A hot topic for the FTC yet to preside on is the use (rather, abuse) of behavioral targeting of consumers. There are many thoughts from stakeholders in different industries and instead of taking a strong stance for or against, I’ll share a few points and counterpoints on the topics of behavioral targeting in your business.

I need to warn you, this is a lengthy opinion/editorial on consumer advocacy, privacy and the back and forth discussion on the need for more privacy laws. It’s fine with me if you skip to the bottom and comment without reading. Just this once.

Just to be clear, I want to quickly identify a few terms that I (and the industry) uses in this hot topic of behavior. If you know what these mean, skim right over to the next paragraph.

• Consumer - The person who is the person who consumes a product, service or information from a brand.
• Behavior - In this context, behavior refers to the actions, attitudes or preferences by the consumer.
• Targeting – The process to provide tailored information by means of data obtained by the consumer.
• Opt-in – The decision where a consumer selectively chooses to permit an activity with a brand.
• Opt-out – The decision where a consumer has to take an additional step to exclude themselves from an activity.
• Data Retention – The lifetime of how long stored information should be kept.
• PII - Personally Identifiable Information or “PII” includes names, addresses, complete IP addresses and any other data that would personally disclose the identity of a consumer.
• RFM Data - The data obtained through actions by the recency, frequency and monetary transactional data from consumers.

A number of privacy groups have stated the misuse, storage and application of behaviorally targeted advertising has led to unwanted disclosure of PII. (The AOL Search Data Scandal was the best case study of this.) Through long-term data retention, the risk of undesired disclosure increases significantly. Ideally, a majority of privacy advocates ask for users to fully control their data which happens to be stored on their name. Not only do they want users to retain full control, they also aim to restrict the use of that data — such as abstaining from marketing, sales or other actions that revolve around inducing a transaction to take place. These basic rights to privacy have been fleeced as our society has become more digital and their concerns are becoming more of a real issue as the data stored increases. Of course, staunch privacy advocates believe companies should not store any data; opposition from companies does lend belief that data retention is a necessary evil in doing business.

Many companies feel if they acquire the data, they can do anything they want with it, except share it with outside organizations. What kind of data do companies store on their users? You’d be surprised — prior purchases, referring sources, residential address, phone number, email, payment method, social security number, credit history, product interest, age, gender, ideal type to contact via phone, email, letter. You name it, it’s being tracked somewhere by some data mining warehouse. However, the data itself is not the problem — it’s the intentions and use of that data within companies so they can ethically and strategically use the data in alignment with their customers desires. Right now, there are few laws or regulations regarding the storage of data and the marketing and advertising industries regulate themselves in this regard. Examples of this include AOL — when they launched their “Penguin” education program about behavioral advertising (or propaganda depending on where you sit); Google, Yahoo all modifying their data retention policies. As expected, these received much fanfare from privacy groups.

I decided to ask a neutral source on this. I asked our product manager who oversees email and marketing features in our application, Ryan Peterson, about what he feels is the crux of the matter for consumers and companies when it comes to their data. He shared, “In the eyes of the consumer, the question is if the marketer trying to sell me something I need or are they trying to sell me things that I’ll buy.” As far as data retention is concerned, he succintly describes the bottom line, “At the end of the day, let me decide what data you keep.” We agreed that Google does a great job of giving users complete control over their data; while still collecting massive amounts of aggregate and personal information.

(It probably doesn’t help too much right now to point out that Google is currently in litigation for releasing the name of a once-anonymous blogger to a celebrity who is suing her for defamation. As a result, Google is now being on the defensive end of a privacy disclosure suit.)

With RFM analysis, marketers are able to provide relevant communications about products, their usage and even offers for relevant products. Many privacy advocates will scream at the notion that a marketer has a potential for profit here. It’s a bit scary, because it works. Let me walk you through a real example of true targeting in action. (Mind you, I see no evil in this.)

I purchased an iPhone 3G and I also purchased a protective case from the Apple store several months ago. A week later, they email me an offer thanking me for the recent purchase and informing me that purchasing AppleCare (extended warranty), I’m able to protect my phone and receive additional support. This was likely due to my protective case purchase or the very fact I declined it at the point of sale. Months later, I receive follow-up invites to inviting me to my local Apple store to check out the current model iPhone 3GS. I would say this marketing was not invasive or unethical in any way.

In most cases, I would say it’s a good idea  to have a data expiration policy. You know, when data gets too old, flush it and seek new data. Email marketing and CRM applications are included in this broad suggestion. Email addresses from 10 years ago are junk and should be intelligently discarded unless there is reason to retain it. Successful marketers do this already and qualify their customers and prospects on a regular basis and remove faulty data from their database.

Peterson suggests for marketers to engage in feedback more frequently to gauge how much data to retain and for how long. “One of the failures we [as a marketing industry], we made it a one-way medium. Feedback is a great way to improve and tailor marketing to be helpful. It’s important to respect the audience and consider the privacy implications. For instance, marketing to marketers might allow more liberal use of data; while marketing to grandma might want data collection to be much more conservative.” Data security, privacy, retention and application are all areas that should be adequately considered a company’s growth so they can scale legally, ethically, and safely.

The current state of privacy affairs are improving, but neither side is satisfied. Everyone who wants opt-in for targeting data won’t get it from companies. Companies who offer opt-out methods aren’t getting the consumer advocacy ”credit” from critics. It’s at a point where privacy advocates and companies have secured themselves mutually assured destruction and won’t ever be able to resolve this interesting conflict. At this point, the FTC will likely step in and govern how companies can retain data and implement some practices that will boil down to common sense.

I suppose the argument will really come down to who wears tinfoil hats and feels data is used purely for ill-will juxtaposed against those who see their use behavior targeting to improve relevance to consumers. Personally, I’m on the fence when it comes to making decisions around data retention and use. Holding onto a lot of data is dangerous if it’s in the wrong hands, but oh-so-very-useful in the right ones.

As I say in these situations, it comes down to respect – respect for people, the law and the industry — that a brand wishes to participate in. If they don’t have respect for consumers, they probably won’t respect the law either and continue fulfill on mischievous deeds despite whichever legislation they are violating.

What do you think about using data that customers and prospects provide to deliver better, relevant messages to them? Is it evil?

[Photo credits: drjimiglide, tuchodi, rpongsaj on Flickr]

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