Call it an awakening.
Consumers are increasingly mindful that marketers use the growing volume of individual data they leave behind for corporate gain. And as details continue to stream out about the National Security Agency’s collection of data on ordinary American citizens, concerns about privacy and data security are growing as well.
More and more, individuals want to know when data about them is being collected, what is being stored and by whom, and how that information is being used, said Forrester Research senior analyst Fatemeh Khatibloo, in an interview with CMO.com.
They may even want a piece of the action. According to a survey conducted by Compass Intelligence for identity data management provider UnboundID, 61 percent of respondents said they would be motivated to give more of their personal and behavioral information if they received some kind of reward.
“Consumers today have an expectation that they should get something of value in exchange for their data,” said Debi Kleiman, president of New England’s Internet business and marketing association MITX, in an interview with CMO.com. “It makes sense; the data is very valuable.”
Marketers who lean on ambiguous or abstruse data collection and use policies will only make matters worse. “Some large companies see their customers less as individuals and more like dollar signs when it comes to the rich data they can collect and sell to the highest bidder,” said Scott Schlesinger, CapGemini senior vice president and head of business information management, in an interview with CMO.com. “The profits are huge, and there seems to be no true financial benefit in it for those whose data is being used.”
As Scott Howe, the CEO of Acxiom, told The New York Times in announcing the launch of a Web site that allows consumers to view the information the $1.1 billion data broker has collected about them: “We are not going to get anywhere by hiding.”
There will be an upside for brands that confront consumer data concerns openly, say industry watchers. By starting a conversation with customers about the issues, marketers also open up the possibility that informed individuals will share more and better information with them. That will require significant changes in marketing process—and culture. But those changes need to happen now before concern turns into anger, say industry observers.
“It’s a hot topic—one that, as marketers, we need to be thinking very carefully about,” said Richard Mooney, partner and North American managing director of Essence Digital, whose corporate clients include Google, eBay, and Expedia, in an interview with CMO.com. “For too long consumers felt they had the wool pulled over their eyes. But marketers have a great opportunity to embrace the increased focus that customer data is getting from consumers.”
Who’s Data Is It Anyway?
The collection and sales of individual data for financial gain is nothing new. “Privacy concerns and data collection has been on the agenda for half a century at least,” Mooney said. But, today, consumers see the immediate effects of that riding alongside their email, their favorite social media sites, or their mobile apps. It feels much more personal—and potentially invasive.
“For years, large banks have sold their customers’ transactional data to outside groups that use this data to collect and analyze consumer spending patterns. But in this age of big data, everyone’s information is more readily available and more easily collected,” CapGemini’s Schlesigner said. “Facebook made $3.2 billion dollars in advertising revenue in 2011. How? By the selling ad space to companies that wish to reach Facebook’s more than 1 billion global subscribers.”
Big data is big business. U.S. companies spend more than $2 billion a year on third-party data about individuals, according to Forrester Research, not even taking into account credit data, market research, and derived data.
“The kind of data we had before was not nearly as granular as it was today, nor was there this kind of volume,” Khatibloo said. “It wasn’t as if catalogs or financial services companies could understand all kinds of patterns about your life.” Today’s marketing data creates a detailed—if not entirely accurate—individual portrait.
At the heart of the matter is control. “Something’s happening that [consumers] don’t have full visibility of,” Mooney said. “They want to have a conversation about it.”
Indeed, 62 percent of customers expect companies to ask permission before using their digital information, according to the Compass Intelligence survey; 43 percent said they would think better of companies that give them control over data sharing.
According to a recent survey conducted by the Pew Research Center, 86 percent of consumers have taken steps online to remove or mask their digital footprints, and 55 percent have taken steps to avoid observation by specific people, organizations, or the government.
“The fundamental problem we’re dealing with as marketers is overcoming the fear that the media creates around [data collection],” said David Welch, vice president of marketing insights and operations for Adobe (CMO.com's parent company). “I’m sure there may be some people doing bad things [with consumer data], but most companies aren’t. Ultimately, the best thing to do is to give the customer the opportunity to make their own choices.”
Marketers get it, though they may not know what to do about it. “They’re so nervous about having the conversation. They don’t want a lot of attention or PR [around the topic],” said Elea McDonnell Feit, executive director of the Wharton Customer Analytics Initiative, in an interview with CMO.com. “There are some companies that—very quietly—are doing a great job. And there are some companies that—very quietly—are doing an awful job.”
