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Why misusing consumer data is bad for business

20th Nov 2013
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Marketers have long known that treating consumers’ personal data with care has a direct correlation with trust and loyalty but new research has shown the extent that it also affects brands’ profitability.

Latest research from Transactis, based on a survey of more than 1,000 consumers has shown that 63% would spend more money with a company that uses their data to create relevant offers and good service whilst 59% said that they would buy more regularly from that brand.

Additionally, a whopping 70% of those surveyed said that if a company usually makes intelligent use of data to ascertain their preferences and strengthen its relationship with them, then on the rare occasion it makes a mistake, they would be unlikely to take advantage.

Conversely, those brands that send irrelevant information to consumers are likely to lose out with 61% of respondents claiming that they would stop buying from that brand in the future.

And that’s not the only way brands will suffer for clumsy marketing campaigns. The survey found that consumers are more likely to take advantage of such brands with 49% admitting that they would keep an extra item if a retailer delivered two instead of one; 61% would use a discount voucher they were not actually entitled to; 64% would keep a loyalty reward bonus they had not earned; and 72% would keep quiet about TV channels they had not subscribed to.

The new report, which builds on Transactis’ previous studies into consumer trust, showed that consumers feel less guilty about taking advantage of big brands and supermarkets but only a handful are willing to capitalise on mistakes from government organisations and charities.  Just 14% said that they would keep a charity gift sent in error; 25% would retain a tax credit they received by mistake and 17% would not return a wrongly awarded state benefit, the figures showed.

John Sharman, Transactis’ commercial director, said: “This research demonstrates clearly that taking care of a customer’s data and using it to better communicate and serve consumer needs both builds trust in a brand and makes it easier for the company to trust the customer.

“Failure to use data to more efficiently deal with customers not only fosters alienation and dissatisfaction, it actually opens the way to abuses by consumers who see organisations that are not tracking what is going on as careless and ineffective. As a result, they have few qualms about taking an opportunity to keep something they are not entitled to, thus generating hidden costs for the business.

“The survey also makes clear that using data to better tailor, time and target offers and create a more personalised customer experience helps brands to win trust and expand their relationships with consumers – paving the way for cross-selling and up-selling opportunities, as well as further sales. The findings also plainly show that firms that fail to make good use of personal data by sending out badly timed, inappropriate and poorly targeted messages and offers will suffer the consequences, as their customers turn to more efficient competitors.”

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