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How Do Businesses Use Customer Information: Is the Customer's Privacy Protected?
Subcommittee on Commerce, Trade, and Consumer Protection
Ms. Jennifer Barrett
Executive
Summary Acxiom
Corporation strongly supports a balanced approach to the use of information.
We believe that inappropriate use of information to defraud or
discriminate against consumers must be illegal.
At the same time, the free flow of information we enjoy today has
significantly contributed to our nation's economic growth by enhancing
variety in consumer goods and services, by facilitating lower domestic prices,
and by accelerating the speed and ease with which transactions can be
completed. For
over thirty years, Acxiom has been a market leader in responsibly providing
innovative data management services and technology. We are very proud of our reputation for helping both large
and small businesses sell better products and services smarter, faster, and at
a lower cost. And we do so in a
manner that far exceeds what is required by either law or industry
self-regulation in order to respect consumer privacy. Acxiom's
business includes two distinct components:
database managment services and information products.
Database management services represent 90% of our company's revenue.
These specialized computer services assist companies in better managing
their customer information by making accurate "customer recognition"
possible across multiple lines of business and across multiple points of sale.
These same services also assist companies by helping them save costs
and secure a better return on investment through more focused direct
marketing. The additional 10% of our
business revenue is derived from our separate line of information products.
Our InfoBase® products fill an important customer
recognition gap in today's business to consumer relationship - one which
increasingly involves remote transactions. Acxiom's three categories of
information product offerings - directories, customer enhancement, and list
products -- provide needed intelligence to help businesses overcome the time
and distance of less-personal commercial interaction. In building our
information products, we acquire data from public records, self-reported
information, and directly from companies that sell products and services to
consumers. Any data collected is general in nature and not
specific to transactions or purchases.
It does not
include details on specific actions that an individual has taken.
Acxiom does not sell data on one individual or one household, nor do we
sell information to the general public. Acxiom has a long-standing
tradition and engrained culture of respecting consumer privacy in the
development and marketing of our information products.
We have established our own guidelines that are more restrictive than
industry standards. Since 1997,
we have posted our privacy policy on our Website, and we maintain a Consumer
Care Department to handle consumer inquiries.
We also provide consumers the option to opt-out of all of our marketing
products. As business leaders and consumers ourselves, Acxiom is committed to protecting consumer privacy, and to increasing consumer understanding of how businesses use information -- as well as of the benefits that accrue from the free flow of information. Introduction Chairman
Stearns, Ranking Member Towns, and members of the Subcommittee, thank you for
the opportunity to participate in this timely hearing and to share Acxiom
Corporation's perspective on how the current flow of information powerfully
underpins the vibrancy of the new American economy.
As
your Subcommittee continues to explore the issue of privacy in the responsible
manner that this series of hearings evidences, we strongly support the concept
that a balanced approach to the use of information must be achieved.
We believe that inappropriate use of information to defraud or
discriminate against consumers should be illegal, as it is already in most
situations. Furthermore, the
relatively free flow of information we find today in the U.S. has significantly
contributed to our nation's economic growth and stability by enhancing variety
in consumer goods and services, by facilitating lower domestic prices as
compared to foreign markets, and by accelerating the speed and ease with which
transactions can be completed. We
believe that it is imperative that consumers be protected from fraud and
discrimination while the benefits to both consumers and businesses are
preserved. When
privacy laws and implementing regulations overreach, the results can be
devastating: legitimate businesses
suffer irreversible damage, and consumers unintentionally lose many advantages.
It is our hope that by sharing our story with you - as well as by
separating information myths from reality - we will aid you in evaluating an
appropriate legislative direction. About
Acxiom Corporation Founded
in 1969, Acxiom Corporation has more than thirty years experience in customer
data management services, technology leadership, and awareness of and
sensitivity to consumer and business privacy concerns.
We are based in Little Rock, Arkansas, with operations throughout the
United States, Europe, and Asia. Our
annual revenues approach $1 billion. Our
company has over 5,000 employees worldwide:
with over 2,800 of them working in Arkansas, almost 1,000 in Illinois,
more than 200 in California, and 170 in Arizona. Acxiom's business includes two distinct components: database managment services and information products.
Database Management Services
Acxiom's database management services, which
represent ninety percent of the company's revenue, include a wide array of
leading technologies and specialized computer services. These services
help large companies improve and boost customer loyalty, retention, and market
share by making accurate "customer recognition" possible across multiple
lines of business and across multiple points of sale, including the Internet,
call centers, and retail outlets.
