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gdpr in customer loyalty

GDPR’s impact on customer loyalty in Europe

Since its implementation in 2018, the GDPR has transformed how European companies manage personal data. This regulation has not only imposed strict standards, but has also influenced customer loyalty strategies.

Understanding GDPR in 3 Minutes

Definition and objectives

The General Data Protection Regulation (GDPR) is an EU regulation designed to protect citizens’ personal data. Adopted on April 27, 2016 and coming into force on May 25, 2018, it aims to modernize rules in the digital era, strengthening individuals’ rights, standardizing rules across the EU and holding companies accountable.

Its main objectives are: data protection, increasing citizens’ rights, and empowering companies to manage personal information securely and transparently.

Main provisions of the GDPR

The GDPR may seem very complex from the outside, as the regulation spans over 80 pages, however, the provisions it contains are rather very simple to understand. They can be summarized in 10 points:

On an individual level :

  1. Explicit consent.
    Companies must get clear and explicit consent from people before collecting or processing their personal data.
  2. Right of access.
    European citizens have the right to know what personal data is held on them and how it’s used.
  3. Right to be forgotten.
    European citizens can request the deletion of their personal data when it is no longer necessary, or if consent is withdrawn.
  4. Data portability.
    People can request to receive their personal data in a structured, commonly used and machine-readable format, and can transfer it to another data controller.

At company level :

  1. Notification des violations.
    Companies must notify any data breach to the competent data protection authority (the CNIL in France) within 72 hours, and inform the individuals concerned if the breach poses a risk to their rights and freedoms.
  2. Supervision of data transfers outside the EU.
    The GDPR does not strictly require that the personal data of European citizens be stored only in Europe. However, it requires strict conditions (that adequate protection measures are in place to guarantee a level of data protection comparable to that of the EU), for the transfer of personal data to countries outside the European Economic Area (EEA).
  3. Data protection by design.
    Companies need to integrate data protection measures right from the design phase of new systems (such as software) and processes, including employee training.
  4. Appointment of a Data Protection Officer (DPO).
    Some organizations are required to appoint a DPO to oversee GDPR compliance internally within the company.
  5. Responsibility and documentation.
    Companies must document their data processing activities and be able to demonstrate their compliance with the GDPR. We’re talking about the famous DPA (Data Privacy Agreement), which governs the processing of personal data with the various subcontractors.
  6. Fines and sanctions.
    Failure to comply with the GDPR can result in fines of up to $20 million or 4% of a company’s worldwide annual sales, whichever is higher.

Since coming into force on May 25, 2018, the General Data Protection Regulation (GDPR) has resulted in fines totaling around $2.77 billion being issued across Europe. This amount reflects a continuous increase in sanctions, with particularly high fines imposed on major technology companies such as Amazon and Meta. For example, Meta was fined a record $1.2 billion in 2023 for violations relating to data transfers.

(Global Law Firm | DLA Piper) (International).

What about the CNIL in France?

The CNIL is the national supervisory authority designated to oversee the application of the GDPR in France.

The CNIL provides advice, recommendations and guidelines to companies and organizations to help them comply with the GDPR. In addition, it’s responsible for receiving and processing citizens’ complaints about potential violations of their personal data protection rights. Finally, the CNIL has the power to investigate companies and organizations suspected of non-compliance with the GDPR.

Customer loyalty: definition and importance

Loyalty concept

Let’s start with a classic definition, but it’s important to keep it in mind for the rest of the article.

Loyalty means all the strategies and actions implemented by a company to encourage its customers to remain loyal to its products or services.

There are several well-known methods for creating or generating this famous loyalty. Here is a non-exhaustive list, with examples:

  • (B2C and B2B) Personalizing the customer journey.
    Adapt products, services, and communications to individual customer preferences and behaviors.
    Example : JULES clothing brand offering a promotional code the week of the customer’s birthday.
  • (B2C and B2B) Create an exceptional Customer Experience.
    Ensuring a positive experience at every customer contact point, from product quality to after-sales service.
    Example: Amazon, which in the majority of cases will offer a full refund if customer service is contacted about a product or reception problem. Mastering an NPS of over 70 and therefore, ultimately, a CLV much higher than its competitors.
  • (B2C) The creation of loyalty programs.
    Offer points, rewards or discounts based on the frequency or amount of purchases.
    Example: American airlines, which are the creators of this loyalty lever with the creation of the “Miles Program”, offer benefits (extra luggage, VIP lounges, upgrades, etc.) based on the miles (or kilometers) traveled with the airline.
  • (B2C) Customer engagement through social media.Regularly interacting with customers on social media platforms to maintain their interest and engagement.
    Example: Zappos, which, when contacted via social media customer service regarding an order or product issue, responds quickly and with great empathy, often exceeding customer expectations. Thanks to its high responsiveness and high customer satisfaction rate, Zappos manages to maintain exceptional customer loyalty and stands out from its competitors through a remarkable customer experience.
  • (B2B) Creating common experiences.
    Creating shared experiences with key clients, such as at trade shows, restaurants, or in-person meetings.
    Example: Various trade shows like SITL, where Feedier was able to participate to meet its clients and enhance relationships with them.

The good news about customer loyalty is that it’s easy to measure. There are 3 indicators that provide a complete overview of customer loyalty levels:

  • Retention Rate: Percentage of retained customers over a given period.
  • NPS (Net Promoter Score) : Measure of the probability that customers will recommend the company to others.
  • Customer Lifetime Value (CLV): Total amount of revenue a customer is expected to generate over the duration of their relationship with the company.

Loyalty benefits

The benefits of customer loyalty are numerous, we have an article here, detailing how to measure the economic impact of loyalty in a tangible way.

