Privacy vs personalisation – building trust in a digital world

'Firms that think of customer data as an asset and blindly gather all the data they can will be stymied by the lack of trust'

 Privacy vs personalisation – building trust in a digital world

 

Internet shoppers have become accustomed to the idea that what they see when they visit Amazon.co.uk is quite different to what others see, based on their respective interests, search history and past purchases.  

Personalisation, which started 20 years ago with simple web browsers, is migrating to the physical world. From phones and tablets to connected cars, smart homes and connected medical devices, people are giving out information like never before. 

Many firms and product makers are finding ways to leverage that information to improve people’s experience of the physical world. According to design firm frog, many organisations building smart connected products for the first time are not sure whether the data is an asset – a great new way to learn more about their customers and build a deeper relationship – or a liability, with the potential to harm their brands if the data gets hacked. They question what constitutes a fair exchange between a firm and its customers.

>See also: Why a data privacy officer should be your company’s next hire

With these questions in mind, frog conducted a multinational study in 2011, and again in 2014, to better understand how consumers think about their personal data.  It conducted surveys and experiments with 900 respondents in five countries, including the UK. The survey takers reflected the demographic composition of  people who use internet services in each of the countries it studied. 

Its first observation was surprise at just how little most consumers know about the information they generate as they go about their daily lives. Many people understand the mechanics of information they post about themselves online, such as Facebook updates or blog posts. However, when it comes to their digital exhaust – data that they generate as a byproduct of using smartphones, mobile applications, connected cars and so on – most are surprisingly vague about the details.

In the 2014 survey, just 21% of the UK survey respondents demonstrated awareness of common types of information, such as IP addresses or location history generated by these tools. 

If consumers don’t know or don't understand the data trail they are leaving behind, should product makers care? Or should they continue gathering their information on the prospect of potential future business value?

Product makers should not just care, but also educate customers about the types of data they are collecting, explain what they are doing with it, and show how the data is being used to deliver more value. This is not because it is the morally right thing to do, but because it makes business sense to do so. 

We are entering the era of a more serious internet. The internet’s first 20 years were characterised by media, entertainment and communication products, and mostly fueled by advertising money. We are now entering an era where the use cases are more serious, focusing on health, wellness, environmental protection, resource allocation and safety. 

A good example is the smart connected Guard Hat by Ockham Razor Ventures, which contains sensors that warn the wearer of carbon monoxide and other environmental hazards. The helmet notifies other workers in the area that a hazard has been detected, and helps the factory safety officers pinpoint where the leak is coming from. 

Other examples include healthcare firms that are embracing smart connected products, offering tracking for diabetics, or monitoring of patients recovering from a heart attack. 

These services generate a lot of value for consumers and society as a whole.  However they also gather – and rely upon – deeply personal information such as location, health or mental state.

The potential to harm individuals by misusing their data is significant, but the potential to do good with this data is also greater than ever before. Firms that are trusted by their customers will be in a strong position to offer products and services leveraging increased amounts of personal data.

Firms that are not trusted by their customers will be stuck offering more limited products, relying on less sensitive – and therefore lower value – data. As the battle for smart connected products heats up, the trusted brands are in a much stronger position, and this translates to a stronger share of the marketplace.

A review of UK brands tested in the survey was instructive. Least trusted were social media brands. If LinkedIn or Facebook want to enter the market with a product designed to manage health or financial data, they will face an uphill battle. 

Internet firms such as Google and Yahoo, as well as entertainment and communications firms like Talk Talk, Netflix, Sky and BT, fall into the middle. Banks come slightly higher. The NHS and GPs are right at the top of the trust index, together with payments firms such as Paypal and Visa.

  

So if trust is a competitive advantage, how can firms earn it? First, they must deliver in-kind value for the data they gather. If company’s service relies upon high-value data, such as medical records or financial history, it needs to offer high-value services to customers in return. Conversely, lower value data such as self-reported demographic information, requires less returned value.

Second, they need to give control to their customers. Even if they don’t make use of this control, the feeling of ownership will make the customer feel more comfortable sharing their data. 

>See also: Consumer trust in the digital age: why privacy has become a differentiator

Third, they need to educate their customers. Very few firms do this today, fearing that customers will stop sharing once they find out how extensively their data is gathered. However, Channel 4, for example, found that just 0.01% of consumers opt out once they watch a humourous Alan Carr video on their privacy page explaining why the broadcaster gathers data – and 80% of viewers subsequently volunteer additional information about themselves. 

Firms that think of customer data as an asset and blindly gather all the data they can will be stymied by the lack of trust. Conversely, firms that work to gain customer trust will be rewarded with even more customer data. 

It is the latter that will be able to compete in the emerging era of the serious internet, creating and recapturing value in ways that will completely change the way consumers and companies conceptualise their data.

 

By Tim Morey, VP and global head of innovation strategy consulting, frog

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