Biting the hand that feeds you. Eating the goose that lays the golden eggs. Cliches like these illustrate what many in service marketing businesses might do to gain more business.

We suggest they use more self-control.

Mutual funds, annuities, and other investment products spell an opportunity for banks. In an effort to uncover the names of appropriate prospective customers, banks use their own customer and transaction records.

Using customer data to suggest prospects for more business is not a new concept. After all, the best sources of new business are current customers.

But the banks must think longer-term and look at a bigger picture.

Though it makes sense to use customer data to suggest new business, the practice should not invade customer privacy.

It's one thing to cross-sell - to offer products and services that will satisfy the needs of customers - but quite another to misuse confidential transaction information for business gain.

An overzealous sales executive can rationalize that customers won't find out. Quite apart from the ethical issue, what if they do find out? The bank could lose those customers and everyone they chose to tell.

Care must be taken.

Follow the lead of one financial services marketer that knows more about you than you could ever imagine, American Express.

This company knows, through fact and inference, your birth date, Social Security number, address, telephone number, mother's maiden name, employer, and income. It knows what kind of car you drive, who provides your health and life insurance, and your medical history. It knows where you eat, shop, and travel, your telephone habits, your driver's license number, who else is in your household, and your credit history.

American Express, a direct-marketing company, relies on this form of distribution and communication. It protects the integrity and confidentiality of customer relationships. It takes great care in renting its customer list.

Further, its communications to customers don't reveal how much it really knows.

Banks and other financial services firms need to do the same. They're new to the game. And the potential for abuse creates risk.

Before your bank considers using or selling client transaction records and demographic data for new business purposes, consider this scenario. How might it make your customer feel?

Call 1: Hello, how are you? I'm from First National Bank. Because you're a valued customer of the bank, I want to offer you a trial membership in our travel club.

Call 2: Hello how are you? I'm from First National Bank. Because you're a valued customer of the bank, I want to offer you a trial membership in our auto club.

Call 3 offers legal services. Call 4 offers a restaurant and dining club card.

At what point might this First National Bank customer get fed up with all these new-business telephone calls? At what point might the realization dawn that First National Bank is the culprit, the one giving the customer's name to the telemarketer? And at what point might the customer decide to pick another bank?

A recent Louis Harris study about privacy and interactivity indicated that 76% of respondents to a national poll commissioned by the journal Privacy & American Business said that businesses generally ask for too much personal information. And 82% expressed concern about "threats to personal privacy."

Further, 61% of the respondents identified possible loss of privacy as the chief concern arising from the collection and use of custom-tailored information about their interests, purchases, and viewing habits.

While this study concentrated on interactivity and the information superhighway, it has implications for banks and the release or massaging of their seemingly confidential customer data.

The high percentages indicate little ambivalence. We suspect a similar level of concern might be shared by your bank's customers.

Mr. Weisman is president of Weisman & Associates Inc., a New York direct-marketing consulting firm. The second part of this article will appear shortly.

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