Go back to Blog
By demonstrating a commitment to keeping customer personal information safe and secure, companies can foster a culture of trust and transparency that sets them apart from the competition. It is a way to build a solid foundation for fruitful collaboration with consumers and mitigate the risks of data breaches and cyber threats which may appear at any time. Therefore, personal data security should be a top priority for organisations aiming to create an exceptional Customer Experience (CX) that leaves lasting impressions.
Effective data protection policies and tools allow constant compliance with up-to-date legal regulations. Feeling that their private information is secure with a company can increase buyers’ confidence and loyalty significantly. This can lead to better retention, high brand perception, positive word-of-mouth marketing and revenue growth. However, the biggest challenge of the initiative is effectively balancing security, privacy, and CX empowerment.
This article explores the critical relationship between data protection and Customer Experience and highlights the importance of safeguarding personal information and the benefits it brings to businesses.
The data needed to empower Customer Experience
In today’s digital era, many companies include virtual channels to engage with consumers through diverse touchpoints to reach wider audiences and increase efficiency. Online interactions enable businesses to collect and process large amounts of buyers’ data and then use them to generate valuable insights into customers’ behaviour and preferences. Such a data-driven CX strategy creates the opportunity better to understand individuals’ pain points, needs and interests. It allows businesses to move beyond just handling customer requests and complaints and provides them with personalised experiences and tailored communication.
Different types of data used in the CX strategy
Organisations usually collect different types of personal data depending on the nature of their business, industry, and purpose. The most common and frequently gathered information refers to contact details, such as name, e-mail address, phone number, or physical address. This data is essential regarding operational issues when a consumer makes an order, selects a shipment, or provides payment details.
Along with contact information, companies collect and utilise:
- demographic data, such as age, gender, or location,
- behavioural data, such as purchase history or product usage patterns,
- interaction data, such as website usage or social media activities,
- preference data, such as types of selected products or services or the most favourable communication channels.
Personal information can be collected in many ways, for instance, through online forms, website cookies, surveys and questionnaires, customer accounts or publicly available sources.
Data management standards and regulations
Several regulations oblige businesses to comply with data protection. Although they have different scopes and applicability, they all aim to safeguard the privacy and personal information while allowing companies to ensure transparency and accountability regarding their data processing activities.
Some of the major international standards and regulations are:
- The General Data Protection Regulation (GDPR), provides a framework for collecting, using and transferring personal data within the European Union and affects any company that processes the EU resident’s data.
- The APEC Cross-Border Privacy Rules System (CBPR), is a voluntary, accountability-based system facilitating privacy-respecting data flows among the economies included in the Asia-Pacific Economic Cooperation (APEC).
In addition, many countries worldwide have legislation to protect personal information within their national borders. For example, it refers to countries such as Australia, Brazil, Canada, France, India, Italy, Japan, South Korea, the United Kingdom, the United States, and many others.
The impact of data protection regulations on Customer Experience
An overall CX strategy can have positive or negative implications, depending on whether the company adheres to data protection regulations. Compliance with data privacy laws helps to attract consumers and build strong and long-lasting relationships with them. On the other hand, non-compliance can result in data breaches or misuse and have severe consequences for the organisation and its customers. Below are the most potential benefits and risks associated with an overall CX strategy that follows data protection regulations:
Compliance with data protection regulations enables to build of an excellent Customer Experience and brings benefits such as:
Non-compliance with data protection regulations contributes to a poor Customer Experience while creating the risks like:
Promoting a safe, enjoyable, and satisfying Consumer Experience across all touchpoints to ensure a positive brand perception.
Damage to the company’s reputation and unfavourable brand perception resulted in the organisation’s demise in the most severe circumstances.
Making customers dedicated advocates of a trustworthy and responsible company while encouraging them to repeat purchases.
Creating an environment that generates insecurity and mistrust among individuals, which leads to increased attrition rates and a decline in revenue.
Reducing the risk of cybercrimes and other security incidents that could harm buyers, and a company, in various unpleasant ways.
Data breaches or theft may harm buyers significantly and, in some critical situations, result in financial losses, compromised identities, and damaged reputations.
A better understanding of customer needs and preferences based on data, which, in turn, allows for more targeted and compelling experiences.
Loss of business opportunities to boost Customer Experience.
It is a necessity to make an investment in security measures, which helps to avoid significant financial losses and legal liabilities.
Legal action taken by affected customers, administrative sanctions, and penalties. One of the examples is a fine resulting from GDPR violations, which include fines of up to 4% of a company’s global annual revenue or £17.5 million. **
The importance of data protection in providing exceptional Customer Experience is indisputable, as most consumers are aware of the risks associated with sharing personal information online and are increasingly concerned about how their data is being used.
According to a survey of 1,000 North Americans conducted by McKinsey*, consumers are becoming increasingly intentional about what types of data they share and with whom. However, they are still willing to provide the information necessary to interact with an organisation. A McKinsey analysis found that 82% of consumers would avoid a company with security concerns, and 72% would stop doing business if they shared sensitive data without permission.
