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As an online business owner, you must ensure your business generates profits to remain commercially sustainable. Since your customers have access to a global marketplace, the competition for their business is fierce. Rather than focus on a new product, one way to ensure you entice new customers and retain your eCommerce purchasers through brand loyalty is to create an online business customer loyalty program. However, if you decide to consider loyalty programs, you should be aware of the potential legal issues accompanying them, such as data collection methods. This article will explore the potential legal issues associated with online business customer loyalty programs.
What is a Loyalty Program?
An online business customer loyalty program is a marketing method for you to increase and retain your customers. By offering a loyalty program, you incentivise your online purchasers to buy from you as a returning customer. Your eCommerce customer should feel appreciated and enjoy shopping with your online brand. There are various types of online business customer programs, which include those rewarding with:
- points towards discounts;
- gifts in return for points;
- free perks; and
- cashback programs.
Potential Legal Issues With Customer Loyalty Programs
When you run an online business, customer loyalty program for your eCommerce brand, the main potential legal issues are concerning data. Naturally, for your online customers to participate in your loyalty scheme, you will need to collect personal data from them. The primary law you must comply with is the UK GDPR. Below, we look at potential issues you could come across.
1. Lack of Choice
It is crucial that when you offer your eCommerce customers an online business loyalty program, you give them a choice whether to join this or not. Otherwise, you could fall into potential legal issues. Therefore, your loyalty program for your eCommerce brand needs to be an opt-in and permission-based one.
2. Lack of Transparency
The UK GDPR requires your eCommerce business to be transparent about processing your online customer’s data as part of your loyalty program. You must have a proper disclosure in place. If you fail to do so, you could breach legislation.
A way to ensure you avoid these potential legal issues is to ensure you have a privacy notice that covers this. You must ensure you pass it on to all customers when you collect their data. This should explain:
- your reason for collecting customer data is your loyalty program;
- that the reason for collecting the data is a lawful basis to process their data; and
- your eCommerce customers’ rights concerning this.
3. No Lawful Basis
- consent; or
- legitimate business interests.
You should note that if you collect ‘special categories’ of data, which can include, for example, health issues about your customers or ethnicity, consent alone is not enough to provide a lawful basis. You will need explicit consent. Another reason you may need explicit consent is if you use your online customers’ data to create personal profiles of them. You will use this to determine what they like and how they behave.
This factsheet sets out how your business can become GDPR compliant.
4. Non-Compliance With Data Laws
If you have a customer loyalty program for your online brand, you will process customer data. This is because you will need personal information to store the details of the loyalty program users. This means that the UK General Data Protection Regulations (GDPR) apply. This UK law requires you to be transparent towards your online customers. This is in terms of how you process their customer data. You need to explain, for example:
- why you process the personal data; and
- your online customers’ rights.
You must also ensure you have a lawful basis for using their loyalty scheme data. This can include customer consent but also could be through a legitimate business interest. However, if your customer loyalty program collects specific data, such as your customer’s ethnicity, you must obtain their explicit consent.
5. Adequate Terms and Conditions for the Customer Loyalty Program
When you create a customer loyalty program for your eCommerce website customers, you must ensure your online brand’s customer terms and conditions cover this. Alternatively, you could develop terms and conditions specifically for the customer loyalty program. Your customer loyalty program terms and conditions should include:
- how your online customer earns rewards in the loyalty scheme; and
- explain if the scheme may change in the future, as customer loyalty programs are rarely static.
Precise and robust terms and conditions decrease the risk of potential customer disputes and customer complaints.
6. Intellectual Property Infringement Concerns
The introduction of a customer loyalty program also poses intellectual property usage concerns. Some online brands may decide to give their customer loyalty programs a specific name and branding. If you do this, you must conduct a trade mark search to ensure you do not infringe on current trade marks.Continue reading this article below the form
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