Small-business owners should proceed with caution when collecting and storing information about customers
The owners of Heartland Soles, a relatively new shoe store in Johnston, have discovered the value of collecting their customers’ basic information and purchase history.
“It’s really helpful for when customers come back, and they really liked their shoe, but they don’t know what it was,” says Jordan Andrews, who opened the store with his wife, Lindsey, about two years ago. “We can look it up.”
The Andrewses collect each customer’s address, email, telephone number, zip code and purchase. The data helps them with inventory, as well as identifying the area from which most of their customers come so they can target communities where they have fewer sales.
Many businesses, particularly those with an online presence, collect data, whether it be about trends in the market, customers’ purchases or even details about competitor companies.
“Data can be collected in more ways than ever before, and there’s more ways being added,” says Rebecca Herold of Des Moines, who is known as The Privacy Professor and has advised people about information security, privacy and compliance issues for more than 25 years.
Marketing experts say there are benefits to business owners who collect their customers’ data, while privacy and security experts agree collection needs to be done thoughtfully with a plan to store and protect all data.
Here are four things to consider when collecting customer data:
1. Should you collect data?
The answer is yes, says Kris Winter, the owner of M2K Marketing Group in Urbandale, though that can be a loaded question with privacy concerns. Winter’s group advises clients on how to collect and use customer data.
“Keeping a record will help you upsell, cross-sell and provide customized director messaging to your customers based on their purchasing needs,” she says. “Gone are the days when you’re just blasting out communication for everybody. People now will rely on, and want, customized information that meets their particular needs and why they’re doing business with you.”
There are very few businesses that don’t collect data or could be collecting it, Herold says.
Even if a business doesn’t think it is, or needs to, collect data, it still is. Any business that accepts money from customers, sends invoices, keeps a record of what it sells, pays employees, purchases equipment or services, and tracks its purchases is collecting data. Data collection comes down to the bottom line for most businesses, says Denny Fisher, a chief strategist who handles cybersecurity issues for Associated Computer Systems Ltd. in
“Most people use it for targeted marketing to determine what products they may or may not sell, to make better decisions and to generate more revenue,” he says.
2. What do you need to collect?
Marketing and business experts suggest business owners collect the following:
• Name and contact information, so the business owner can market directly to the individual with personalized
communication and share information about orders or products.
• Transaction history to learn the customers’ preferences, which products they buy, how often they purchase them
and how much they spend.
• Communication between the business and the customer to track the frequency of communication and the effectiveness of different types of communication.
• Age, gender, profession, incomeand hobbies. This information can help complete a clearer picture of the business’ target customer, so the business can better focus its advertising and marketing efforts. Knowing profession can help with pricing.
• Spending habits such as impulse buys and considered purchases. This can help with the position of products within a store.
• Birthdays, so the business can send texts, cards or even coupons.
At the very least, business owners should at least collect a customer’s name, email address, cell phone and track his or her purchases, Winter says.
3. How do you collect information?
Experts say it’s important customers do not feel harassed for data or be required to fill out long forms, which could discourage them from making a purchase. Collecting information through various methods a little bit at a time can be less intrusive and timeconsuming.
Any business that has a website or social media account also will want to track information about how their customers come to them.
“There’s ways to track how they came to the business,” Winter says. “You know that’s a good channel to you to reach them on and to continue to send messages to them.”
A business owner should use his or her purchasing system or website to track sales, she says. They also can purchase third-party data about consumers that the business owner can cross-reference with their own list to
learn more about a customer’s buying habits. An online purchasing system can help obtain basic information about the customer.
Many websites use “cookies” or web beacons or web bugs to learn more about users. A cookie is a piece of data that is sent to a user’s web browser from a web server and stored on that person’s computer’s hard drive. Web beacons or bugs are 1-by-1 pixels that can relay information from a person’s device back to its source. These provide more insight about the user, although many users have become savvy on blocking cookies.
One of the more common ways businesses gather customers’ information is through loyalty programs or offers to provide coupons and discounts through an email list. This allows the business to track buying habits and then better market itself to the customer, Fisher says.
“Most businesses want more insight as to how their customers are behaving,” he says. “Anything that would give them any type of behavior thing: Where you’re going, what type of card you use, how often do you come to their store?”
A loyalty program or competition also can make a customer feel as though they are getting something in return for giving up some of their personal information. A recent Pew Research Center poll asked Americans about privacy-related questions and found that most weighed the decision on whether to share their information with the value of the benefit they would receive. Many reported they wanted convenient access to information, goods and services, according to Pew, a nonpartisan thinktank in Washington, D.C., that conducts polls, research and analysis about issues, attitudes and trends.
Customer surveys can be helpful to provide the business owner with feedback about the price of the item, how the customer is using it, their satisfaction, the customer’s service/experience and more.
