The Customer Information Backlash

The Customer Information Backlash

The customer information party is over. Customers are tired of giving up their personal information only to have it used without their knowledge in ways that don't offer them any benefit. Smart companies are going to start giving customers their information back. All of it. In a format that lets customers share their information not only with you, but with your divisions-even your competitors.

Heresy? Try survival in the Internet economy. As the thrill and novelty of doing business on the Web wear off, customers are beginning to chafe at the amount of information demanded by the Web sites they visit.

The backlash has been a long time coming. The Internet is to a marketer what a CAT scanner is to a doctor. It enables the pitchmen to examine the brain without opening the cranium-observing how customers act in online shopping environments, in real-time. The dynasties of, Yahoo, Lands' End, and many other Internet companies were built on the bedrock of knowing their customers' search patterns and desires better than their brick-and-mortar competitors did. Investors are willing to give these upstarts hundreds or even thousands of dollars per subscriber-adding up to billions in market capital-because they know so much about their customer base.

Marketers use this information to create environments that are driven by customer demand. W.W. Grainger, for example, the $4.3 billion maintenance, repair and operating supplies distributor based in Lake Forest, Ill., has seen its sales per order double (from $125 to $250) since customers started buying on the Web site ( In return for the information customers give Grainger, Grainger tailors its search tools to help them find products easily using their particular industry's jargon. The result is happier customers who spend more.

But will this giveaway of customer data continue? I doubt it. Customers are beginning to realise that their information and navigation patterns and buying preferences are valuable assets. If the capital markets are giving Yahoo $1,000 per subscriber, customers will ask, "Why can't I take my file of my behavior and preferences and sell it to the highest bidder?"

To date, Net merchants will not allow you to take your information with you. You can ask for a list of what you have bought, but it is in such a cumbersome form as to be useless. The result is that each time a consumer wants customisation, he or she must teach the merchant by indicating each individual preference. Some sites have begun to pay people for their participation, but customers must continually reenter the data and demonstrate their preferences through interaction with each site, rather than simply being able to box up that information once and ship it to different sites when needed.

And how many times do customers need to prove that they are worthy of a good credit rating? On eBay's Web site (www., for example, other buyers and sellers rate your reliability and quality as a buyer and seller. Do you pay on time? Do you represent your goods and services correctly? Reputation is obviously very important in that online community. However, there is no way to take your good reputation with you to other auction sites.

Laying the Groundwork

New entrants to the market are just beginning to solve this problem. Startup company PrivaSeek, lets you register once and then determine how much of your data you want to share with the different Web sites that have signed up to participate in the program. Customers have "Personas," which are kept at PrivaSeek's Web site ( Then, when they visit a participating commerce site, they push one button to fill in the information needed by the site. This is the first step in giving control to customers.

The natural next step is giving customers control over their buying power. A San Mateo, Calif., startup,, allows users to register and then negotiate with sellers for the best price. When you go to the site, you get a list of suppliers that are willing to sell you the item and their prices for it. You then state your price, and the sellers get the chance to meet it-either in real-time or via e-mail. The site keeps track of your buying behavior and displays it when you begin negotiating. If a seller meets your price and you accept, your "reputation" (a numerical rating) improves-perhaps leading to lower prices the next time you negotiate. In this process, you're profiting from your own buying profile.

Companies that give their customers' information back now-before the infomediaries establish critical mass-will reap many benefits besides happy customers. Imagine data maintenance done by the customer. Imagine the time and money saved by not having to sort through legacy databases that contain four names for the same customer. That work is all done gladly by the customers, if it means they will get less egregiously ill-suited junk mail and fewer telemarketing calls at dinnertime.

A standardized format for entering information also means customers will be able to customise their preferences much easier when dealing with different companies. Standardized data sharing means you can invest in more customization on your Web site because so many more potential customers will be able to access the features you build into the site.

What's Yours Is Mine

Some powerful forces are holding back the move to open preference, however. The "if it ain't broke, don't fix it" argument will be a popular response from most marketing honchos. Worse, legacy systems that contain the data are often challenging to work with. And privacy concerns must be dealt with carefully so that customers' behaviors are not shipped out against their will. Yet it is possible to navigate these murky waters to create strategic advantage. For example, Citigroup, formerly Traveler's Group and Citicorp, first gave its customers the ability to download credit card transactions through Quicken in the early 1990s. The feature proved so popular that most credit card companies now offer the service through Quicken, whose standard information format has become a magnet for both banks and their customers. That was just the beginning.

CIOs are the senior executives who best understand the power of open systems. They know that's why the Internet became popular in the first place. It is vital to let your colleagues know that allowing customers to own their personal behavior does not mean losing them to competitors. It will create a new and deeper relationship. Companies that open up to customers-and have the effective, efficient business processes to execute the orders-will get more of them. The only thing lost will be the illusion of control.

John J. Sviokla, a former Harvard Business School professor, leads the digital strategy practice at Diamond Technology Partners. Will you give your customers' information back to them? Tell us at

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More about Amazon.comCiticorpCitigroupDiamond Technology PartnerseBayGraingerHarvard Business SchoolPrivaSeekQuickenYahoo

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