your business. Why? The answer is simple: it allows you to connect with your customers on a personal level. You can create a direct relationship to understand customer needs better, and provide them with products, services, and ads that are tailored to these specific needs and interests.
First party data also give you insightful information about your customers, and it's not just limited to their identity. It includes data on behaviour and interactions with your brand, which makes it a lot more comprehensive than zero-party data.
On top of this, it’s more private and secure than third-party collection methods because there are fewer ways for someone outside of your organization to access it. Customers also have to willingly share their information with you, so there’s a level of transparency and trust in first-party data collection.
So, you know that first-party data is the best option. But what else can you do to respect customer data to build trust and loyalty?
Here are 3 things you can do to protect customer data privacy:
- Avoid data silos
Fragmented data increases data privacy and security risks. Many businesses have data spread across different CRMs, POS systems, or even online documents. When data is siloed, it’s difficult to keep track of what information is held where. It’s also very risky because anybody inside or outside of an organisation could access, change or steal data without it being noticed. This is why it’s important to have all of your data in one place.
- Use software with high security standards
It goes without saying that you should only partner with trusted and reliable technology providers. Choose software that is fully GDPR-compliant and secure so you (and your customers) don’t have to worry about losing or misplacing data.
- Transparency builds trust
Trust is built through transparency. Make sure you clearly communicate to your customers how you intend to use their data, and what value they will get in return for sharing it with you. Tell your customers how they can opt-out of data tracking or submit a request to have their information removed. The more transparent you are, the more comfortable and confident your customers will feel in doing business with you.
Have you thought about using a loyalty program to collect first-party data and build relationships with your customers? Here are a few ways loyalty programs help businesses:
- Collect first-party data and connect silos
A loyalty program or app is an easy way to collect consensual first-party data directly from your customers. Upon signup, customers can agree to share their information and activity with you, in exchange for personalised marketing or rewards.
At White Label Loyalty, we believe that loyalty solutions should be simple. That’s why we provide full integration with existing ePOS and CRM systems - so all of your data can sit in one place. You don’t want to search through different sources in order to understand your customers. Our solution combines data from your existing sources so you can see a complete overview of your customers’ activity in a single view.
- Build trust with secure technology
Our loyalty software is fully GDPR compliant and features a 99.99% uptime. Security is also at the forefront of our data capture solutions. For example, our card linking option features full PCI compliance and card tokenization. This means you can be confident that all transaction data is kept safe and secure. Card network offline? No worries - all customer transactions get linked to their loyalty card app accounts as soon as a connection is re-established.
- Connect to your customers with personalized experiences
Did you know that 81% of customers are willing to share their data in exchange for personalized and meaningful experiences? Use first-party data collected via a loyalty program to personalize your marketing campaigns and reward offerings. This makes customers feel that brands care about them as individuals, helping to establish a relationship based on trust and emotional loyalty.
Apple tech updates prove loyalty programs are more important than ever
Creating relationships based on mutual trust will have a significant impact on your customers and their loyalty to your business. When you build a relationship based on transparency and trust, your customers will be more likely to stick by you and even tell their friends and family about their experience. Make sure you are using consensual first-party data collection methods to protect customer data privacy and consider creating a loyalty program to do this. Got questions? Get in contact.
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Senior Content Marketing Executive
Helen is our Senior Content Marketing Executive. She shares valuable information about the Future of Loyalty and will keep you up to date on the latest industry insights...