There are 2 concrete benefits:

  • In the medium term, customer loyalty increases Customer Lifetime Value (CLV). The various means described above help to reduce the churn rate (“customer departure rate”) by creating lasting relationships, thus encouraging customers to increase the frequency and amount of their purchases over time.
  • In the long term, customer loyalty strengthens brand image. Using satisfied customers as brand ambassadors can attract new customers through positive word-of-mouth. This is the concept of promoters, in NPS jargon.

The impact of the GDPR on customer loyalty

The implementation of the GDPR has transformed data management practices, directly influencing the way companies approach customer loyalty. By strengthening data transparency and security, the GDPR is helping to build a relationship of trust between companies and their customers, essential for long-term loyalty.

1. Trust and transparency

The GDPR improves customer trust by imposing strict data protection standards, guaranteeing the security and control of personal information (higher retention rate, improved NPS).

Some concrete examples of transparency imposed by the GDPR are:

  • Any customer can find out which companies process their personal data, and where in the world their data is hosted.
  • Any customer can request access to the data that the company holds about them.

By strengthening transparency in data management practices, companies demonstrate their commitment to customer data privacy and security.

2. Personalizing the Customer Experience

The GDPR has a “negative” impact on the personalization of the customer journey, because it limits access to personal data and therefore the company’s ability to tailor its journeys based on customer data. This regulation requires companies to review their data collection and processing practices to comply with the new data protection requirements.

It’s essential to request the customer’s consent and clearly explain the purpose of data processing before collecting data. This establishes a trust relationship with customers, who are more likely to share their data when they understand how it will be used. Taking into account the customers experience refusing access to their personal data is also important to offer a quality experience despite this limitation, thus responding precisely to their expectations while respecting their privacy.

Furthermore, the GDPR encourages companies to limit the use of superfluous data by only collecting necessary information. This approach not only complies with regulations but can also improve the effectiveness of personalization processes. By focusing on relevant and useful information, companies can offer more targeted and tailored experiences without being overwhelmed by unnecessary data. Ultimately, this enables better response to customer needs while respecting their privacy rights.

3. Engagement and communication

Firstly, regarding consent management, which is essential to obtain the necessary data for loyalty actions:

Clear and explicit consent forms.

It’s necessary to simplify the language, using plain language, to ensure that customers understand exactly what they are consenting to. This includes detailed descriptions of data usage, specific purposes, and user rights. Then, offering the option for granular consent allows customers to choose precisely which data they want to share and for what purposes. For example, a customer might consent to receive newsletters but refuse to share their data with third parties.

User-friendly interfaces.

Whether through a preference management portal or using attractive and non-intrusive banners and pop-ups to inform customers about data collection and obtain their consent without disrupting their browsing experience. It’s important that these tools are easy to understand and use, thereby increasing consent rates.

Regular updates.

Regularly inform customers about changes in privacy policies or the use of their data. Proactive communication strengthens trust and ensures that users stay informed about the company’s data management practices.

4. Challenges and opportunities

The main challenge posed by the GDPR to customer loyalty is the legal complexity of maintaining an exceptional customer experience, which generates compliance costs that vary depending on the size of the company.

The GDPR brings about changes in customer journeys and compliance management. Companies must adapt their processes to ensure transparency in the collection and use of personal data, and implement mechanisms to handle requests for access and deletion of data.

It’s also crucial to ensure that subcontractors comply with the GDPR, requiring regular audits. Setting up a DPO (Data Protection Officer) is often necessary to oversee data processing and establish robust protection policies.

The GDPR also represents a key opportunity to differentiate oneself through better data management and increased respect for privacy, strengthening customer trust and standing out from competitors.

Concretely:

  • Companies that are transparent in their data management practices have a higher customer retention rate, and more easily attract new customers through positive word-of-mouth and a better brand image.
  • Companies can use privacy-respecting personalization techniques, such as anonymous data analysis and secure segmentation, to offer customized services without compromising user confidentiality.
  • By scrupulously complying with the GDPR, companies avoid the heavy fines and sanctions that can be imposed in the case of non-compliance. This not only protects the company’s finances but also improves its reputation in the market (Global Law Firm | DLA Piper​​).

Technology solution: Focus on Feedier

At Feedier, we provide our customers with actionable, affordable, real-time customer insight. This customer intelligence is based on the analysis of customer feedback (NPS, reviews, complaints, etc.) and operational data (such as CRM data), and is actionable by operational teams to help the company improve more quickly, and ultimately increase customer loyalty, and its impact.

Our expertise is therefore strongly influenced by the GDPR, and as a European publisher working mostly with European companies, we have taken several actions to enable our customers to transform the GDPR into a competitive advantage and not a threat to their customer experience.

100% of data hosted in Europe.

We only work with subcontractors whose data centers are based in Europe and where there is no data transfer.

ISO 27001 Certification: 2022.

An important certification that testifies to the measures in place to protect customer data, whether from a software or organizational point of view, with ongoing employee training on GDPR-related topics.

Automatic anonymization of personal data ( ?? )

By using text analysis technologies (NLP), we enable our customer to automatically identify personal data (names, account numbers, emails, etc.) and replace them (in a non-reversible manner) with a mask (for example, ******). This allows for the secure processing of personal data without loss of time.

Managing consent and citizens’ rights.

Firstly, our software allows users to exercise their erasure and access rights, on request from a customer’s feedback via a simple interface. These erasures and accesses are audited and tracked to ensure full GDPR compliance. Secondly, during the collection of customer feedback, we enable clear explanation of the processing purpose, as well as consent management.

In conclusion, the GDPR has profoundly changed data management practices, bringing challenges but also significant opportunities for companies. By strengthening trust and transparency, it makes it possible to build lasting, solid customer relationships. For companies like Feedier, this regulation is an opportunity to differentiate themselves and improve loyalty through exemplary data management practices.

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