The ethics of customer behavioral tracking

Customer data is valuable, and as such, it’s essential for companies to understand how they can use that information responsibly. Many people are concerned about their online privacy, and many of these fears are related to behavioral-tracking firms’ use of such data for targeted marketing. In fact, according to KPMG, 40% of consumers do not trust brands to use their data ethically, yet businesses are collecting more customer data now than ever before.

However, there are ways to approach customer behavioral tracking ethically or unethically. In this article, we’ll take a deep dive into the ethics of digital customer behavioral tracking.

What is behavioral tracking?

Customer behavioral tracking refers to the practice of monitoring customer behavior online and using that data for marketing purposes. This data can help produce advertisements relevant to the individual’s habits and interests, which the publisher may then show in their browser. The primary aim of this method is to deliver advertising messages to the behavioral target markets that have shown a lot of interest in them.

Behavioral tracking covers a variety of actions such as:

• Customer activity on websites (for example, which pages are visited);
• Customer purchases made in-store or online;
• Customer web browsing around the internet (in addition to site visits).

A common example would be an e-commerce website attempting to track where users go after visiting its homepage. This allows marketers to better understand customer “abandonment rates” when potential buyers leave before making a purchase.

How to track and analyze consumer behavior online

Different companies use different methods to track and analyze consumer behavior online. For example, various companies use cookies and other technologies to find out how people interact with the websites they visit. For instance, some digital behavior tracking firms work by placing a unique Javascript ID tag on each user that tracks where they go on a given website.

Common ways to track and measure online consumer behaviors include:

• Keyword research: Tracking the keywords that people search for before visiting a website. These are then used to deliver targeted ads.
• Customer database: Customer data is collected via a third party and analyzed to find specific attributes that help marketers create targeted advertising.
• Site visitors: Customer data is collected via a pop-up that asks for a website visitor’s email address in exchange for a coupon.
• Customer loyalty: Customer data is collected via a third party that analyzes the shopping cart abandonment rate of e-commerce websites.

There are various other ways to measure and analyze customer behavior. It all depends on the type of business and what they want to achieve.

How does digital behavioral tracking benefit marketing efforts?

Tracking digital customer behavior online can help marketers better understand what their customers are doing, where they’re going, and how to reach them.

Customer behavioral data is valuable for marketing purposes because it enables businesses to identify new markets interested in their services or products. Customer data also allows companies to find out the best channels to communicate with these target audiences. Thus helping marketers execute optimized campaigns based on market research findings to create more effective campaigns.

Here are a few of the benefits that behavioral tracking offers:

• Increase in user engagement: Customer data helps marketers understand users’ interests and deliver relevant information. They can improve customer experience and overall user engagement, encouraging repeat visits over time.
• Lower customer acquisition costs: Customer behavioral tracking can help marketers reduce their advertising costs by identifying new customer segments through keyword research, finding more ways to reach potential buyers through behavioral matching, and finding new ways to market products through loyalty programs.
• Increase customer lifetime value: Customer insight helps businesses learn more about their customers to target them effectively over time with the right messages at the right times. This increases customer retention rates because marketers can meet consumer needs better than competitors who haven’t invested in this type of market research.
• Improved conversion rates: Customer data helps marketers improve conversion rates by identifying the most effective marketing channels to use, then tailoring messaging and calls to action based on specific audience segments.

The advantages of tracking digital consumer habits are obvious. With more data than ever before, businesses may better understand their customers, improve customer experiences, and generate more revenue.

Nonetheless, it’s also as critical as ever to not just take consumer privacy concerns into account, but to be a consent-positive brand with data advocacy in its DNA.

This, says Google Cloud’s VP of Consumer Packaged Goods, will allow forward-thinking, customer-centric companies to “fundamentally rethink how they collect, analyze, store and manage consumer data to drive better business performance and provide customers with personalized experiences.”

The importance of ethical behavioral tracking

Customer data is valuable to marketers, but it’s also highly sensitive. Effective behavior tracking requires complete transparency with customers, given the potential for this information to damage a brand’s reputation and consumer trust.

Furthermore, companies should be clear about how customer behavior data will be used for marketing purposes before asking them to provide personal information. The more transparent businesses can make the process of sharing customer data feel, the higher consumers’ level of trust in that business tends to become over time.

When clients understand why their behavior tracking data is required for company operations and how it will benefit them in return, customer trust tends to rise.

