Will data privacy become a competitive differentiator?

Ollie Fifoot
By Ollie Fifoot | 20 April 2021
 

Ollie Fifoot is chief digital officer at Hearts & Science.

Data privacy legislation and consumer demands have substantially changed the rules of digital marketing. Out of the ashes of a cookie-less digital economy, rises a new hope.

Brands that embrace robust, transparent data privacy practices do more than merely comply with legal obligations; they stand to gain a massive competitive advantage. Here is how diligence with consumer data can yield a handsome harvest.

IBM estimates that the average cost of a data breach in 2020 was up 10% YoY to US3.86m. Which begs the question, are brands that embrace trust - but also let it be known to consumers and customers - seeing more of a competitive advantage over those that do not?

Protection, Privacy and Profits

At first, data laws focused on protection, which is securing data against unauthorised access. Over the years, legislation has evolved and is now centred on privacy; governing the proper usage, collection, retention, deletion, and storage of data.

The General Data Protection Regulation (GDPR) roll-out in Europe in 2019 signalled a new era of privacy law. The USA followed shortly after with the California Privacy Rights Act (CPRA). Recently, The Brazilian General Data Protection Law (LGPD), India’s Information Technology Act, 2000 (the IT Act), and South Africa’s Protection of Personal Information Act (POPIA) have been published.

It is clear that data privacy is here to stay. However, data privacy is not only a legal requirement. Consumers are growing ever more sceptical of brands’ data collection, storage and dissemination policies - demanding that their data is handled responsibly.

Facebook’s latest move to hire their first Chief Compliance Officer, Henry Moniz, shows they see that this isn’t going away. Over half a billion personal information records were hacked and released into Hacker forums last week.

Consumers are acutely aware of the value of their personal data. A report by The Australian Institute of Criminology¹ revealed that the cost of identity theft had increased 17% to $3.1bn with personal losses on average $4,000. A significant increase of 57% was seen in the misuse of personal information to open a mobile phone account.

Brands that support customers in directing their own data privacy stand to gain priceless customer loyalty.

So, brands worldwide have been working to implement robust consent frameworks informing consumers why, when and how their data is collected transparently.

Crystal-Clear Privacy Standards are Paramount

Technology is a critical business driver these days. The use of artificial intelligence (AI) and machine learning (ML) for product development are proliferating - but be sure to keep your tech in check.

Ever, a photo storage company turned facial recognition firm, was forced to shut down following a charge by the FTC (Federal Trade Commission) of having “Deceived consumers about the use of its facial recognition technology, Companies training algorithms with personal data need clearer privacy standards to avoid regulation”. According to a report by from e-Marketer, settlement with the FTC forced Ever to “deactivate the algorithms it had developed using images of its customers”.

For this reason, companies like Ever are forcing developers and governments alike to define regulation that produces clear privacy standards. Without which, brands could face further fines and regulation.

With the rise of machine learning being deployed across data sets, the algorithms may draw conclusions and develop uses for the data beyond the original reason for its collection. It is no stretch of the imagination that sophisticated algorithms can and will adapt beyond the creator’s original function. If unsupervised, they could unintentionally break laws and processes - even if the outcome increases productivity or function.

Embracing New Opportunities Borne from Data Privacy Demands

With privacy comes consent. Building a structured framework with clear parameters for what data is captured and how it will be used will become invaluable in future marketing personalisation efforts.

Publishers, technology companies and relevant agencies realise that a trade-off in scale produces tighter segmenting controls which, with the right partners involved, yields compelling results.

As ever, technology has identified the opportunity. Customer data platforms are being sold to clients for their ability to combine CRM with prescribed data points and then match to publishers whose data meets the same criteria using permanent IDs.

The methodology behind this is nothing new. However, execution relies on joint buy-in between publishers, tech platforms and brands. The uptake was initially slow because marketers - in their perpetual pursuit of scale - viewed the approach as a ‘nice to have’ rather than a ‘must-have’.

Now the industry is being forced to take a different approach.

The advent of Apple’s stringent opt-in enforcement with IOS14, then Facebook and Google’s removal of third-party cookie tracking (eliminating the ability to track individual actions in-app and across browsers) has moved targeting and measurement into new territory.

Our industry - heavily reliant on ‘last click - can seize a new opportunity. Companies with ironclad consent frameworks and first-party CRM data can append a unique identifier to gain superior targeting and analytic abilities. The depth of insight made possible allows brands to visualise what transpired during a campaign precisely, measure success, and take new learnings forward into new marketing initiatives.

Reaching New Heights in Consumer Trust

As mentioned, consumers already distrust companies that are not transparent about what data is collected and its purpose. Only 10% of 1,000 respondents in a McKinsey & Company consumer survey showed trust in media and entertainment companies. Meanwhile, 52% indicated confidence in companies that don’t collect information they deem irrelevant to their product.

Brands that want to monetise customer data further to create additional revenue streams will need to carefully consider if the pros (extra revenue) outweigh the cons (mistrust). Banks and healthcare providers hold enormous data. So, they need to be explicitly clear to consumers if they hope to increase adoption of their services; let alone increase revenue.

What’s next?

Will customers still trust a brand that isn’t transparent about their use of data in the future? Consumers will likely shy away from brands that don’t have clear and firm data policies.

Should we look at creating readily available data trust league tables, which compare the types of data and the purpose for which companies collect data?

Looking forward, the use of data to better understand a product or even a business will become central to its success.

Ensure Data Privacy for Marketing Success in your Organisation

Tips to secure data privacy and marketing success.

  1. Involve legal teams in planning from the onset. Explain the concept clearly so that the legal teams can ascertain if and what changes to current terms and conditions are necessary.
  2. Make everyone responsible for data, governance, and consent. Organisations with the most data also tend to have the most extensive systems, teams and sign-off process. Forming a steering committee of key people will be paramount in launching a project of this importance successfully.
  3. Appoint a privacy officer. This person, or people, will take charge of the operation holistically, ensuring that data processed within the organisations upholds the law and creating procedures for potential breaches.
  4. Educate. As with all corporate governance, it is vital to inform everyone across the business about the initiative and the reason for it to make its importance clear. You will also gain employee buy-in and perspectives you may not have otherwise considered. Finally, it will also make presenting updates at your next board meeting a breeze.
  5. Communicate with customers and potential customers. Select communication platforms that ensure customers are clear on your position, how you will protect their data and the risks of not. Intersect with customers at key touchpoints within the customer journey to drive consideration and conversion.  
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