Data has always been compared to one of the most precious commodities on earth: oil.
Unfortunately, marketers go to great lengths to collect first-hand data, often violating their customer’s privacy in the process. This uncouth practice has the customers worried, giving way to an unbalanced dynamic between the two.
However, customers are wising up. A McKinsey & Company survey revealed that 87% of consumers consider a brand’s privacy policies before making a purchase. This lack of trust is costing brands dearly.
Fortunately, it’s not too late. Brands can build customer relations by obeying data privacy regulations.
Does Complying With Data Privacy Regulations Improve Customer Relations?
Historically, collecting and analyzing consumer data has been crucial for companies to understand their target audience and tailor their products and services accordingly. However, with the increasing demand for generative AI, businesses need copious amounts of data to train and refine such models.
Alas, improper handling and exploiting sensitive data to attain their goal has proven detrimental to the brands. They’re swiftly losing their customer’s hard-earned trust. Besides, they also have to deal with:
- unwarranted security breaches,
- lack of investor appeal, and
- eye-watering regulatory fines.
These issues don’t just spell trouble for a company’s financials but also raise questions about its survival in the cutthroat digital business landscape. So, to succeed, empower their customers, and gain a competitive edge, businesses must embrace transparency and give consumers control over their data.
But how can brands achieve that? By complying with data privacy regulations.
Although this isn’t a new concept, only 53% of EU (European Union) and UK companies can confidently obey the GDPR. Alternatively, 35% feel somewhat prepared, while 10% aren’t well-prepared. This lukewarm preparedness stems from two things:
- limited understanding of data protected by privacy laws, and
- a lack of knowledge about the latest laws passed by international, federal, and state agencies.
Information protected under data privacy regulations
Data privacy regulations—international, federal, or state—have a common goal: to protect consumer data from exploitation and give them control over their personal information.
As such, these laws focus on three core principles, including:
- Permission: companies must get permission from consumers before collecting, storing, sharing, and using their data.
- Right to access, edit, and delete data: consumers have ultimate control over their data and reserve the right to access, edit, and delete it. If a company receives such a request, it must accommodate them.
- Monitoring web traffic and collection of data: under these laws, companies must collect required data and use consumer data for specified purposes only.
Keeping in line with these core tenets, data privacy regulations protect two types of customer data:
- PII (personally identifiable information): This includes any information connected to a person, such as name, address, driver’s license, birthday, contact details, IP address, employment records, biometric records, and other personal information (PI).
- SPI (sensitive personal information): This is personal information that could lead to unprecedented damage if compromised. Examples include passport information, financial details, medical history, social security number, and login credentials.
Review your site settings regularly to ensure you don’t violate your consumer’s trust, abuse their personal and sensitive data accidentally, and don’t store more data than you need.
While doing so is important to build better relationships with your customers, monitoring website traffic and keeping an eye on the collected IP addresses will also help you from becoming the next target of misleading and ad-budget-draining click farms.
Additionally, ascertaining there are no proxy servers throwing you off your marketing game will minimize the risk of fraudulent engagement and allow you to gauge your campaign’s organic success.
However, you must be aware of the most pressing data privacy regulations to responsibly integrate AI and machine learning into your development process and protect your business.
Data privacy regulations businesses must be aware of
Although you can draw inspiration from comprehensive privacy laws and follow your version internally, it’s generally not the right direction.
Since 61% of Americans are confused about a company’s privacy regulations and believe the laws don’t clearly state how the collected data will be used, it’s best to follow privacy regulations pertaining to your business to a T.
Besides adding some much-needed clarity, following these laws will help you steer clear of hefty penalties. Having a dedicated preference center to update consumer communication preferences is a good idea, too. This includes setting up a digital platform to let your customers:
- modify their email IDs,
- opt-in or out of modes of communication, like email, SMS, push notifications, and WhatsApp messages,
- dictate how and when they’d like to be contacted, and
- update the brand on their areas of interest, such as whether they would like to know about its spring-summer collection.
