How Companies Gather Data & What They Do With It
As digital products continue their rise, companies have an increasing number of opportunities to gather information on customers’ actions to better inform their business practices.
From long-term behavioral trends to small interactions with a web page, companies are researching how customers use products. That can sound a bit scary, especially when companies aren’t transparent with what information they gather and what they do with it.
Read on to find out more about how businesses collect data and what they do with the information once they have it. Designers and stakeholders can better involve the user in the process of building the final product with a customer data transparency policy.
What Kind of Data Do Companies Collect?
Advances in wearable tech, GPS, and recording have greatly expanded the type of data companies can gather. They don’t have to rely on voluntary information from surveys and other feedback methods, although those are still widely used. Companies can now view locations, times, clicks, eye movements, biometrics, and more.
Why do companies do this? Because it can be incredibly lucrative when done correctly. Having good data allows businesses to tailor marketing campaigns, improve their products, and build a stronger connection with their customer base.
Most people are already somewhat familiar with cookies, which businesses use to track browsing history to make the user experience more streamlined and personal. Web beacons also help track where people go on the internet and where they’ve been.
All this is done so companies can get the right ad in front of the people most likely to respond to it. Google and Facebook have both created huge markets by granting companies the ability to place targeted ads on the web for a fee.
Apps and social media have also allowed for unprecedented access to customer information. In the case of most social media interactions, customers put their information and opinions in the public domain in the course of creating the user content that makes social media so popular in the first place. Businesses are finding new ways to track this kind of information and put it to use in their products and advertising.
Categories of User Information
Generally speaking, there are four types of user information collected by businesses.
1. Personal Data
Personal data includes common information like social security numbers, gender, phone number, and email address, as well as some less personal but still private information such as device IDs, web browser cookies, and IP addresses.
This is where customer data transparency and protection are most important. If you have a database of social security numbers and other personal data and allow a breach, you could be looking at serious legal repercussions.
2. Attitudinal Data
Perceptions held by the customer fall into the attitudinal data category. These could be trends that come and go or they could be opinions about specific aspects of the company and its products.
The most well-known metric of users’ attitudes is customer satisfaction. Businesses may ascertain the satisfaction level of the customers through outreach and surveys or they could be getting information off of social media.
3. Behavioral Data
Although it sounds the same as attitudinal data, user behavior encompasses a few things that attitudinal data doesn’t. Behavioral data focuses on repeated actions from the customers. That might include things like purchase history, mouse heatmaps, product usage history, and past transactions.
Marketing professionals also monitor how users are interacting with ads as part of their behavioral data research. It’s a fast way to see if promotional material is working or not.
4. Engagement Data
The degree to which customers interact with the brand and its products is called engagement. Social media pages, emails, ads, customer service lines, apps, and websites are all within the umbrella of engagement data. To some degree, there is some overlap between behavioral data and engagement data.
The main difference is that engagement data aims to study how well outreach works, whereas behavioral data is more geared toward learning about how customers and users act of their own accord.
How Businesses Collect Data
There are three ways businesses collect data on their customers and users.
- By Asking Customers
In this case, the company will request feedback from customers through surveys, ratings, and reviews. This is the clearest way to get information from the customer in a transparent way. However, the attitudes of the customers could lead to a limited amount of useful information from these methods.
Incentivizing survey responses with coupons and similar rewards is a common way companies get people to send in feedback.
- By Tracking
Tracking could be direct or indirect. When companies have their own apps and websites, it’s usually direct tracking that is used to see how people are interacting with the brand and what kind of behavior is most common throughout the customer base.
In some cases, this tracking is not openly acknowledged. The people being tracked may not know they’re being monitored or not know to what extent information on their habits is being collected by the company.
- By Purchasing It
Some companies don’t rely solely on their own methods for gathering user information. Entire businesses have evolved to look everywhere for new updated customer information and then sell that data to companies that can use it. Think of it a little bit like outsourcing.
These third parties are usually much more sophisticated in their data collection methods since they specialize in that pursuit. It might cost companies, but the return on investment can be incredibly high if the data is correct.
Tracking Customer Behavior
Another huge source of data comes from email tracking and third-party trackers. Businesses collect data regarding whether an email was opened, when it was opened, where it was opened, and on what device. You can imagine designers and marketing professionals like to know how the majority of customers view their promotional material and respond to it.
Third-party trackers are more commonplace in apps. These trackers are commonly used to give companies a glimpse at how apps are used as well as targeted ads, location tracking, and behavioral analytics. All this information may impact the design of the product itself or it could change how companies gather data and communicate with their customers.
A Better Customer Experience?
The most common reasoning underlying all this tracking is to give the user the best possible experience with the product. Targeted advertising and third-party cookies endeavor to get the most pertinent information to each user based on their individual interests and desires.
But is that really the case? Does all this user information actually create a better experience for the users?
It’s a complicated answer, but the basic answer is that data doesn’t automatically create a better product. Over-reliance on customer data could well turn an authentic interaction into a stilted one. Automatically tailored advertising has been known to pester users with the same ads across many websites, for example.
When it comes to information about apps and other products that designers use to change their products for the better, then tracking can and often does help create a better customer experience. For this purpose, individuals’ personal information isn’t as important as a record of their behavior.