But on a larger scale, companies can ensure data advocacy across their full organization by implementing a dedicated team responsible for doing so: a data advocacy panel.

Features of ethical behavioral tracking

Industry research has identified several best practices related to customer behavior data for marketing purposes. Marketers who adhere to these universal criteria can better meet the highest standards of ethical tracking:

• Responsible data management: Customer data should be used responsibly and stored securely at all times. When sharing information with third-party software providers, make sure you use reputable tools only (i.e., ones that won’t sell your data) and understand what happens when you delete customer records from their platforms.
• Ensure transparency about data collection: Make it clear how each piece of personally identifying information will be used for marketing purposes and why it’s necessary to collect this information. Customer data should also be stored no longer than necessary, as detailed in each company’s privacy policy (clearly stating how long the business retains customer records).
• Ensure transparency about how customer data is shared: The sharing of personally identifying information with third parties must meet standards set forth by industry self-regulation. Customer data should never be shared without first obtaining customers’ explicit consent unless extenuating circumstances exist.
• Be transparent about customer rights: Customer data should be used in a way that meets customers’ expectations, provides them with access to their records, and enables them to delete or correct the information you have collected. Any stakeholders involved must also abide by these rules.
• Utilize reputable third-party tools: Customer data should only be collected through reputable third-party tools, such as Google Analytics, with a proven track record of complying with industry standards and best practices. They must meet specific requirements for safeguarding customer privacy or provide clear disclosures about how their customers’ information is used.

Ethical consumer behavior tracking should not be hard to do. It’s the only way for marketers to fully realize the benefits of digital behavior tracking while protecting their brands’ reputations and consumer trust.

Features of unethical behavioral tracking

Any practices that do not meet the previously mentioned criteria for ethical customer behavior tracking can be considered unethical and should be avoided at all costs. Additional unethical behavioral tracking methods include:

• Manipulating customer data to meet business goals: Customer data must always serve a business purpose. Therefore, it’s never okay to use it in ways that don’t align with customers’ interests. The potential consequences of approaching behavioral tracking in this way are severe, particularly in the wake of new legislation like the GDPR, which holds businesses liable for mishandling customer data.
• Using customer data without transparency: Failed transparency is arguably worse than no transparency because it leaves consumers unaware about how their data will be used and vulnerable to exploitation by any number of bad actors. There are many negative consequences to adopting this method of behavioral tracking, from fines to prosecution.
• Data mining: Data mining refers to extracting and analyzing customer behavior from different sources for personal gain or profit without consent or knowledge. One example would include marketers using cookies on an individual’s computer without notifying them to track their online activity across multiple sites. Consequences of this are also dire and can consist of fines, lawsuits, or even jail time.
• Infringing privacy rights: Consumers’ privacy is protected under federal law in the United States, and there are several privacy laws on a state level. Businesses that violate these rights by leaking information or illegally distributing it may be subject to penalties or fines if customers choose to sue for damages.

Unethical consumer behavior tracking should be avoided by adopting the best practices outlined in this article and beyond. It’s the only way for marketers to fully realize the benefits of digital behavior tracking while protecting their brands’ reputations and consumer trust.

The legality of behavioral tracking

The legality of behavioral tracking depends on the laws, regulations, and company policies in each country where digital behavior tracking is used.

However, customer data should always be protected by default regardless of legal standing because it’s an ethical best practice that benefits both consumers and your business. There are several rules and regulations in place to safeguard personal information. These include:

• The California Consumer Privacy Act: Consumers under the CCPA have the right to inspect and obtain copies of their personal information held by covered businesses. Personal information cannot be sold without a web notice and an opt-out option.
• GDPR: The GDPR has a vast scope, affecting all European businesses and those who sell products or services to European citizens regardless of where data is processed, stored, or accessed. Specific requirements include obtaining explicit consent from consumers before processing any personal data related to them online and ensuring that personal data is processed lawfully, fairly and transparently.
• PIPEDA: PIPEDA applies to all companies that process the personal information of Canadian citizens and subject them to cross-border privacy laws, as well as businesses located in Canada that collect customer data from other countries around the world. People have the right to access their personal data. They also have the right to challenge its accuracy. Personal information may only be utilized for the purposes that it was collected.

Digital behavior tracking for marketing

Digital behavioral tracking is a relatively new phenomenon in digital marketing. But it quickly gained traction and became an integral part of many companies’ business strategies, especially when used ethically with the customer’s explicit consent. An ethical approach to data management and usage can (and should) start with data advocacy.