“It’s a scary proposition to all of a sudden have to think about leaning in and engaging customers about something that has until now been like a black box,” added Marc Guldimann, CEO of Enliken, a start-up that enables businesses to be more transparent with marketing data, in an interview with CMO.com. But now is the time for marketing to come out from the shadows, CapGemini’s Schlesinger said, because “consumer backlash and outrage is on the horizon.”
One brand doing transparency well: Tesco.com. Visitors to Tesco.com are greeted with a cookie notification banner at the top of the page that they can click through to find out more about what’s collected, how it’s used, and why, among other things. The British supermarket operator is subject to European privacy and data collection regulations that require disclosure and consent.
“They’re forced to be transparent,” said John Lovett, president of the Digital Analytics Association (DAA), in an interview with CMO.com. Fewer American companies go that far. It’s “one more step between you and the ‘buy’ button,” he added.
Regulation or not, such transparency is a good first step toward building consumer trust. “Most data collection and use is relatively innocuous,” said Dr. Eric Siegel, founder of Predictive Analytics World and author of “Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die.” Making that clear can disarm the fear, uncertainty, and doubt that exists.
“It comes down to educating consumers around what this ecosystem is built on. A lot of brands have a true value exchange sitting there, but they don’t have the courage to explain it,” Essence’s Mooney said.
At Adobe, the marketing team only collects customer data that will improve the customer experience; nothing is ever sold. But, Welch told CMO.com, “I don’t think we’ve done a good job in the [marketing] industry of saying, ‘You know what, there's a customer benefit to this [data collection].'"
Too many marketing organizations don’t have a clear internal policy about data collection and use. Sharing with consumers the ins and outs of data collection “requires first and foremost that you and your organization understand what you’re doing with the data, and then making consumers aware of that,” the DAA’s Lovett said.
Forrester’s Khatibloo is helping companies develop internal standards for data collection and privacy and making a customer-facing version of those standards rather than the way it has traditionally been done—calling in lawyers to craft a policy that leaves loopholes for all of marketing’s potentials. Consumers don’t respond to a 60-page document in legalese, Lovett said. “The whole thing has to be simple enough that you can explain it to your mother,” he said.
The AdChoices icon-based system, introduced in 2010, allows users to find out why they’re being served an ad—you searched for a vacuum cleaner on eBay and that information was sold to an aggregator—and opt out of online behavior tracking. “You can refuse to participate, go anonymous, and delete your cookies. Consumers can take control,” Lovett said. “The problem is, you don’t get the benefits. Frankly, it’s a better customer experience when the Web understands who you are.”
Brands have the opportunity to explain exactly that—and some do. Google, for one, has invested in educating its customer base and giving them the option to see just what has been collected. But, Wharton’s Feit pointed out, “not everyone can invest in that kind of portal.” It might not make sense for BestBuy, for example, to give its customers electronic data dossiers on demand. But it might provide a transaction history that contains a clear benefit for the customer, said Forrester’s Khatibloo, such as electronic product manuals for everything they’ve purchased. That simultaneously provides visibility and value.
Third-party data broker Acxiom’s recently launched AboutTheData.com, which lets consumers not only see what data has been collected and by whom, but enables them to correct information and opt out of data collection altogether. “I think Acxiom's push for openness could usher in an age of data enlightenment where brands who already posses consumer data at scale adopt similar transparent strategies,” Enliken’s Guldimann said.
It’s a model Adobe’s Welch said he would like to emulate. “We want to be able to give people complete transparency and complete control over what we collect and what we do with it. To me, that’s a no-brainer,” he said. “It’s just a matter of how fast we can get there.”
Giving customers a say in what is collected can also be beneficial--not just a simple opt-in or opt-out page, but opt-down or -up choices. Such data preference centers are catching on, Khatibloo said. “There’s very much a sense that when you provide choice and give customers a chance to understand, you’re building customer loyalty,” he told CMO.com.
What’s In It For Me?
Brands that clearly articulate what the customer gets out of sharing data can take the customer relationship further. “A marketer’s goal should be to strike some sort of balance between the use of customer data to drive engagement, increase customer retention, and grow sales with a value exchange,” CapGemini’s Schlesinger said.
Customers choose to share more—and perhaps better—data than they otherwise would in exchange for benefits. To enroll in Progressive Insurance’s Snapshot auto insurance program, for example, customers allow the company to collect data on their driving habits via a device installed in their cars. Those with safe driving habits get a discount; poor drivers continue paying their initial rate. Another example: Users of startup HitBliss agree to actively engage with targeted ads, surveys, or other marketing content in exchange for credits that can be used to pay for streaming TV shows or movies.
