Businesses are asking their customers some very personal questions and, for the most part, they don’t seem to mind. According to the Direct Marketing Association (DMA) one in three people now regard their personal information as a commodity to be traded with companies in exchange for free services or better benefits, rising to two in five among 25-40 year olds.
But consumers are discerning about which brands they share personal information with, says Chris Combemale, chief executive at the DMA. “While people are concerned about data privacy, many are confident in sharing their information in particular circumstances. Trust is the key factor – people are far more willing to share their data with brands and companies they trust.” Indeed, the DMA’s recent research reveals that 58 per cent of respondents cite trust as the most important factor when deciding whether or not to share information. But trust takes a long time to build – and a very short time to destroy.
As Harvey Lewis, research director at Deloitte, says: “With so much data around, it is one thing to adhere to data protection principles and entirely another to make sure the way you act upon the data is done in a responsible way – and that is where you generate the trust. So if consumers know and understand that brands are only going to use their data in a way that they consider to be responsible and delivers some benefits, then they are much more likely to engage.”
BA’s newly launched Know Me tool enables staff to access customer data on board flights in an attempt to give a more personal service. However, it has received a mixed reaction in the media with concerns that staff will know too much about customers and that information about its travellers could fall in to the wrong hands. In particular, fears have been raised about the potential of the tool to store images of people.
In order to allay any fears that customers may have, brands must be transparent regarding how they capture data, what data is captured and how this will be used and why. This is essential to building trust with consumers. Paul Berney, chief marketing officer and managing director of the EMEA branch at the Mobile Marketing Association (MMA), says marketers need to start paying attention to “transparency, choice and notice”, particularly when it comes to mobile marketing. “The technology exists to allow us to offer consumers a much more sophisticated approach than just a blanket opt-in and opt-out, which is frankly a heavy handed and blunt approach. The choice mechanisms we offer in particular could allow consumers to change their level of consent based on individual brands or their individual context.”
Adrian Hado, head of insight and analytics at Avios (formerly AirMiles), agrees that giving customers choice is key. He says: “After registration [our customers] can go in and change their preferences – they can say what type of communications they want to receive, such as our deal of the week email and a statement with their balance – and customers can opt in and out.” He adds that Avios frequently sees customers impart further personal data as the relationship develops. “We keep it open so people can go back in and add more information. There may be stuff they don’t want to share at the beginning of a customer journey with us, but they may add that later. We see that happen a lot.”
‘Less is more’ is an approach that Jeremy Henderson-Ross, legal director and general counsel of EMEA at Aimia, parent company of the Nectar loyalty scheme, also believes in. “Asking people for too much information puts consumers off completing any transaction.” He adds that it is also important to offer incentives. “Just a small reward makes a huge difference to the take up rates. The most effective methods to gather data offer compelling reasons for consumers to share information. Rather than simply asking for personal data outright, it is much better to offer a useful new service which requires consumer data as a consequence.” The DMA research shows that 32 per cent of respondents cited price discounts as a sufficient incentive to share information.
Return for sender
When it comes to mobile marketing, the added layer of location-based data can help brands gain an even deeper understanding of their customers and enable them to serve useful content that is contextually relevant. Berney cites the RightMove app as a good example of this.
“This app allows people to stand outside a property, press a button to get located and be served the details of the house they are looking at. In this instance, consumers are happy to utilise the location functionality and it is clear to them why their location is being tracked.”
He also mentions the Poynt app, which serves up location relevant advertising when consumers are searching for things locally, such as places to eat or entertainment: “Again, I would argue that sharing your location is actually valuable to both e-consumers and the local advertisers.”
It seems that younger consumers need less of an incentive or reward to share personal information in the online space than their older counterparts. Yet, tellingly, this group is less likely to even recognise that organisations collect data about them, particularly via social media channels.
According to the recent 2012 Deloitte data attitudes survey (Data Nation 2012), which sampled more than 1,000 teenagers and adults about their attitudes to data both online and offline, as high as 40 per cent of 15- to 17-year-olds profess ignorance of data collection by companies and public sector bodies in the social media space, compared to just 18 per cent of the wider population.
