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Data Driven Marketing Legal Considerations

Customer groupings, or segments, are an indispensable tool in data driven marketing. But they sometimes require careful handling. Income and especially geographic data can prove problematic in some instances. The seriousness of the problems is heavily dependent on your industry. It’s important that you understand clearly which regulations apply to you.

Consult your attorney to support your data driven marketing initiatives

The financial-services industry is heavily regulated with respect to data collection and usage. Several federal statutes related to credit reporting and fair lending apply not only to banks but to other lenders as well. It’s far beyond the scope of this book to address these regulations in any detail. It’s important for you to understand, however, that these regulations don’t just apply to banks.

Even if you don’t work for a bank, fair lending regulations apply to you whenever you extend an offer of credit. When you’re communicating to customers about payment plans, deferred payments, or co-branded credit cards, be sure to consult your attorney to ensure that your offers are compliant with federal regulations.

The health care industry is also highly regulated. Consumer privacy with respect to medical records is jealously guarded by legislation and audit oversight. Practically any use of consumer data for marketing purposes in this industry should be run past your legal team.

There is also growing concern among consumers and legislators about the collection of geographic data from mobile devices like cellphones and tablets. The concerns stem partly from the fact that so many children are using these devices. As of this writing no legislation has been passed on this subject. But it has been proposed.

The regulatory environment related to database marketing in the U.S. is dynamic. You need to stay informed about and adapt to new legislation. But you do need to get a legal opinion from your corporate counsel on these issues.

Potential data landmines in data driven marketing

Correlation is when two traits are correlated if they tend to appear together. A simple example would be the presence of children and minivan ownership. You target a specific lifestage segment with a message about your product because people in that segment tend to buy your product.

Some groups, particularly geographic groups, can be highly correlated with income and with race and ethnicity. By simply using an income level cutoff to target an audience, you may inadvertently be introducing a racially discriminatory selection criterion. Similarly, targeting specific geographies can lead to the same result.

The smaller the geographic grouping, the more correlated it is with race. In other words, individual zip codes are more correlated with race than greater metropolitan areas are. Banks are very careful about this issue because of legislation surrounding fair lending practices.

It’s important to be familiar with the entire demographic profile of your audience to avoid introducing racial bias into your campaign. Even the appearance of racial discrimination, intended or not, can lead to legal problems.

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