Consumer Privacy: Regulations and Ethics:

Consumer Privacy: Regulations and Ethics: Judging Privacy Concerns and Protections

Consumer Privacy and Data Mining:

Ethical Implications for Marketers in the 21st Century

The ethical implications of using customer data have become more paradoxical and challenging than ever before for marketers globally. The continual convergence of data analytics, aggregation, content analysis and modeling has given marketers the ability to know more about consumers than ever in the past. The act of opting in or opting out by consumers is today incidental to all the other data that is captured on them through advanced aggregation and analysis techniques. The need for creating more effective ethical guidelines to protect the identity of consumers is needed as analytics, aggregation and data mining techniques continue to accelerate in terms of their ability to define the identities of individual customers through interpolation alone (Wen-Yu, 2012). The continual improvements in analytics, data mining, advanced techniques of latent semantic indexing (LSI) and textual analysis all give marketers the ability to gain greater insights not only into buying behavior but intentions as well (Kiron, 2012). As these systems of record from a buyer behavior and intention standpoint are continually refined, there is a corresponding need for greater precision in the definition of regulations, ethics, consumer privacy, and online marketing practices that protect the right of consumers while giving marketers the opportunity to refine and improve their strategies as well. What's needed is a balance of ethics and disclosure relative to the performance these new applications can provide. Defining the spectrum of compliance to ethical standards to marketer's freedoms is also addressed.

Foundational Elements of Consumer Privacy and Data Mining

As the variety and depth of complexity that automation, analytics and marketing automation tools increases, so does the ability of marketers to lift back the veil of consumers' lives. The rise of digital marketing has led to the ability of marketers to personalize their messaging, promotional strategies and lifetime customer relationship programs individually to each consumer (Bose, Chen, 2009). In so doing, marketers motivate consumers to provide an abundance of their personal information through various opt-in approaches and methods. For the marketer the outcomes of these efforts are a comprehensive and complete customer system of record that can easily be used for planning and executing highly targeted campaigns. These campaigns, using data beyond opt in scope and having an exceptional amount of personal data within them, can easily cross ethical boundaries in how they are used. Add in the fact that many marketing services companies will sell this data and the ethical implications become even more pronounced (Payne, Trumbach, 2009).

Regulatory controls on digital marketing are nascent and fail to deliver the full level of protection for consumer privacy they had originally been created to accomplish. The regulation of consumer privacy has been more oriented towards the protecting of digital identities of consumers from being resold by credit card companies or credit reporting bureaus (Samuelson, 2012). Regulators for the most part have left marketing services providers out of the regulatory and compliance process, due to the fact that the myriad of approaches marketers take to implementing customer identity management are too varied to monitor. Further, an enforcement process has not been defined for individual marketers, leaving them free to create their own approaches to defining how customer data will be used. With no specific oversight of how marketers are implementing the many strategies they plan, execute and track, regulators have been hesitant to attempt to regulator the software applications, data analysis and statistical modeling tools in use today (Kiron, 2012). That would involve creating an entirely new branch of regulatory compliance; one that would also need to include all industries and all types of consumer data. As a result of this depth of complexity, marketers will continue to be able to use this data without regulatory compliance being an issue for them. This leaves the consumer at a disadvantage and also indicates how critical it is for consumers to guard their information closely. As studies have shown, the tendency of marketers, given this lack of regulatory oversight, is to use the data as much as they can for their own advantage without regard to consumer's interests or needs (Pratt. Conger, 2009). Without regulatory oversight, consumers must be vigilant as to which companies are collecting their data and why, and exercise opt-out as much as possible as their data will often be sold to marketing database companies who can create a very accurate picture of who they are based on data alone (Kiron, 2012).

The second aspect of consumer privacy is the issue of ethics. Marketers have long been able to extend beyond the boundaries of ethical behavior by simply not reporting their activities, or worse, shielding them from public view. The ethics of marketing continue to be centered on what is most expedient for the marketer, not necessary what is best for the customer (Kaiser, Bodendorf, 2012). Marketers therefore have long had a credibility problem when it comes to the issue of their ethics and how they treat customers' data, often as their own asset first and the customers' second (Samuelson, 2012). This extends to all aspects of analytics, data mining and textual analysis that are being used today to analyze individual customers based on their social media posts to Facebook, Twitter and other social media websites (Samuelson, 2012). The use of advanced technologies aren't necessarily unethical, yet the combining of all publically-available data and personal data gleaned from Facebook accounts made accessible through a customers' enrolling on a brands' fan page is (Kaiser, Bodendorf, 2012). Leading consumer brands are using a technique called Latent Semantic Indexing (LSI) to glean all available data from all public and private social media and website forums to gain a complete of a picture of customers as possible (Samuelson, 2012). Facebook was the pioneer of this concept with their infamous Beacon technology that tracked their subscribers even after they left the site and reporting on what they clicked on, purchased and showed interest in (Mitrano, 2008). Facebook never told the subset of subscribers they had that they were doing this; instead they just rolled it out in beta test and only after a Facebook subscriber saw an ad for the exact same ring he was looking at giving to his fiance for their engagement did it become uncovered. The fiance was also show ads for the same ring. The surprise of the proposal for marriage was ruined because of Facebook not respecting the privacy of these two subscribers, who had never opted in to the Beacon technology they were using in the first place. This and many other examples led to the beacon technology being cancelled and Facebook apologizing for its mistake. While not illegal it was clearly unethical for Facebook to engage their existing customer base in tests without their knowledge (Mitrano, 2008). Clearly this activity by Facebook is at the opposing end of the spectrum of compliance that was mentioned earlier in this analysis. Facebook regularly attempts to push the boundaries of this spectrum of compliance, looking to gain competitive advantage through their intensive level of data sold to advertisers (Mitrano, 2008).

Consumer privacy as at the opposing end of the spectrum of compliance, anchoring the needs and rights of individuals to protect their online identity and activity online. A prudent assumption on the part of consumers is to automatically expect a marketer or business to use data that has been made available, even through sporadic or occasional interaction (Pratt. Conger, 2009). From a consumer privacy standpoint the use of data mining continues to challenge the sovereign right of individuals to protect their privacy online and ensure they have full knowledge of how their personal information is being used (Payne, Trumbach, 2009). Where the ethical use of marketing information is a vast and very complex problem to solve, the rights of consumers to the privacy of their data is an area that is a high priority both for legislators and for consumer rights groups. The aggregation of consumer data into large-scale data marts is the catalyst of en entirely new area of data mining and analysis called Big Data, and the implications of this on consumer privacy are significant in that 360-degree views of customers can for the first time be produced (Kiron, 2012). This translates into a full 360-degree view of the consumer, using data they may or may not be aware of sharing online and also through their routine transaction histories with banks, retailers who track their purchases, and their activity on social media sites as well (Wen-Yu, 2012). The goal of marketing is to gain this level of insight into customer behavior, so much so that a completely accurate, real-time view of all their habits, healthcare issues, dietary habits and purchasing history is available to plan marketing and promotional programs from (Adams, 2010). It is not surprising that researchers warn consumers to presume that any and all data shared will be capture, aggregated and sold that pertains to any and all purchases online or off (Pratt. Conger, 2009).

Recommendations for Organizations

The many factors of data mining and their use for profiling customers and their needs also create opportunities for organizations to build greater levels of trust with their customers as well. And trust is the greatest asset any marketer can have today. The following are a series of recommendations for how organizations can address demographic influences that impact their marketing strategies in light of concerns surrounding the ethics of data mining.