InformationWeek

Analysts and businesses agree that, used correctly, such information can improve customers' buying experiences. They say that if customers trust a given company, they don't mind sharing personal data. "If the retailer has a long-standing relationship with customers and has established a high level of trust, the [privacy] issues are less of a concern," says Ken Robb, VP of marketing for Brodbeck Enterprises Inc., a grocery store chain in Plattesville, Wis.

Trust is critical, but so is the customer's sense that he or she is getting something back for the information being given up. Brodbeck Enterprises, for example, gathers point-of-sale data from customers enrolled in its frequent-shoppers club, then rewards faithful, profitable customers with coupons and other offers tailored for them. "If companies collect information and do something that benefits the customer, they'll distinguish themselves," says David Halek, consumer research director for consulting firm Peppers and Rogers Group.

"We're working on learning about our customers and building 'sticky' relationships," says Tony LaCivita, director of customer experience and enterprise customer management at General Motors Corp. "Because we're making it easier for the customer, the switching costs become way too high." Information gained from one of GM's many businesses can be used to flesh out the customer's profile in other areas. If, for example, a customer specifies that GM's OnStar navigational and content system track all hockey scores, GM could recommend the most-appropriate sports channels if and when the customer buys GM's DirecTV service. GM's Pontiac division sends customers personalized magazines based on the age of their car. And since GM knows when its customers typically dispose of their cars, it can offer information to those owners on how to sell a Pontiac when they're ready to do so.

Most companies remain mindful of the privacy issue, but the line between interest and invasion can be blurry. "You don't want to be invasive, but we want to have the data that serves the customer's needs, wants, and desires," says Greg Stahl, Mitsubishi Motor Sales of America Inc.'s manager of E-commerce initiatives and director of retail development in Cypress, Calif. Mitsubishi contacts customers only the way they want to be contacted. If a customer says he prefers E-mail, for example, Mitsubishi won't call or send a letter in the mail.

Customers often don't mind when companies they frequent gather and use personal data. But they don't like it when businesses turn that data over to marketers, who often turn that data into "spam," or unwanted E-mail or junk mail. That's why many businesses refuse to share the information they collect. GM has huge amounts of data coming in from its many businesses--automotive sales and service, GMAC financial services, DirecTV, Web sites, and OnStar. But the automaker is the only organization that sees that information, executives say. "It's treated like our own W2s. We don't volunteer it to anyone who doesn't need to know," LaCivita says.

GM also tries to gather information only when its customers give their OK. For example, when customers call in to request information on a stock, the operator asks whether they want that data recorded in their profile. If not, it's not entered.

American Airlines Inc. is also careful about the way it uses customer information. It won't sell customers' names or personal data, and it makes sure that its employees know what the limits are for using that data. The airline has just updated its privacy policy, which is printed in materials for all new hires--E-mail sent to customers must be from campaigns for which the customer has signed up. While American can track information from its customers' flight and credit-card activity, it prefers to ask for it outright via frequent customer surveys.

Flower retailer 1-800-Flowers.com Inc. has strict privacy policies as well. But the best thing a business can do, says Joe Hage, VP of marketing at the Westbury, N.Y., company, is to make it clear to customers why they're receiving the marketing messages they are. "As long as the communication is anticipated, relevant, and personal, customers are willing to give up information about their lives," he says. And that can help everyone involved.