As Massachusetts lawmakers debate new rules on the use of consumer data, a survey by the statewide business association finds that small businesses depend heavily on digital data to find customers, drive growth and compete against larger companies.

The survey of 100 Massachusetts small businesses finds that 86 percent use non-sensitive data to enhance their marketing efforts while 75 percent use anonymous customer location data to inform business decisions such as where to advertise, find growth opportunities, or open new locations.

The study was commissioned by Associated Industries of Massachusetts (AIM) and conducted by RXN.

“Overregulation of online data use will make advertising more expensive and less effective for the Main-Street businesses that form the backbone of the Massachusetts economy. Marketing has changed dramatically in recent years, and companies ranging from your local bookstore to regional accounting firms depend upon online data to connect with customers in need of their products and services,” said Brooke Thomson, President and CEO of AIM.

The survey included companies with 500 or fewer employees.

Eighty-three percent of the companies surveyed say that digital ads are important to their company’s success:

• 71 percent say digital ads help their company compete with larger competitors.
• 84 percent say digital ads help them reach new customers, and 88 percent use them to reach local customers.
• 89 percent say digital ads deliver a better return on investment compared to traditional, offline ads.

The Massachusetts Senate on September 25 passed the Data Privacy Act, which would impose the most restrictive data-privacy laws in the country by setting strict new limits on how companies may, and may not, use customer data.

Of particular concern for the business community is the strict data-minimization standard that would limit data collection to products or services explicitly requested by the consumer. The provision would prohibit businesses from seeing crucial data about whether their ad is working and reaching their intended audience.

The legislation also contains novel terms and requirements that deviate from those in states that have already enacted comprehensive data-privacy laws. Those deviations will make compliance with the new Massachusetts proposals significantly more expensive.

The debate now shifts to the state House of Representatives.

Fifty-nine percent of the companies in the AIM survey say their business will be negatively impacted if data collection is restricted:

• 78 percent say their digital ads would be less effective if their advertising partners couldn’t collect or process data.
• 60 percent of all Massachusetts small businesses say that without access to personalized ads and analytics, they wouldn’t be able to reach new customers efficiently.