Think Before You Buy (Buyers) -
Think Before You Sell Customer Data (Vendors)
I read two disturbing articles this week about how companies are (mis)using customer data.
In one piece (see "Siemens Seeks Protection For Corporate Travel Data", 6/16/2008, Business Travel News), a Siemens executive was surprised to learn during a RFP process for hotel rooms that 'nonpreferred hoteliers contacted Siemens commodity specialists to ask about gaining more of their business armed with the number of room nights Siemens booked in the hotels' zip code."
In particular, this executive was concerned that a third party had and was selling this information and this information could be used by competitors and others to gain special inside information. For example, with the right programs and analysis, a competitor could detect changes in travel patterns that could tip off competitors to: potential acquisitions, potential new client acquisitions, potential sales, etc. Worse, competitors should not know the movements of their employees.
While the legality of these data sales is unknown, the fact remains that information about what your employees buy, sell, the prescriptions they take, the insurance claims they file and the even the web sites they surf can be bought and sold by third parties and your firm might not be able to do anything about it if it even knew it was occurring.
Siemens, understandably, wants the firms selling this information to aggregate it with other firms but it may not succeed in getting this done.
In another article in BusinessWeek (see "Your Lifestyle May Hurt Your Credit", June 30, 2008), Jessica Silver-Greenberg wrote about an FTC case against credit card issuer CompuCredit. The gist of the article discusses how credit scoring activities are using factors other than payment history to raise/lower your credit scores. Specifically, credit card issuers may be looking at what you buy (i.e., buying behavior patterns).
The FTC is investigating whether firms are cutting credit lines to people who frequent marriage counselors, massage parlors and other establishments. Boy, cash is looking better and better these days.
At the heart of both situations is the unintended consequence or misuse of transaction data. When businesses sell their customer lists (a la mailing lists), they may do so to monetize an asset they own but they also destroy the relationship and confidence customers have with them. Once this list is sold, it can be re-sold, modified, etc. through numerous other information brokers and the original customer is bombarded with junk mail, solicitations, etc. If you really don't give a damn about your customers, then go ahead and sell their contact data.
If you really don't care about your customers, then sell their transaction data. Tell the world who rented that risque video, who eats out every night of the week, who consistently overpaid for their automobiles, who clips coupons, who bought a pregnancy test, who browsed for adoption sites online, etc.
We do not have even the appearance of privacy rights in the digital world and we won't until someone or some firm is heinously violated by some neer-do-well who uses this information that should have remained private all along.
Ethically, businesses must ask themselves if they'd want their data sold to others the way the do. If ethics always trumped the pursuit of cash, we wouldn't have this problem. We've got a privacy trainwreck underway and, as a consumer, I can't wait to see someone sue the living daylights out of a firm that betrayed their confidence.
Until then...
