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Personalization vs Privacy: Balancing User Recommendations and Data Protection

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The one-fits-all approach to consumers is dead.  86% of your clients expect you to know them well enough to offer personal recommendations. The rise of AI gave a new impulse for personalization: today, 9 in 10 companies use AI-driven tools to develop custom client experiences.

However, there is a tension between personalization and data privacy. While customers are happy to get personalized experiences, they are deeply concerned with the necessity of sharing their private information with companies. Building customer trust brings the solution to this contradiction. 

Let’s discuss why personalization is a must today and how your business can balance personalization and data privacy.

Personalized Recommendation Is the New Black

Personalization of product recommendations, content, and communication is what your clients love and expect from your business by default. A McKinsey study shows that 71% of customers wait for business interaction to be personalized, and 76% get frustrated if it does not happen.

Resource: McKinsey

Moreover, personalization helps build long-term client relations. 56% of customers say they will return after having the tailored experience.

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So it’s not surprising that 69% of companies choose to increase investments in personalization tools. They do look like a key to the client’s heart.

But an individual approach has its price, and this price is private information. It is the point when the conflict arises.

Personalization vs Privacy

Personal recommendations are impossible without collecting private data. 

But while customers appreciate personalization, they are not so happy about sharing their names, locations, demographics, browsing histories, and shopping habits.

Scandalous data breaches and personal information misuse cases add fuel to the fire and elevate public concerns about data protection.

Only half of customers trust brands to keep their personal data secure and use it correctly. 82% of customers are unaware of how companies gather and use data, and 64% do not feel in control over their personal information. 

Resource: Ketch

Communicating about data protection policies and building trustworthy relations with customers can be an answer to numerous security concerns.

The 7 Strategies for Enabling Personalization and Building Customer Trust

The world around us becomes more personalized while customers become more demanding. It means only one thing: security concerns will grow with time, and it is impossible to ignore them. How should brands act then? You guessed it right. Investing in customer trust is essential for any responsible business.

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The strategies below answer many disturbing questions and serve as a solid foundation for long-term client relations.

1. Be Transparent About Data

Communicate transparently with your customers from the beginning. I recommend specifying the following:

  • Point out what data you collect, how you will use it, what results you expect to get, and how data usage will benefit your customers;
  • Always mention if data will be shared with third parties; 
  • Do not hide under long reads, use clear and understandable messages; 
  • Notify users about any changes in your data privacy policies;
  • And, of course, always keep your promises.

2. Collect Only What the Required Essentials

Every piece of personal data is a matter of trust, so use information wisely. Ask yourself if this data set will truly enhance customer experience or if you collect it just out of habit. Do not ask for what you do not need.

3. Use Aggregated and Anonymized Data 

Remove personal details and assemble data from many users into summary reports. Then use machine learning tools to uncover insights without compromising privacy.

This approach reduces the amount of personal data your organization stores and adds more confidence to your customer relations.

4. Reward Customers for Sharing

Users may not be willing to give their information for free, but some bonuses can easily fix that. A recent study shows that 80% of consumers are eager to share their data in exchange for deals or offers from brands and retailers. Mutual benefits will certainly do the trick.

5. Give Customers Control 

When collecting private data, always ask for specific and informed consent. It is a good practice to offer several data points for a user to share and an option to withdraw consent if a customer changes their mind. 

6. Develop Your Reputation

To strengthen customer trust, communicate your data privacy principles consistently and continually. Make them a part of your value proposition and inform your customer about measures taken. Let the industry (both your clients and competitors) know you take data privacy seriously.

7. Keep Data Safe

Do what it takes to keep your data secure and private:

  • use strong encryption and two-factor authentication,
  • limit employee access to customer data,
  • conduct regular audits to ensure there are no vulnerabilities,
  • stay up-to-date with data privacy regulations and best practices.

Final Word

It is hard to imagine a fast-growing business without a well-crafted customer experience. And what do modern customers appreciate the most? Yes, you are right, a feeling of being valued. Personalization greatly helps with that.

But here is what: personalized offerings are impossible without collecting a lot of private data, and for that purpose, they require a strong, trustworthy connection between businesses and customers.

Managing data in IT is always a great responsibility because we deal with unique ideas and solutions. The more complex the projects are, the more data they involve and the better data protection they require. That’s why CHI Software has received ISO 27001 certification, proving our highest information security standards. 

Meanwhile, let’s discuss the challenges of balancing data privacy and personalization from your experience. What are your thoughts on this point? Have you already faced data protection challenges?

About the author
Anna Pronina
Anna Pronina Business Development Manager

With over 15 years of banking experience, Anna has the expert ability to figure out efficient and modern IT solutions for her clients.

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