“This is a way to collect more information and help identify the ideal customer,” Winter says.
Most businesses, even small ones, will have a transactional system they use or customer-relationship management software, to track point-of-sale transactions or business-to-business, as well as a website that’ll use
analytics, Fisher says. A database software program can help the business owner better manage data, especially as it becomes more detailed, beyond a Microsoft Excel spreadsheet.
4. What do you do with it?
Businesses can be overwhelmed with data, so it’s important to have an organized system for data collection and to know how it can be used, technology experts advise.
Data can be used to track patterns and other information that can be used to develop a strategic marketing plan.
Heartland Soles uses the data it collects to help it keep track of the top-selling shoes and sizes.
“We have to use that data to determine what shoes people are going to purchase for the next six months,” Andrews says.
The Andrewses also track the zip codes of their customers to see where most live.
“There’s been times when we’re not getting customers from a certain area,” Jordan says. “We’ll get out on the trails and put out water with our logo on it, some fliers.”
He says the marketing must be working because business has grown each month since Heartland Soles opened.
“The more data we get each year, the better we get with our market and how we impact the customers who get to know our brand,” Jordan says.
Business owners should analyze their customers’ purchases to see if there are any commonalities or trends and to send them reminders or information on other services, Winter says.
For example, if a business sells lawnmowers, it may want to reach out to customers who bought a mower every so often for a service reminder. If the business studies its data and discovers customers who purchase
lawnmowers also purchase another item such as a trimmer, they’ll want to reach out to new lawnmower purchasers and try to sell them a trimmer, as well.
“You always want to think in terms of what you can cross-sell or up-sell,” Winter says.
Once a business owner has collected enough data to create a profile of his or her company’s ideal customer, he or she can reach out to similar potential customers for similar products, she says.
Data also can show areas where the business needs to do better. If a former customer hasn’t been to the business or made a purchase in a while, the business owner can see this and reach out to that person. The data also will show if a product isn’t selling or if sales have stalled.
A business’ website analytics can show it how traffic arrives at the site. This can help drive future advertising decisions, Winter says. For example, if a majority of people in the past couple of months have stumbled upon the
business through Facebook, the business owner may place more money into paid Facebook advertisements to reach a specific audience. But business owners should be careful with these marketing decisions as well, as recent reports from Imperva and others show that as much as half of all web traffic isn’t human but rather “bots” that are computer generated and often used fraudulently to boost website traffic. Social media marketing has its flaws as well, which a recent survey by Custard, a British digital marketing company, showed with 75 percent
of users admitting to lying about themselves on social media.
5. How do you keep it safe?
The collection of data is a mostly unregulated area, though that could change with the General Data Protection Regulation that went into effect May 25 in the European Union. Small-business owners should take note.
The GDPR is a data privacy law that protects all European Union citizens from privacy and data breaches. It applies to all companies, regardless of location — this includes U.S. companies that process personal data of EU residents.
The Federal Trade Commission provides business owners with guidelines for securely collecting electronic consumer data with its Fair Information Practice Principles. Businesses that collect customer data need to
privacy claims and policies can be found guilty of deceptive practices and fined by the FTC.
Most states, Iowa included, have data breach notification laws. These laws require businesses and entities to notify affected individuals if there is an unauthorized disclosure of certain personal information that includes the person’s name and social security number, driver’s license number, financial account number, medical information, insurance information, date of birth, mother’s maiden name or DNA. This can vary by state, and there are provisions regarding the type of breach and whether the information was encrypted.
The FTC acknowledges that companies have personal information and recommends they safeguard that information with a sound data security plan. It also recommends that businesses don’t collect or keep any sensitive personally identifying information that does not have a legitimate business purpose and is not integral to the business’ products and services.
Any business security plan should address what the business will do in the case of a security breach, Fisher says. This will include how the customer or client will be notified of a breach, as well as how the company will
address a breach with the media, vendors and others who are involved.
The more businesses prove they can keep data private, the more willing customers will be to share their personal information, Fisher says. Consumers should ensure businesses are compliant with the laws and regulations for
their industry and that they have a layered security policy in place that includes encryption of data and restrictions and monitoring of access to data. The policy also needs to have a plan in case there is a breach, he says.
Any data, especially customer data, needs to be kept private and safe, Winter says, adding that she advises her clients to work with information technology experts to ensure that have a secure system. Even so, data storage is susceptible to hacking, as many businesses large and small have learned the hard way.
More customers are starting to question what their data is being used for and how it’s stored. Winter says it’s also a good move for business owners to tell customers that they do not sell their personal information to third parties.
“People feel more comfortable if someone has a plan,” Fisher says. “Then they can make a choice if they want to continue (to do business) if there is a breach.” ♦