Customer recognition is critical to delivering
an exceptional initial customer experience, retaining that customer, honoring
consumer preferences about how personal information is used, and improving
business profitability. Although
e-commerce has increased consumer product availability, it also has made
customer recognition more difficult.
Acxiom's database management services assist
companies in better managing their customer information to address this need.
For example, it is not uncommon for a company's databases to contain
several different names and address variations for the same person.
We provide services that will accurately recognize a particular
individual. Our services can save a
company millions of dollars when, for example, unwanted duplicate catalogs or
other mailings are eliminated. Moreover,
we assist companies maintain up-to-date records to ensure that their
customers' opt-in or opt-out requests are properly honored.
Informational
Products Acxiom also offers a complementary line of information products that represent the remaining ten percent of our gross revenues. Our InfoBase® information products allow businesses to make smarter and faster strategic decisions, streamline customer communication at every point of contact (Website, telephone, store, wireless, and more), personalize and target various communications, and strengthen relationships with their customers. The majority of our testimony today further explains these products. The
Economic Need for Acxiom's Information Products Acxiom's information products
help fill an important gap in today's business to consumer relationship.
Think back to 1901. The
local shop owner knew his customers and his market well.
The shop owner was familiar with what they bought, what they liked to do,
how they spent their time and something about their family.
Today, large and small businesses are trying to achieve the same level of
knowledge about their customers' interests and needs as the small shop owner
enjoyed a hundred years ago. This
need for knowledge is not new. In
the current environment, however, with customers shopping remotely via the
Internet, on the phone and through catalogs, securing information about
customers that allows companies to better serve them is more difficult to
accomplish. In our information-based
economy, companies grow by exceeding consumer expectations with unparalleled
products and services of the highest quality.
Despite technological advances, businesses do not instinctively know what
their customers want and need. Acxiom's
information products provide the additional knowledge necessary for businesses
across diverse industry sectors to stay in touch with and to satisfy their
customers in order to achieve profitability and market growth. Our role is to help businesses
systematically recognize and engage consumers who, with the aid of our
information products, are believed
to be those with a likely interest or need for their products, or services.
While changing technology, such as the Internet, has largely reshaped the
mechanics of how commerce is conducted, the basic strategy of marketing remains
constant - the operational need to focus a company's marketing efforts on
those most likely to have an interest or need in their products or services. With
Acxiom's information products, companies have been able to accomplish goals
such as:
Without the use of our
information products, each of the businesses in the preceding examples would
have been less effective in communicating with their existing and potential
customers. Consequently, the real
winner in the use of information to engage consumers is the consumer. The following chart has been provided to assist the Subcommittee in understanding the information marketplace from a more macro perspective, as well as the key role that Acxiom plays in this interchange.
Consumers expect to complete transactions quickly, obtain the best price possible, and be able to choose from a wide variety of products and services - as reflected in point A on the chart. Businesses - point B on the chart - respond to the expectations by working hard to understand their customers and their market. To do this effectively, they need information beyond that collected during the sale. If the information cannot be collected directly from the consumer, then it is available from two sources - either directly from other merchants - point C - or from information compilers, including Acxiom - point D. Information compilers use public information, primarily obtained from the government, or in some cases collected from other businesses - point E - that obtain the information through their relationship with the consumer - point F. Information Product Development Acxiom begins its information product development with the identification of a marketplace need. For example, in order to achieve growth and product objectives, businesses may need to know something about the characteristics of a household. Is it a single adult household, or is it a married couple? Do they have children, and if so, are they small children, teenagers, or college aged? Other relevant characteristics might include whether the household has an interest in certain hobbies, such as cooking or gardening, or participates in certain activities - do they play tennis, golf, or both? Such characteristics are extremely relevant in determining whether a consumer in that household may want to learn more about a product or service. Once a particular information
need by business has been identified, Acxiom compiles or acquires the relevant
information from a variety of sources and aggregates it by household.
This is a complex process which varies on a case-by-case basis.
However, it is important to emphasize that in all such efforts, any data
collected is general in nature and not
specific to transactions or events.
It does not
include details on specific actions that an individual has taken, confidential
medical information, or specific information regarding children.
Once the data is collected, Acxiom must clean, integrate, and package the
information into a product that meets the marketing needs and information
demands of businesses. We invest
significant time and resources in developing these products.
