Honesty really is the best policy
But IT professionals are discovering that balancing the power of sophisticated algorithms with consumer rights is about more than avoiding bad publicity or lost sales. These days, it pays to be honest -- literally. "Organizations that are transparent about their use of data will be able to use that as a competitive advantage," predicts Davis. "People are starting to become very interested in what's going on out there with their data, so organizations that have practices in place to share that information ethically are going to be in a much better position to be trusted."
Yet many CIOs and data scientists are struggling with the question of how to derive real value and actionable insights from confidential data while still respecting consumers' rights and even earning their trust. As the store of data grows, and techniques for manipulating data multiply, some IT professionals are taking matters into their own hands with innovative approaches to preventing data abuse.
Retention Science is a perfect example. The Santa Monica, Calif.-based data analytics firm uses predictive algorithms and data such as aggregated household income, purchasing histories and credit scores to help companies predict a customer's purchase probability and build retention-marketing campaigns. In addition to the data supplied by a client, Retention Science also relies on the data it licenses from third-party providers to target the right consumers at the right time.
To create targeted campaigns while still respecting consumer privacy, Retention Science has established hard-and-fast rules governing its use of consumer data. For one, Retention Science refuses to share data across clients. For example, if Gap Inc. were a client, and had supplied Retention Science with consumer data, that information would never be shared -- even anonymously -- with other retail clients.
In another effort to preserve consumer privacy despite handling terabytes of confidential data, Retention Science insists that all of its data scientists, many of whom are professors and researchers, sign confidentiality agreements. "They are not allowed to share or use data anywhere else or for their own publications," says Retention Science CEO Jerry Jao.
In addition to holding its own employees accountable, Retention Science also "works only with businesses that are fully committed to getting their consumers' consent in advance to use their data," says Jao. "We don't want to include information from individuals if they didn't grant access in the first place."
Full cookie disclosure
While setting internal controls can help, you can go a step further by offering consumers a firsthand look at what's known about them. One company that has an open-book policy like that is BlueKai, a Cupertino, Calif.-based vendor that offers a data management platform that marketers and publishers can use to manage and activate data to build targeted marketing campaigns. In 2008, BlueKai decided to launch an online portal where consumers can find out exactly what cookies BlueKai and its partners have been collecting for them, item by item, based on their browsing histories.
Consider, for example, a woman who is shopping online for a red bicycle. As she visits different sporting goods sites that partner with BlueKai, a collection of anonymous cookies is stored on her browser. Based on this browsing history, BlueKai marketing partners will display behavioral ads on the woman's computer that are relevant to her bike-shopping quest.
These days, most online shoppers realize that it's not a coincidence when they see ads that are clearly tied to their browsing histories. But the BlueKai Registry makes the process more transparent, and even allows visitors to opt out of the registry altogether or update their anonymous profiles by changing their preferences.