Tapping a valuable commodity

As more companies adopt database marketing techniques to tailor their goods and services to consumer needs, so, in turn, consumer information will become more valuable. Alan Mitchell predicts that customers

A condescending smile comes over his face and patiently he presses his internal “explain for the thousandth time” button. And out it comes, again. Complaints against junk mail are falling not rising; the improved targeting that extra information creates means less junk mail and more appropriate messages; millions delight in pouring out their innermost secrets to companies – just look at the astonishing success of the lifestyle databases; and so on. There’s hardly a direct marketer who avoids this kneejerk response to what they obviously pigeonhole as “the media’s privacy question”.

Everything they say is true. But it’s not the whole truth. Direct marketers may have won the first argument. But they haven’t won the war. Fear of Big Brother is still there (see box) but it is just part of the information age cocktail. And though it is bound to return as the industry ventures down the path of database integration, it is not what the war is about. Last week, at the Direct Marketing Association’s tenth anniversary seminar, the Henley Centre unveiled its Dataculture report – a dataculture being “a culture of information exchange between companies and their customers in return for specific benefits to the customer”. The foundations of such a culture have been laid, it says. There is “a healthy and encouraging environment in which database marketing, properly conducted, can flourish”.

The key question is what that “proper conduct” will consist of. Most consumers, the report says, have a pragmatic approach to revealing personal details, the crucial factors being that they want to feel in control, they want the data exchange to be relevant to the product or service that’s being sold, and they want to see the benefits of that data exchange.

These are eminently sensible objectives. But they could be a graveyard for marketers, for two reasons. First, mismatched expectations. It’s very easy for a company to take the theoretical standpoint that the more it knows about its customers the better it can shape its offers to them. But how does my answering this questionnaire deliver me an immediate, palpable benefit that I value?

Likewise relevance. From the marketer’s point of view, all the usual suspects (income, age, occupation, etc) are “relevant” to building profiles of key market segments. But many consumers don’t agree.

Conceivably both these issues could be tackled by education. But the third issue – control – cannot. That is about power. And, as Calyx UK managing director Mark Patron pointed out at the seminar, just as the focus of information power shifted from manufacturer to retailer in the Eighties, so now it is moving towards the consumer. Saturated markets are buyers’ markets, and the information revolution is giving buyers ever more access to ever more information about sellers.

So far consumers have not wielded their new power. But just as they have become ad literate, so they’re becoming data literate too.

Indeed, the education process that is needed to allay naive fears will drive home the simple truths that lie at the heart of the information economy. That, increasingly, it’s information and not things like coal or steel that are its core raw material. And that every purchase transaction also involves a parallel exchange of data which carries its own value: information is an asset in its own right – don’t just give it away.

Net result? Data-literate consumers will require increasing control over which marketer gets what information for what purposes – a demand which goes way beyond the current blanket choice of either totally “opting in” or totally “opting out”. And the prime reason for seeking this control is not fear of Big Brother but the realisation that privacy creates information scarcity and scarcity enhances your bargaining position.

List renters don’t give away their data free. They hire on a ‘once-only’ use basis and require premiums for anything more. If list renters do that, why shouldn’t consumers? Rising information literacy has an inevitable side effect: the idea that consumers should be the rightful and beneficial owners of information about themselves – not marketers. And that they should be free to give it or sell it as they wish, for the highest price.

When Tesco offers one per cent off, it is not only doing a promotion. It is beginning to pay consumers for data. And who says one per cent is a good enough price? Certainly its top five per cent customers could probably charge a lot more. It’s conceivable that in future elite “customer clubs” could emerge for this very purpose. How long before some info-entrepreneur organises one?

If that sounds far-fetched, try something a bit more down-to-earth: marketers will have to develop new brands and brand positionings to cater for different customer clusters who have different attitudes to information sharing and who want different sorts of relationship with different companies (equal partner, teacher, guardian, servant). And “how I will handle your information” and “what benefits you will get by telling me about yourself” will become an increasingly overt differentiating factor.

Commenting on the Henley report last week DMA chief executive Colin Lloyd predicted “the price of one-to-one relationships will go up as consumers get more demanding”. That’s a good candidate for understatement of the decade.

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