Some programs track clicks, page views, and time spent on a given page to gain a clear picture of what people are using the app or website for. Since the information can be gathered anonymously, most people won’t have an issue with such tracking methods.
Building an Action Plan for Customer Data Transparency
Data may be the new oil but that doesn’t mean companies should gather tons of information for its own sake. Creating a plan for what information is most relevant, how to record it and keep it safe, and how to analyze it is key for the best results.
Part of that data plan should also include how you approach the users or inform them about tracking measures that are in place. Here are a few other things businesses should include in their user data plan:
1. Analyzing Data
New technology in the field of artificial intelligence has made it even easier to sift through tons of data points and figure out what’s most important. AI can even be programmed to make decisions and draw conclusions about data. It works at a pace that simply isn’t realistic for human actors.
Data analysis is more than just tracking trends. There’s plenty of room for innovation. For example, analysts might look in less obvious places to gain insight into customer behavior or invent completely novel approaches to trends in the data.
Companies can also do some serious soul-searching when they have data collected. Perhaps an idea may sound great in the conference room but doesn’t make the expected impact in the real world. User information is the surest way to see how ideas truly play out.
2. Storing User Information
In many cases, businesses collect data that is highly personal or sensitive. Alongside the increase in new digital technologies, there has been an increase in cybercrime and data breaches. Ensuring all the customer information is safe from prying eyes is critical for building trust with the customers.
Part of any good customer data transparency initiative should be a clear explanation of what data is collected and where it goes. Who gets access to the information and how unneeded data is disposed of are common questions for users whose information is collected by companies.
It may also be a good idea to explain how predictive tools and behavioral analysis is performed and what conclusions these methods arrive at. If the customers disagree with the prediction, getting feedback from them could help avoid unsuccessful attempts at improving the customer experience.
3. Collection Methods
How companies gather data is a matter of choice and determining what information is most important. For websites, mouse heatmaps that track where the user goes on a page and when they interact with are sure to be useful. Eyetracking heatmaps work on a similar principle but they may be too expensive or impossible to implement.
GPS tracking is another method that delivery apps use to find nearby businesses and ridesharing apps use to locate users and bring drivers to them. Some people are uncomfortable with constant data tracking, especially when apps aren’t transparent about when they are using a device’s location.
Some businesses have even gone so far as to use signal trackers to ping people’s phones and track their movement inside brick-and-mortar stores. This is done to create a more optimal path through the store, but it sounds a bit invasive when it’s revealed that a company has used these signal trackers after the fact.
In-store wifi is another way companies get access to certain information such as customers’ emails and web browsing activity while they’re in the store. Tracking individual habits is much easier with a loyalty card or rewards program that incentivizes a strong customer history with discounts and special offers.
4. Turning Data Into Knowledge
Businesses put all this user information to a variety of uses. For creatives, improving the product and the user experience is often the highest priority. Marketing teams tend to try and make more effective messaging while stakeholders are more likely to be looking at cash flows and profit margins.
One thing that is certain in this new data-driven business environment is that companies are not going to abandon user data anytime soon. Companies use data to get more data. That new information might be in a new realm or it could be updated from new collection efforts.
It’s not how companies gather data that’s most important, it’s the knowledge they extrapolate and the actions they take based on that knowledge that matter most. This is an area where analysts are free to get creative. AI may help cut through huge amounts of data, but dreaming up imaginative interpretations is still in the hands of creatives for now.
5. Data Privacy Regulations
Stay on top of legal developments surrounding user information and the right to privacy. Most often, these initiatives are undertaken to promote transparency and set up structures to protect personal data. Make sure your company complies with all the relevant data legislation.
Companies can turn this aspect into a positive. Customers may not know or understand all the ins and outs of data privacy and transparency laws. Businesses can highlight these regulations and explain them to customers to highlight a transparent and open attitude toward user data collection.
Customer Data Transparency & Privacy
The massive surge in user information and company efforts to collect as much data as possible have created a need for regulation to protect customer privacy. Personal data is a common target for hackers and scammers, so businesses must protect what they gather.
Transparency is a key element of any good user information plan. A company that opts for sneaky tactics to get information about its users without their knowledge is destined to experience a PR disaster.
How much do users need to know about the data companies collect? Ideally, there should be a full explanation of what kind of user data collection the business engages in. Even if some people don’t ever read it, people should be able to find such information when they need it.
Anonymous information about digital products that measures their effectiveness and whether they break down or go through other problems is probably not going to ruffle any feathers, but privacy concerns and a general preference for transparency mean people want to know when even this anonymous data is being collected.
Then again, if the data is collected anonymously then people will be glad to know it. Companies who are transparent about this fact can likely look forward to higher engagement and a better reputation for honesty among their customers.
As the world becomes increasingly digitized, companies are looking for more and more data. This user information is the eyes and ears of many businesses who would not otherwise have a way to see how their customers and products interact in the real world.
Concerns about privacy and transparency are important to maintain a friendly brand image. Regulations surrounding the tracking and storage of user information are changing all the time. Still, turning the data gathered into knowledge is one of the most promising ways to improve the user experience across products and industries.