Finally, a successful information product provides Acxiom's customers
with enough of the right information to solve their specific business problem or
need. Acxiom does not sell data on one individual or one household at a time. We do not sell information to the general public. Information is sold by the thousands of elements or records to qualified businesses. We perform a credit check on all prospective customers. Once we are satisfied about our customer's qualifications, we require them to sign a contract that binds their use of the information acquired from us for specifically articulated purposes. Acxiom and our customers typically enter into long-term contracts - one, three, or five years - for use of a particular information product. Categories of Acxiom's Information Products Our information product
offerings provide needed intelligence for three primary functions:
(1) our directory products provide telephone information necessary to
locate, verify or contact consumers by phone; (2) our enhancement products
provide the information businesses need to better understand their customers and
their market; and (3) our list products provide access to consumers who are
potential future customers. As
mentioned earlier, these products comprise about ten percent of Acxiom's gross
revenues. Directory
Products: Containing name, address, and telephone number, Acxiom's line of directory products are compiled primarily from the white and yellow pages of published U.S. and Canadian telephone directories - 5,900 different directories in the U.S. alone. For example, we license some of our directory products to companies as an inexpensive form of directory assistance and to Websites that provide free nationwide directory assistance. These Web-based directories benefit consumers in many ways, such as providing help in finding friends or family members with whom individuals may have lost touch. In
all our directory products, Acxiom respects a consumer's choice regarding
unpublished numbers. The names and
numbers we include in these widely-used directories are derived only from those
consumers who have elected to have their number made publicly available by their
local telephone carrier. Moreover,
for consumers who contact us in writing, through our Website, or by calling our
toll-free Consumer Hotline, Acxiom offers the option to opt-out of this service
if, for instance, the consumer wants to keep a published number in the local
printed telephone book, but not have it available on a Web-based directory. Enhancement
Products:
Acxiom also offers businesses lifestyle,
demographic, and interest data on their customers to enhance the company's
knowledge about their customers and provide a better understanding of their
customer's desires, needs, and changing characteristics.
Demographic data includes such information as the makeup of the household
- single, married, with or without children.
Lifestyle data might include information such as home ownership,
retirement status, or average income strata of the neighborhood.
Interest information would identify a passion for cooking or golfing. This demographic, lifestyle and interest information is added to a company's already-existing customer files, known as "response lists." The information is general in nature. We do not provide detailed transactional information. We license enhancement information to qualified businesses through a menu-oriented approach. Businesses license only the data needed for a particular business decision or process. In many cases, we have pre-packaged information groups to meet common or recurring business needs for specific industries.
How might a business use enhancement information?
First, it is used to better understand the interests and needs of current
customers. Second, enhancement data is employed to identify the best market
segments for up-selling or cross-selling particular products.
Finally, demographic, lifestyle, or interest data can help identify
characteristics common in a business' best customers in order to target
similarly-situated prospective customers who may be more likely to have an
interest or need for the company's products or services.
List
Products:
Acxiom offers prospect lists as a third type of
information product. These lists
are built from a variety of information sources, and represent broad coverage of
the population. Prospect lists,
which contain much of the same information contained in our enhancement products
(including demographic, lifestyle, and interest information), differ from a
particular company's response lists in so far as they contain information
about consumers with whom the company has had no prior relationship. Prospect lists allow businesses to take the information about their best customers and apply that knowledge to selecting likely households of potential new customers. Acxiom sells prospect lists to businesses, not-for-profit organizations, and political parties and candidates. Data
Sources for Acxiom's Information Products
The
information we acquire to build our information products is obtained from three
general types of sources - public information, self-reported information, and
summary customer information from companies who have consumers as customers.
Acxiom compiles or acquires this information from several hundred
carefully chosen sources with whom we have cultivated and maintained long-term
contractual relationships.
Public
Information:
Public records and publicly-available information are the foundation of
Acxiom's information products. The
types of data that Acxiom acquires or compiles include: telephone directories
and other types of publicly-available directories, property records, and other
state and county public records. This
information provides the basic names, addresses, and general demographic
information, such as home ownership, profession, and the age of members of a
household. Self-Reported
Information:
Surveys and questionnaires are an additional source for demographic
information and provide much of the lifestyle and interest information we
acquire. Consumers are asked to
voluntarily complete surveys, such as those contained on warranty cards, from a
variety of companies asking for specific information. In these cases, the consumer is customarily provided
the opportunity to opt-out of further use of the information beyond
that of the company conducting the survey. Information
from Merchants:
Acxiom acquires some information directly from companies who sell
products and services to consumers. In
these instances, we ensure that consumers have received an opportunity to
opt-out of their information being shared with a third party, such as Acxiom.
