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Article 8 min read

Customer transparency: Why it matters and how to increase it

Here’s why customer transparency has become such a critical ingredient in building trust and loyalty.

By David Galic, Contributing Writer

Last updated June 8, 2023

Customers are becoming increasingly wary of the personal data they share with businesses. At the same time, the demand for highly personalized brand interactions has never been greater.

A recent Verizon study found that 45 percent of young customers (ages 18 to 24) would share personal data in exchange for a more intuitive and personalized user experience. Yet 69 percent of all customers who were polled, regardless of age, stated they would avoid companies that have a history of data breaches.

Businesses must be able to balance the collection of customer data with the need for data privacy in order to provide the personalization consumers expect, without compromising or exploiting their information. The key is prioritizing customer transparency—this helps you deliver a superior experience, establish trust, and foster loyalty.

Why is customer transparency important?

Seventy-five percent of consumers will spend more to buy from a company that treats them well, according to the Zendesk Customer Experience Trends Report 2021. But what does it mean to treat your customers well? Customer satisfaction doesn’t hinge solely on perks, gifts, proper pricing, and polite communication. Now more than ever, customer transparency and honesty are essential business practices.

Customers are already skeptical of how companies use their data

Transparency around how businesses capture, use, and share personal data now plays a critical role in any customer-company relationship, especially given how many consumers don’t trust the way businesses are using their personal information.

  • In a 2020 McKinsey survey, 71 percent of customers reported that they would leave a company if it shared their sensitive data without permission.
  • Even younger generations care immensely about data privacy. According to Internet Innovation Alliance research, nearly three out of four Millennials are concerned with how technology and social media companies use their data and location information.
  • A Cisco study revealed that 40 percent of customers don’t trust that organizations are following their own data privacy policies.

The good news? Companies can gain customer trust by being more open about their data use policies. A recent Sprout Social survey showed that nearly nine in 10 people would be willing to give second chances after a poor customer experience when an organization is transparent and has a history of transparency. And the 2021 Cisco Data Privacy Benchmark Study found that companies, on average, saw nearly double the returns for every dollar spent on privacy, with wide-ranging benefits:

  • 76 percent saw a significant boost in customer trust

  • 73 percent said it made them more attractive

  • 73 percent said it enabled innovation

Prioritizing data transparency as an integral part of your company culture pays off—both for your customers and your business.

Personalization can’t happen without data transparency

Customer data has become an incredibly powerful CX tool. Think of the last time you shopped on Amazon. Your home page is custom-built from data on your previous orders and search history. No two Amazon home pages look exactly the same.

Much of the data companies collect—from your favorite running shoes to your shirt size—makes you feel like you’re walking into a store with a personal shopper. These personal touches go beyond sizing and product recommendations. Details like your preferred communication channels or prior support interactions enable agents to deliver better service. Agents will know the best way to contact you, and they’ll have all the context they need so you don’t have to repeat yourself.

This style of concierge service has become the hallmark of any good customer experience. In fact, 75 percent of customers say they expect personalization when making purchases. But paradoxically, fewer and fewer customers want companies to have access to their data.

Why? A lack of transparency around what’s being captured and how it’s being used has eroded trust.

What are some examples of customer data?

  • Previous orders or interactions with customer service

  • Information about the device used to contact customer service

  • Status of recent orders

  • Credit card information from previous purchases

  • Search history

  • Plan or subscription details

  • Personal details (address, date of birth, etc.)

  • Conversational data (shoe size, favorite brands, etc.)

Ping Identity’s 2021 Customer Survey discovered that 85 percent of consumers want to know how online services share their personal information, and 63 percent said they would feel better about a brand that made it easy to see how their information was being used. But companies aren’t doing a good job of being clear about the process—72 percent of customers polled said that it’s difficult for them to find out how their data is being used and shared.

Personalized experiences cannot exist without customer data, but policies are often vague, and distrust is on the rise. Businesses need to offer transparent data policies so customers feel comfortable sharing their information.

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In this free guide, we go over the difference between CSAT and CES, how social media metrics differ from support data, and more.

Compliance requires customer transparency

Data transparency isn’t just important for targeting customers. It’s also a legal requirement in many countries.

There have been several high-profile privacy incidents lately, including WhatsApp forcing users to agree to additional tracking earlier this year. To provide guidelines, a growing number of governments has enacted laws to regulate how businesses collect and use customer data, including:

Many consumers seem to be happy with these regulations. An Internet Innovation Alliance survey showed that 72 percent of customers support a national privacy protection law.

Violating these regulations can be costly for businesses, both in terms of the damage to their brand reputation and the hefty fines associated with disobeying the laws. Many companies that are committed to keeping their data practices transparent are also working toward legislative compliance. This helps them to avoid fines and paint themselves as organizations that prioritize honesty and fairness.

How to increase customer transparency

The stakes are high, and organizations that are upfront and transparent about what information they’re collecting (and why) have an opportunity to stand out from the rest of the pack. Transparency creates trust, and that trust leads to customer loyalty—a winning strategy for building lasting relationships with buyers.

Here are the steps companies should take to improve customer transparency:

Use clear language and formatting

As a customer, being able to pinpoint what organizations are doing with your data can be like trying to decipher the Rosetta Stone. And for those who don’t speak legalese, it’s hard to know if your personal data is being exploited or used for purposes other than those that benefit you.

According to data from Cisco, of the 48 percent of customers who don’t feel like they can protect their personal data, 79 percent say it’s too hard to figure out what companies are actually doing with their data. Make it easy for your customers to understand your data policy by following these best practices:

  • Don’t omit or hide the fine print found in your company communications. Instead, highlight it.

  • Provide links to privacy pages so any customer who wants to learn more has an easy way to do so.

  • Explain your privacy policies in plain language—avoid legal jargon.

All customer communications, from opt-ins to calls-to-action, are great opportunities to educate buyers and showcase your belief in complete transparency.

Give customers control

Provide consumers with greater control over their data and how it’s being used. Let them decide what data they’re entrusting you with, who else will be able to use and see it, and how long the information will be stored. ​​Web and mobile messaging could be useful tools here.

Say you’re messaging with a customer about the type of windshield wiper they should buy for their car. After asking them for the make and model, you follow up by asking if they want to store that information. Doing so means they’re only shown the accessories that work with their specific car.

Not only does this boost transparency around the process, but it also provides the customer with decision-making power—a huge step to building trust. And when experiences like these could be the difference between customer retention and churn, companies have no choice but to pay attention.

Deliver real value

Telling consumers you’re collecting their data and explaining how you’re using it is a great start. The final piece is describing how this data usage is benefiting them. While it’s obvious that businesses gather data for their own gain, not all customers understand there’s something in it for them as well.

Companies should prioritize showing users the value their data creates for them—whether that’s enjoying faster support, better product recommendations, or access to recall warnings on past purchases. Customers are more likely to feel comfortable sharing their data if they know the advantage of doing so.

What’s good for customers is good for your business

Data transparency gives customers peace of mind. They can share their information knowing your company will use it fairly and ethically.

Aside from reassuring consumers, data transparency policies also help set your business apart. Go above and beyond to show customers you’re using their information in their best interests, and you’ll be well-positioned to secure their trust and their repeat business.

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