But this has to happen in conjunction with data privacy laws. So, without further ado, here are the data privacy regulations businesses must be aware of:
1. The European Union’s GDPR
Perhaps the most infamous weapon in the EU’s arsenal, the General Data Protection Regulation (GDPR) was enacted on May 25, 2018.
This regulation mandates businesses to gain explicit consent from their consumers before collecting their data. The regulation also makes it mandatory for companies to mention how they intend to use the collected data.
Although these two directives effectively safeguard consumer interests, the EU wanted individuals to be in complete control over their information.
Consequently, companies must:
- allow a person to correct incorrect information and delete it under certain circumstances, and
- refrain from using the gathered data in case of irregularities.
Moreover, organizations must encrypt the stored information to protect consumer information in case of data breaches.
To ensure businesses operating within the EU took the regulation seriously, the supranational organization gave them two options:
- they must either comply with the regulation or
- cough up €20 million or 4% of their annual global turnover, whichever is higher.
Since its enactment, the GDPR has become the cornerstone for subsequent digital laws, like the DMA (Digital Marketers Act) and DSA (Digital Services Act).
2. US data privacy regulations
Similar to the EU’s GDPR, the US government enacted a few privacy regulations, too. These laws are divided into two categories—federal and state—since a few laws are applicable through the region, while others are state-specific.
a. Federal regulations: Privacy Act, COPPA, HIPAA, and GLBA
Popular US data privacy regulations mandated by the federal body include:
- The Privacy Act: The US government enacted the Privacy Act of 1974 to safeguard individual data by giving them the right to:
- ask for their collected data, barring Privacy Act exemptions
- request modification of inaccurate and irrelevant data,
- be safeguarded against invasive collection, storage, use, and dissemination of sensitive details.
- COPPA (Children’s Online Privacy Protection Act): This 1998 act protects the interests of children under 13 and governs data collection in kids’ apps and websites and apps. It forbids organizations from collecting data without consent and directs them to disclose their intended purpose for the collected data and gives guardians the right to delete or access related information.
- HIPAA (Health Insurance Portability and Accountability Act): This 1996 law requires health organizations to safeguard patient data and forbids them from disclosing sensitive information without gathering explicit consent.
- GLBA (Gramm-Leach-Bliley Act): This 1999 regulation directs financial institutions to make their information-sharing policies known and protect personal and sensitive information.
Though these rules apply to the US, they don’t cover data privacy in-depth or account for current data violation practices. This is where state regulations come in.
b. State regulations
In the absence of a comprehensive federal law governing data privacy, several US states have issued privacy laws to govern private and government organizations at the micro level.
For instance, California came up with the CPRA (California Privacy Rights Act), also known as the CCPA (California Consumer Privacy Act) 2.0, to protect consumer rights and empower them.
3. Other data privacy regulations to keep an eye on
Besides the regulations passed by the EU and the US, there are global laws you must be aware of, especially if you conduct business internationally. Such regulations include:
● India’s DPDPA (Digital Personal Data Protection Act):
This regulation is similar to the GDPR in several aspects but is unique because it mandates data fiduciaries to redress grievances related to consumer data privacy.
● Canada’s PIPEDA (Personal Information Protection and Electronic Documents Act):
This act aims to protect Canadian citizens. It provides clear guidelines on how data should be collected, processed, and maintained, along with the steps marketers should take in case of breaches.
● China’s PIPL (Personal Information Protection Law):
This law governs PI’s collection, storage, and use across China and is known to impose hefty fines for non-compliance.
Better customer relationships by complying with data privacy regulations
Digital trust is no longer a luxury for marketers and businesses. The same McKinsey survey reports that 53% of consumers prefer brands that have ironclad policies in place to protect their PI. 46% went as far as saying that they’d switch brands if a company had unclear data protection guidelines.
Since losing customers isn’t an option, businesses must become aware of and obey data privacy regulations governing them. This will let them establish digital trust and foster a genuine relationship with their target audience. Moreover, complying with applicable regulations will help them avoid hefty penalties. Win-win!
With over a decade in the tech field, Bogdan blends technical expertise with insights on business innovation in technology.
A regular contributor to TMS Outsource's blog, where you'll find sharp analyses on software development, tech business strategies, and global tech dynamics.
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