Personalization vs: Privacy: How Does a Subscription Retail SMB Win the Battle?
Can subscription retail SMBs strike the right balance between personalization and privacy? Personalization is essential to subscription customer CX and results in more loyalty, higher sales and reduced churn. But problems like data breaches and falling short of regulations like GDPR and CCPA are costly. This article talks through both sides and reveals what SMBs must do to get the best of both worlds.
In this article:
A subscription retail SMB needs to grab every opportunity to stand out and differentiate itself.
One of the options that some SMBs choose is giving a personalized experience to their potential and existing customer base. Personalization can be used in anything from marketing to offerings to terms and payment methods.
Though it’s great for the customer, there is a downside. It brings privacy concerns. And subscription retail SMBs must understand the privacy challenge to figure out how to strike a balance.
Without it, they stand to lose both financially and legally.
This article will explore all the issues around the personalization vs. privacy debate, and how it impacts SMBs. It will also give insights on how subscription retail SMBs can enjoy the benefits of both.
What is Personalization?
Personalization is the process of harvesting and analyzing information from customer data to create experiences that are tailored to each individual customer.
It involves data points including:
- Website/platform usage: What type of devices they used which features are most appealing, how they navigate the site, what repels them, etc.
- Demographics: Age, income, gender, culture, geographical location, family info, etc.
- Behavioral data: Purchase patterns, browsing history, what they engage with and what they avoid, preferred subscriptions and terms, etc.
- Time data: Seasonal info, active times of day, preferred days of the week, etc.
- Psychographic data: Customer interests, lifestyle preferences, and even emotional triggers.
Platforms then take the information, analyze it, and create a unique experience for each customer.
We’ve all experienced this process as customers.
- Received an email from a business that has your name on it?
- Get products tailored to your likes on a website?
- Ever abandon a shopping cart, then get a message that gives you a discount for all the items in the cart?
- Get an offer to re-buy something you’ve bought in the past?
- See products that you did some research on earlier in the week?
That’s all personalization. And customers want and love it.
81% of customers prefer companies that offer a personalized experience. -Forbes
Customers are far more likely to engage with brands that give them the personalized touch that’s unique to them. This gives subscription retail SMBs a huge opportunity to build that long-term relationship that they need for success.
When personalization is used in the right way, it brings some incredible benefits to subscription retailers:
- Better Customer Lifetime Value: Running a subscription model demands long-term customer relationships. Retention is absolutely essential because it’s easier to sell to existing customers. They also spend more money.
- Better sales: Because the offerings, pricing and terms are personalized to what each customer wants and doesn’t want, the sales cycle is shorter. And as a retailer gets to know subscribers more, add-ons and cross-selling are more successful because they align with each customer’s preferences at the optimum time. So you’ll eliminate your lost sales opportunities.
- Better customer CX and loyalty: It’s not just about the CLV. It’s about what comes with a meaningful customer experience. Tailored loyalty and bonus programs further reward the customer and build the emotional bond with your brand. And happy customers become brand ambassadors. They tell other people through comments, message boards, content, and word-of-mouth in person too.
- Differentiation: Retail is so competitive; any advantage helps. When subscription retail SMBs show that they understand their audience’s needs every step of the way, they immediately set themselves apart from retailers that refuse to offer personalization.
- Less churn: When customers are engaged and get value from their subscriptions, they’ll stick around. Churn is extremely high in retail. Customers bounce all the time, for the smallest reasons, so it’s important to cut any reasons for them to leave.
And that’s not all personalization does. Personalization brings benefits to customers too:
- It saves time and effort: Customers who sign up for personalized subscriptions see the terms and products that are relevant to them. They don’t have to spend time searching for the best prices or something more appealing elsewhere. They’ve already got it right in front of them, when they need it, for the price they’re willing to pay.
- Better engagement: When customers feel more attached to a brand, they’ll engage more. They’ll offer feedback. They’ll make suggestions. They’ll seek your brand out more often. They’re invested in your future because you make their present so much more pleasant.
- Feeling valued: Customers are bombarded with a million adverts and messages a day. Most of them are generic, and tossed out to the world hoping something will stick. That’s not how customers want to be treated. They want to be valued, not used.
Businesses have jumped on the data-driven personalization bandwagon because it makes good sense.
But there’s a downside. Some businesses do questionable or unethical things with their customer data, like selling it on to other companies that have less respect for the data. Or hackers break into systems and cause dangerous data leaks.
And this creates serious privacy issues.
What is Privacy?
Privacy is not the use of customer data, but the protection of it.
Privacy involves businesses not only taking steps to protect data but being completely transparent about how they collect and use the data.
They also give customers the option of controlling whether their data is collected, and what can and cannot be done with it.