“If consumers were compensated for their data when it was used or sold, would they have as much of an issue or concern over data privacy? I’d argue no,” Schlesinger said. “But this simply is not taking place on a large scale.”
Could it? Perhaps. “The people that do have scale—the Facebooks, the Amazons, the Googles—can take the opportunity to explain to their users that by viewing a targeted ad, they get to use their services for free,” Essence’s Mooney said. “But they could extend that even further to get richer, deeper information. If you take a special survey on Google, you get a voucher for Amazon. Facebook could issue credits based on the level of information people are willing to give in their profile.”
A number of startups have launched in recent years to give consumers the ability to profit from data sharing, but they’re starting from scratch. “In theory, it sounds fantastic to give consumers the ability to eyeball all their data, create these different buckets, and decide what they want to share and with whom, but that’s going to take time,” Mooney said.
“In the future, marketers will need to have the ability to determine the value of different kinds of data so that the ‘give-to-get’ equation works for their brand and company,” MITX’s Kleiman added.
While the idea of consumers locking down some data might strike fear in the hearts of marketers, those who opt in would be a boon. “That’s intention data. You would actually have a customer saying, ‘I’m in the market for a new car,’ instead of having to infer it,” Khatibloo said. “And they can turn off the marketing when they’ve bought it. That’s a huge benefit.”
Consumers are more willing to intentionally share data not just in exchange for discounts, but also for better experiences or more convenience, Khatibloo said. More than 5 million users gave Mint.com access to their banking, investment, and credit data to improve their financial management experience and receive relevant offers.
“Cable companies would really like to sell data on what people are watching to companies that provide content—Time Warner could sell data on what its customers are watching to the Disney Channel, for example,” Wharton's Feit said. “That’s on the edge [of what consumers might find acceptable]. But what if they get really great TV recommendations as a result?”
“As the everyday consumer becomes more aware of what’s going on, they’re going to want to get something of value for their data,” DAA’s Levett added. “To get there is a bit challenging, but I think that’s a win-win for brands and consumers.”
The Best Data Stewards Win
The idea that consumers will ever have total control over all of their data, however, may be a stretch. “The ecosystem has so many chains and linkages that control is hard,” Forrester's Khatibloo said. But consumers do have complete control over brand choices, and those companies that are the best stewards of their data will win.
That begins with well-established data governance practices, such as an interdisciplinary committee that oversees data collection and use. “Every time someone wants to use customer data, it goes before the review board to make sure there’s a benefit for customer, that security best practices are being followed, that they know who must access to the data,” Feit said.
When considering what data to collect, Khatibloo advised marketers to apply the “doctrine of least surprise.” If you think a customer would be surprised that you’re collecting a certain type of data or using or sharing it a particular way, either don’t do it or provide a very clear opt-in. Brands that want to build trust with consumers won’t collect every bit and byte because they can. “Marketers and brands recognize that their approach to data has been to take as much we can and hoard it all, but there are risks,” Khatibloo said. “When you suffer a breach—that’s when, not if—all of that data is at risk.”
Most importantly, marketers need to continue to strive to make the best use of the data they collect in ways that make a difference for their customers. “We have a long way to go there,” Mooney said. “We’ve only just scratched the surface.”
“Everyone recognizes that this is murky. The quid pro quo is still up in the air,” Wharton’s Feit added. “But the companies doing this really well are leveraging the data they have to serve you better in a way that makes sense. They’re getting the most from the data and they don’t need to pay people for it.”
Continuing to play in the data shadows until a professional body issues clear standards or legislators take a stab at regulation won’t work. “Now is the time [for companies] to formulate the right strategy,” CapGemini’s Schlesinger said. “Strike the balance to engage customers, and give them a sense of comfort so that they are well-positioned to leverage the vast quantity of rich consumer data available without alienating their customer base.”
Marketers may fear a sense of data powerlessness. “There’s a legacy and a history of controlling data, and there’s a concern that we’re going to be at the whim of consumers,” Khatibloo said. “That’s short-sighted.”
By loosening the reins, marketers can forge better, smarter, more targeted relationships with their customers and their data. “It will become more of collaboration than a cold war,” Enliken’s Guldimann said.
“We will end up with a very symbiotic relationship [between consumers and markets],” Khatibloo added. “Ultimately, we will all get a little bit smarter.”