TIME FOR A 토토사이트 동화 코드 DIET? DECIDING WHAT CUSTOMER INFORMATION TO KEEP -- AND WHAT TO TOSS
A version of this article was originally published by Knowledge at Wharton
Heartland Payment Systems, a credit card processor, may have had up to 100 million records exposed to malicious hackers. Payment processors CheckFree and RBS Worldpay, and employment site Monster.com have all reported 토토사이트 동화 코드 breaches in recent months, as have universities and government agencies. Experts at Wharton say that personal 토토사이트 동화 코드 is increasingly a liability for companies, and suggest that part of the solution may be minimizing the customer information these companies keep.
Indeed, according to Wharton marketing professors Eric Bradlow and Peter Fader, companies should deploy a technique called "토토사이트 동화 코드 minimization." The concept: Keep the customer 토토사이트 동화 코드 a company needs for competitive advantage and purge the rest.
The problem with the 토토사이트 동화 코드 hoarding approach is that companies can't use most of the information they keep, says Fader. Meanwhile, they become 토토사이트 동화 코드 pack rats, chasing an illusory dream of one-to-one marketing, which he says "is a myth. The best thing to do is aggregate information so companies can predict something like, 'Among all people who bought five times or more, how many times are they likely to buy in the next year?"'
The cost of a 토토사이트 동화 코드 breach in 2008 was $202 per compromised record, up 2.5 percent from $197 per record in 2007, according to the Ponemon Institute, a Michigan group that researches and consults on privacy and information security issues. Ponemon's estimates are based on interviews with companies that have suffered breaches to customer records that include credit card numbers and, in some cases, personally identifiable information. Following a 토토사이트 동화 코드 breach, companies often must hire security consultants, engage legal counsel and offer credit monitoring services to affected customers. The Institute also found that companies will lose customers in the year following a 토토사이트 동화 코드 breach. For example, health care and financial firms lost 6.5 percent and 5.5 percent of customers, respectively, after such incidents.
The real challenge for companies is assessing what customer information they need to retain, says Fader, who adds that firms may be keeping an excessive amount of 토토사이트 동화 코드 because they can't pinpoint what they actually want. "토토사이트 동화 코드 minimization involves more than just the 토토사이트 동화 코드. You can't minimize 토토사이트 동화 코드 until you know what to do with it. What 토토사이트 동화 코드 elements do you need to predict customer behavior?"
The inability to answer those tough questions, says Bradlow, could be one reason why companies default to storing as much 토토사이트 동화 코드 as possible -- not the best strategy when it's clear that many companies don't know what to do with this 토토사이트 동화 코드 even when they have it.
Fader and Bradlow recommend a simple approach to 토토사이트 동화 코드 minimization. First, companies should figure out what information they need to track consumer behavior. Then, aggregate that information over a defined period such as two to four months. With that aggregated information, a company can create histograms -- graphical representations of aggregated 토토사이트 동화 코드 -- and throw away original 토토사이트 동화 코드.
Fader suggests that histograms offer accuracy rates close to individual targeting -- without the risk. Purging individual information lowers costs because companies don't have to secure information in transit, store and analyze 토토사이트 동화 코드, and navigate a bevy of regulations across the globe. "Maintaining 토토사이트 동화 코드 warehousing is costly because the minute you keep 토토사이트 동화 코드, you have to protect it," says Bradlow. "Most firms realize they can't do one-to-one targeting so why not only keep 토토사이트 동화 코드 that's relevant?"
Fader and Bradlow acknowledge that the argument for 토토사이트 동화 코드 minimization is only just beginning. For 토토사이트 동화 코드 minimization to become the norm, a company's management, privacy officers, legal counsel and marketing team will have to reach consensus on customer 토토사이트 동화 코드 collection. Legal and privacy experts are likely to support 토토사이트 동화 코드 minimization, while marketers will argue for keeping all the 토토사이트 동화 코드 they can collect.
In addition, 토토사이트 동화 코드 minimization practices will vary by industry. Wharton operations and information management professor Eric Clemons says that 토토사이트 동화 코드 can be a competitive advantage for many companies. For instance, Capital One used customer 토토사이트 동화 코드 to better segment its most profitable customers and poach similar ones from larger rivals. In this example, customer information led to varied pricing models -- such as interest rates that varied by customer credit ratings -- that maximized the profit from the top decile, or 10 percent, of customers. "Under the uniform pricing models of the mid 1990s, the top decile of customers produces 150 times more profit than average," says Clemons. "Capital One found a way to attract the best customers away from other issuers."
In a co-authored study, Clemons found that Capital One used what it calls an 토토사이트 동화 코드-based strategy that allows the company to try varying approaches based on differences between itself and rivals. This strategy allowed Capital One to deploy a mass customization model. That model also generated returns, says Clemons. Capital One sustained double-digit returns on equity and double-digit increases in sales and profit growth due to its approach.
Clemons argues that storing customer 토토사이트 동화 코드 in bulk could lead to new pricing strategies. He agrees that one-to-one marketing is illusory at best, but a move to precision pricing -- or figuring out exactly what an individual customer will pay -- may warrant being a 토토사이트 동화 코드 pack rat.
Meanwhile, there's another conundrum companies face: 토토사이트 동화 코드 purged today could be valuable tomorrow. "Ten years ago, one of my clients wanted to purge his 토토사이트 동화 코드base. It was an insurance company, but once you purge your 토토사이트 동화 코드base, you know no more about your customers than a new entrant," says Clemons. "That was OK under existing pricing models, but after any form of insurance deregulation, the information they were purging would have been enormously valuable."
Ultimately, the choice to follow 토토사이트 동화 코드 minimization practices boils down to one question: What will a company do with the 토토사이트 동화 코드?
Bradlow says 토토사이트 동화 코드 minimization has the potential to be one of the key security tools used by companies, even if it remains largely an academic concept today. "Security professionals will buy (토토사이트 동화 코드 minimization). Next, you have to convince the marketing world and begin giving talks outside the ivory tower. I think firms will start buying in."
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