Over 120 countries around the world have regulations that deal with customer data. The General Data Protection Regulation (GDPR) laws in Europe and the California Consumer Privacy Act (CCPA) in the U.S. are just two examples of strict rules that govern how personal data must be handled.
When those rules are broken, there are steep penalties and potential lawsuits. And customers can completely lose trust in a brand overnight. So it’s a serious issue, even for the smallest subscription retail SMB.
Let’s look at some of the specifics of ignoring privacy practices and regulations:
- Legal compliance: Data protection laws aren’t flexible or open to interpretation. They’re strict and if you fall out of compliance, it can cripple you financially. For example, if you breach GDPR rules in Europe, you’re liable for up to €20 million or 4% of your annual global turnover—whichever is higher.
- Vulnerability to data breaches and mass lawsuits: New reports on cyberattacks are a daily occurrence, even for big corporations. And SMBs that don’t prioritize their security are at clear risk of being targeted. The cost of a breach (both in fines and customer lawsuits) can be in the millions.
- Trust erosion and churn: As soon as current or potential customers catch wind that your brand is not to be trusted with their data, they’ll leave for your competition. Why would they stay? Customers are risk averse just like businesses are.
- Reputation: As an SMB, your reputation is everything. But customers spread the word about bad brands they don’t like. And legal problems always end up public, which your competitors can latch onto and exploit. On top of that, your reputation as investible might be damaged for good too.
Understanding why they want privacy guarded simply reframes everything into what you can gain, and another level that you can give them that some of your competitors aren’t.
Customers expect to be able to control their data.
- To have the ability to opt-out of cookies and data collection.
- To veto what it’s used for.
- To say no to marketing from your business or others.
- To be able to rescind access to data after permission has already been previously given.
They don’t want the anxiety, financial loss, and legal exposure that a hack and breach brings either. Customers look for trustworthiness and transparency. They want to be told the truth about how their data is used.
But here’s the twist. Knowing what both personalization and privacy are, as well as all the issues that surround them, leaves the subscription retail SMB in a precarious position.
Where to go from here, armed with this privacy vs. personalization conuundrum?
Can Retail Subscription SMBs Give Privacy and Personalization?
Is the privacy vs. personalized issue a zero-sum game? Is it all or nothing for SMBs?
The answer is a resounding no! Subscription retailers and their customers can enjoy both. It’s just about finding the right balance.
Given that we work with subscription retailers, we understand what’s needed to get the most from data, but to protect businesses and their customers from those very real data privacy challenges.
First, it helps to be transparent with your customers from the beginning. Be clear about what data you’re using and how you’re using it. This includes more questionable practices like selling data to third parties.
There is no obligation for you to collect every single piece of data that’s out there. You can be selective too. Which data gives you and your customer the most value? What is the smallest amount of data you need to extract the most value necessary to effectively personalize?
Secure the data with encryption techniques. They will be built into better software and platforms. Keep a running order of the steps you’ve taken to guard data privacy and protection too.
Give your customers control over their data too. Let them manage their data preferences. The most common way of doing this is through pop-ups, dedicated data pages where customers can customize their choices, and tick boxes that must be completed to ensure customers read what’s involved.
And always create a clear and effortless process that allows your customers to change their minds about data access and use.
Get It All With One Solution
If you want to get the best of both worlds without costing you more of your time and resources, you need a good subscription management solution that takes care of this for you.
Here’s what you get with the right solution:
It collects the right data while installing strict privacy protection. For example, your solution can gather demographic and financial information to segment customers and create individual offerings without using the most sensitive information. This gives you the personalization you’re after without violating privacy.
Automatic compliance with something as important as data safety and privacy can feel like a dream. But it’s a reality! There are built-in compliance tools that take into account relevant data laws. The process works automatically. Nothing slips into the cracks.
Because the best subscription management platforms provide dashboards and self-service portals, you can make all data information readily available whenever your customer wants to access it.
You can even show how it’s being used and how it feeds into their personalization process. Free-flowing, reliable information builds trust.
Your customers will be happier. Not only are they privy to clear, accurate information about their data, but they know what it’s for. They’re more secure and not worrying about the security of their data either. Plus they’re getting the personalized experience!
That’s better satisfaction, higher incidence of loyalty, better brand reputation, and higher customer lifetime value.
And – bonus – the right solution also brings you end-to-end subscription management to save you time and resources, while boosting your revenue while you scale.
Conclusion
Privacy and personalization shouldn’t be an either/or.
They are both absolutely essential. And they’re both absolutely accessible. You just need the right solution.
If you’re curious about how easily you can get the benefits of both, why not book a free Discovery Call with our team today.
Let’s chat further.
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