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dataIt may be antithetical or even sacrilegious to say so, but companies may have too much customer data for their own good. With internet marketing focused on generating even more of that data through behavioral targeting and social media, it may be time to consider a new theory out of Penn's Wharton School of Business. It's called "data minimization."

According to Wharton marketing professors Eric Bradlow and Peter Fader "data minimization" is a simple but radical concept: keep the customer data a company needs for competitive advantage, and purge the rest. "I think there is a fear and paranoia among companies that ... if they don't keep every little piece of information on a customer, they [can't function]," Bradlow told the Marketing @ Wharton newsletter. "Companies continue to squirrel away data for a rainy day. We're not saying throw data away meaninglessly, but use what you need for forecasting and get rid of the rest."

Customer data has been the goal of several internet marketing strategies such as cusotmer engagement, and search optimization. It has been worshipped as a valuable asset, and even a competitive gold mine by several management gurus and analytics companies. P&G, for example, has touted its customer database of 65 million plus customers.

But Fader and Bradlow say companies have gone overboard. They say the data hoarding approach is that companies can't use most of the information they keep. Meanwhile, they become data 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 academic duo also believes that being choosy about the data a company keeps will reduce the chances for data breaches, which have hit several internet companies from ChoicePoint to Google to TJ MAXX.

The proper approach most likely lies somewhere in the gray area between data hoarding and minimzation. Internet marketing will continue to run on customer data, and brands are interested in learning as much as possible about cusromer behavior. Even Fader and Bradlow's colleagues don't completely buy in to the minimization argument. Wharton operations and information management professor Eric Clemons.

Some industries, such as insurance or credit card companies, may need to collect detailed customer data for competitive advantage. Meanwhile, companies that serve as pack rats for customer data are focusing on installing better defenses and procedures to protect information.

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Published 23 March, 2009 by John Gaffney

John Gaffney is US Editor at Econsultancy. Follow him on Twitter

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Comments (1)

Guy Stephens

Guy Stephens, Social Customer Care Consultant at IBM Interactive Experience/GBS/MobileEnterprise

Seems to me that the problem isn't the data. Data is simply data. Perhaps the problem is more not knowing what questions to ask? What is it that we need to know from the data? I would imagine that most of the time we don't really know.

over 7 years ago

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