Also, we only receive very general summary information that indicates
possible lifestyle or interest data. We
never receive detailed transaction information.
Rather, general information that we acquire is used to extrapolate
lifestyle or interest characteristics. For
example, knowing that certain households subscribe to a magazine on golf would
indicate that those households have an interest in golf, just as the fact that
those households ordered that subscription from a Website would indicate that
they are Web-enabled. In some cases, Acxiom compiles
information directly from the source, such as the telephone directory and the
property records. In other cases,
Acxiom acquires this information from other reputable information providers, who
perform the original compilation, or we acquire the information directly from
the business holding the relationship with the consumer.
Acxiom carefully screens all information providers and businesses from
which we receive information to assure that the information has been legally
obtained and is appropriate for the intended use. The information Acxiom collects
on an individual or a household is always incomplete.
Acxiom does not have information on every individual, and we do not have
the same kind of information on all individuals.
For example, we may or may not have the telephone number of a household.
We may or may not have property information. We may or may not have lifestyle or interest information.
Our goal as an information provider is to provide sufficient coverage of
various data elements to meet the market needs for that particular piece of
information. The following chart summarizes
the process Acxiom uses to take information from a variety of sources and to
develop specific information products designed to meet the business needs of
various markets.
Respecting Consumer Privacy Acxiom has a long-standing
tradition and engrained culture of respecting consumer privacy in the
development and marketing of our information products.
I have been employed by Acxiom for 27 years, and I have been responsible
for privacy oversight since 1990. Privacy
has been my full-time job over the past three years. Since Acxiom does not have a
customer relationship with individual consumers, we do not routinely have direct
contact with the individuals whose data we hold.
Therefore, we ask our customers to refer any individual consumer to
Acxiom who may inquire about the sources of data they have obtained from us.
Since 1997, we have posted our privacy policy on our Website, before it
was an established and common practice. Acxiom
maintains a Consumer Care Department to handle consumer inquiries.
We also provide consumers who contact us in writing, through our Website,
or by calling our toll-free Consumer Hotline the option to opt-out of all of our
marketing products. Our privacy policy is
designed to adhere to all Federal, State, and local laws and regulations on the
use of personal information. In
addition, Acxiom follows the industry self-regulatory guidelines of a number of
trade associations in which we are active members, including the Direct
Marketing Association, the Online Privacy Alliance, and the Individual Reference
Services Group. These guidelines
include posting a notice that describes what data we collect, how we use it, to
whom we sell it, as well as what choices consumers have about the use of that
data. We recently certified under the European Union Safe Harbor and have
applied for and are in the final stages of being certified for the BBBOnline
Seal. Acxiom is also an active member
of the Privacy Leadership Initiative and the Coalition for Sensible Public
Record Access. We believe
that consumers should be educated about how businesses use information.
To that end, we publish a booklet, entitled "What
Every Consumer Should Know About the Use of Their Individual Information,"
which is available both on our Website and upon written or telephone request. Acxiom takes its responsibility toward protecting consumer information seriously. Beyond the industry accepted guidelines which we follow, we have also established our own guidelines which are more restrictive than industry standards. For example, we do not provide Social Security numbers or other personally identifiable information about children in any of our products. Moreover, we only capture the specific information required to meet our customers' information needs, discarding the remaining data, when we compile information from public records. These voluntary information practices are internally and externally audited on a regular basis. Myths
about Information Providers
With the full picture of
Acxiom's business operations now outlined to better explain what we do, I
believe it is important to close by reiterating for you what Acxiom does
not do.
Over the years, a number of myths have developed about the information
industry that require clarification. Please
allow me to set the record straight:
* * * Mr. Chairman, on behalf of our over 5,000 associates, Acxiom appreciates the opportunity to appear today to share with the Subcommittee a detailed overview of our core business operations. We also wish to thank you, Mr. Chairman, for the deliberative and thorough approach with which this committee has studied the appropriate and inappropriate uses of information in our economy. Acxiom is available to provide any additional information the Subcommittee may request.
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