Your Customer Data: what Small Business Owners need to consider

Customer data is, without question, one of the most valuable assets any business owns.  A company possessing both up-to-date and meaningful customer data has the power to do two things more efficiently and effectively than their competitors who don’t:

1.    Manage their business (e.g. manage creditors, report financials)
2.    Innovate their business (e.g. identify customer wants, plan improvements, reach new markets)

To illustrate the importance of customer data for business management and market innovation, ask yourself the following questions:

•    If every bit of information you have stored about your customers suddenly disappeared tonight, would your business be able to operate as usual in the morning?
•    If you needed to send a critical announcement to a specific segment of your customer base, how long would it take you to identify them, and are you confident that the data is current?

Customer data is so valuable because data is knowledge and knowledge is power. You only have to look at Goldman Sachs’ recent investment of US$450 million in Facebook (which now values Facebook at US$50 billion) to appreciate the perceived value of customer data. The surprising breadth and depth of consumer information captured by Facebook means businesses can now identify, reach out to and grow a willing audience at breakneck speed.

It’s wise however to remember that if your customer data is misused or not adequately secured, you could find your business unable to operate, on the wrong side of the law, or hearing from irate customers who no longer trust you.

Every business needs to consider and have a plan in place that ensures the security, usability and effectiveness of the data that they collect.  The recent publicity over Vodafone Australia’s security flaws with regard to customer data shows that this is an issue that affects any sized organisation.

When a small business owner is building a strategy for the management of customer data, there are 5 questions that they should be asking their self:

1.    Do you know what your legal obligations are?

As a business owner you must ensure that all activity relating to customer data is meeting relevant regulations.

In Australia, The Privacy Act regulates how personal information may be collected, stored and used. For more information visit the website for the Office of the Australian Information Commissioner (OAIC).

Australian companies are also bound to legal requirements under The Spam Act 2003. It is illegal to send unsolicited commercial messages by email, instant messaging, SMS and MMS.  For further details view the Spam Act information pages on The Australian Communications Authority (ACMA) website.

2.   Are you harnessing the power of customer data to grow your business?

Meaningful customer data has the power to grow your business by:
•    Increasing customer acquisition through referrals
•    Growing the spend of existing customers through targeted offers for additional products / services
•    Building loyalty amongst existing customers through mechanisms for customer feedback and satisfaction indicators

If you find it a challenge to use your customer data for marketing purposes, determine whether your Customer Relationship Management (CRM) system is appropriate for your needs. Whatever means or system you use, the solution should allow for customer marketing activities that are easy, cost effective, efficient and regular.

3.    Is your customer data correct and up-to-date?

Too many companies waste time and money by having to clean up their customer data in preparation for a marketing campaign.

The usual culprits are changes of address, incomplete contact names, and missing postal codes. Ideally, data should be entered correctly and completely in the first instance, and updated as you become aware of changes.

A proactive approach to management of customer data is less costly and cumbersome than a reactive approach.

4.    What’s your plan for Business Continuity / Disaster Recovery?

The purpose of a Business Continuity / Disaster Recovery plan is to allow for immediate resumption of operations if your work premises or computer systems were destroyed.

An essential component of a Business Continuity / Disaster Recovery plan is the prompt availability of an up-to-date version of all business and customer data.

This is not possible in the event of destruction to your business premises, unless there is a complete backup of data that is held off-site.

There are a number of options available for off-site data backup.  At the basic end of the scale is a daily backup onto an external drive that is taken home each evening. A more sophisticated method is using a third-party company specialising in off-site data services to trigger, secure and host the backup.

5.    Is your data secure from hackers, disgruntled ex-employees, accidental distribution?

According to industry leading IT Security company, Clearswift, the four leading causes of data breaches are:
•    Accidental disclosure of information via email or the web gateway
•    Breaches caused by malware for the purposes of stealing data
•    Breaches caused by hackers for the purposes of stealing data
•    Breaches caused by trusted insiders for the purpose of personal profit

Adequately securing data can seem like an overwhelming task for small business owners. It is a necessary task though, and using an IT Security specialist to do this for you is the easiest way to get it right.

Some security vendors and resellers provide Security Health Checks for businesses, where they can recommend the policies, procedures and products that will secure your business from data loss.

In some instances the vendor or reseller can provide the Security Health Check for you at no charge. It might be worthwhile researching the IT security specialists in your area and asking if they can offer this service to you.

For further information on how to protect against data breaches, read the Clearswift whitepaper, ‘Protecting against the leading causes of data breach’ .

Article written by Katalina Hill, Writword Communications, 17th January 2011