Transforming Customer Experience with data-driven hyper-personalisation
Hyper-personalisation is a powerful tool for companies eager to create exceptional Customer Experience by addressing individual needs in a tailored manner. The approach allows for a comprehensive understanding of customers’ behaviours and expectations based on the power of consumer data an organisation generates and processes daily. As a result, it helps businesses to raise consumers’ satisfaction, increase their emotional engagement and attach them to the brand for many years while meeting their expectations on a personal level.
With hyper-personalisation, companies can customise communication, marketing, and customer support, which can be achieved through appropriate addressing, language use, and timing. In addition, companies can gain more relevant insights into customer needs and preferences when enriching datasets with buyers’ data using the Voice of the Customer metrics. These refer to solutions such as Customer Satisfaction Score (CSAS), Net Promoter Score (NPS), or Customer Effort Score (CES). More than that, such AI technologies as machine learning, deep learning, and natural language processing can improve customer data analysis while enabling more informed decisions to boost CX strategy even more.
Last, it is worth remembering that implementing hyper-personalisation involves investing in the right resources, making organisational changes, and acquiring skilled talent. But when these components are in place, the payoff can include increased sales, higher CSAT and CES scores, and a strengthened brand reputation.
Balancing between data security and privacy and CX empowerment
Protecting customer data is crucial for companies seeking to provide the best possible experiences for consumers. However, balancing data security, privacy, and CX empowerment can be challenging, especially in today’s digital landscape and competitive environment.
Primarily, businesses must identify the necessity to protect their customers’ data. This decision may influence restrictions regarding the amount of collected information and bring some limitations of personalisation which can deviate from the desired CX level and may require additional resources to implement effective security measures.
On the other hand, companies that prioritise CX empowerment over data protection are more willing to gather and use as much customer data as possible and generate deep insights into their preferences. This approach can lead to a more tailored and effective CX, but it also carries risks, such as potential data breaches, misuse of data, and loss of customer trust.
Therefore, companies should compromise while smartly and carefully balancing their overall CX goals with data protection policies and strategies. This involves the necessity to:
- Implement robust security measures, such as encryption algorithms to protect sensitive information, conduct frequent security audits and vulnerability assessments, and use multi-factor authentication to verify everyone’s identity.
- Limit data collection to the minimum necessary, avoid invasive data-driven profiling and anonymise data wherever possible.
- Have clear policies for handling personal data, treat customers equally, and be honest and transparent about data usage and sharing.
- Always ask for explicit consent for data collection, storage, and processing, as well as provide customers with information about the data collected and access to modify and delete it, if needed.
- Restrict data usage to customer data exclusively, without incorporating any third-party information.
- Review privacy policies regularly and stay informed about changes in data protection regulations.
“Consumer data is a significant aspect of developing an engaging customer experience. Businesses need to know how to balance the collection of that data and create better customer interactions.” (Source: Forbes, Balancing Customer Privacy and Customer Experience: 12 Proven Methods)
The role of BPO (Business Process Outsourcing) providers in Customer Experience data management
Selecting a third-party company to handle Customer Experience can be the right solution for organisations with limited resources or expertise. By entrusting process management to a BPO provider, a company can boost the efficiency of CX operations without incurring significant investments in in-house resources and technology. Outsourcing can help the organisation to elevate the quality of Customer Experience, avoid becoming overwhelmed by day-to-day responsibilities, and focus on more strategic initiatives.
When evaluating a potential BPO provider, it is crucial to consider a few factors. The most critical are teams’ quality and language skills, ability to scale services, access to relevant domain knowledge, geographical coverage, innovative technologies, flagship partnership and a budget-friendly framework.
Moreover, outsourcing can be a favourable option for organisations that operate globally or plan to expand to different countries or regions with varying authorities and data protection laws. By partnering with a BPO provider having a global presence and expertise in navigating different legal environments, companies can ensure compliance with local regulations while maintaining a consistent and high-quality customer experience across all markets.
Summary
In conclusion, the empowerment of Customer Experience can only be achieved with relevant consumer data. However, CX strategy and care for personal information security are closely intertwined. When one is compromised, the other is negatively impacted as well. This highlights the significant impact of data protection regulations on Customer Experience, which must be appropriately addressed. Any compromise in data safety can have severe repercussions, including legal and reputational damages, leading to declining customer trust and loyalty.
” In a highly competitive market, companies must strive to differentiate themselves and create a holistic and positive impression of their brand for consumers. One practical option is offering individual care to everyone. To do so, organisations collect comprehensive data from various sources and subject it to thorough analysis. This is a challenge to protect data privacy and safety. Neglecting this responsibility can result in significant legal and reputational harm,” – said Iulian Bacain, Sales, and Marketing VP at Conectys.
What is worth remembering?
Fueling Customer Experience with personal data helps companies to influence consumers better.
The challenges associated with data processing have become apparent.
The widespread use of data without proper protection measures can undermine the Customer Experience.
By demonstrating a commitment to protecting the privacy and personal data, a company can win the hearts of consumers.
The right balance between data-driven Customer Experience and law regulation compliance must be found.
With BPO provider support, compliance with various regulations can be ensured while maintaining a high-quality Customer Experience across markets.
* Source: McKinsey ‘The consumer-data opportunity and the privacy imperative taking a thoughtful approach to data management’ (2020).
** Source: GDPR Advisor ‘What is GDPR? Everything You Need to Know.”