These results suggest that an awareness gap has arisen in the minds of young adults between their contribution of data and how it is used by organisations. But when asked outright for data, it seems that this generation is likely to share in return for a little honesty and reassurance from brands. Research from YouGov in June 2012 showed that 59 per cent of 18-24 year olds agreed that if businesses provided clearer explanations of why they wanted their personal data and what it will be used for, they would be more inclined to give it to them.
But Lewis says this opportunity for brands to educate consumers about how and why data is captured and used is not restricted to the younger generation. According to the recent Deloitte Data Nation survey, 82 per cent of respondents were aware that their data was being collected by brands, yet more than half didn’t know why. “The main finding of the report is that it is very easy to assume that the public is most concerned about security and privacy and, therefore, focus internally on making sure the principles of data protection are followed. But what organisations miss is that it is the lack of understanding that is driving a lot of behaviour. If brands engage with customers in a different way by being more open about what the data is used for and explaining the benefits, consumers are more likely to be excited about engaging.”
Nick Stringer, director of regulatory affairs at the Internet Advertising Bureau (IAB), says such education is at the heart of the EU self-regulatory programme to address privacy concerns. “The initiative seeks to provide consumers across all EU markets with greater transparency via the use of a small symbol or ‘icon’ in or around ads on websites with links for consumers to exert control (such as via www.youronlinechoices.eu). The EU advertising industry will embark on a consumer campaign to support this and to explain the new icon, how online advertising works and what it helps to pay for.”
When it comes to mobile marketing, the added layer of location-based data can help brands gain an even deeper understanding of their customers and enable them to serve useful content that is contextually relevant
Among the benefits of winning greater consumer trust and encouraging wider sharing of customer data for both brands and consumers is the generation of more relevant content and offers. As Hado says: “The more you know about customers the more relevant you can be. If we know customers like city breaks, why try and sell them business routes? Customers can’t stand rubbish, or spam and junk mail – they lay down the challenge to brands to be relevant to them.”
IAB’s Stringer says the study recently carried out by the IAB and ValueClick found that, when it comes to online advertising, consumers do understand its role in helping fund content and services and the need for a trade off of information to make this advertising more relevant. He reported that 55 per cent of UK consumers would rather see online advertising relevant to their interests.
Yet, in the wider consumer space, Deloitte’s Data Nation research revealed that 45 per cent of people are not happy about receiving tailored communications, adverts and offers from companies – offline or online. “When we asked people whether or not they wanted to receive targeted information, discounts based on previous purchases, or products they had browsed for online, only 17 per cent said they would be happy. This is not an overwhelming response, particularly for marketers who are desperately trying to push offers and ads,” says Lewis. “This really does bring the question of education and engagement to the fore if you have a large number of organisations who want to do this with their data but a set of consumers who don’t want it to happen.”
But education of consumers is not the only missing link. It is also a challenge for marketers to ensure they stay informed about data privacy laws, something Stringer acknowledges. “It will always be a challenge to ensure that everyone is up to speed with new regulations and laws, as well as self-regulatory initiatives. It is a challenge the industry needs to meet as it moves towards a more ‘privacy by design’ approach, offering innovative ways to empower consumers to exert greater control over data collection and use to suit their requirements.” It is an issue Combemale also recognises, pointing out that it is a role the DMA strives to fill. “Unless you’re a lawyer, you can’t expect to be a complete expert on marketing law.”
When it comes to understanding the growing use of data in the expanding social media space, it seems marketers have work to do. Research from the Chartered Institute of Marketing’s Social Media Benchmark report in May 2012 reveals that 13 per cent of marketers have ‘no understanding’ of the impact of the Data Protection Act on social media activity, while only 30 per cent claim to have a ‘very high understanding’. The figures arguably mirror Deloitte’s findings regarding the consumer perspective, which showed that about 60 per cent of respondents strongly oppose companies that provide goods and services using their data from their social networking posts. “A lot of brands want to use social media data to work out customer sentiment and target products better, but what they don’t necessarily understand is that their consumers don’t trust them with that data and don’t necessarily think they will be responsible with it,” says Lewis.
As brands become ever more sophisticated in capturing customer data, from major retailers providing free Wi-Fi in stores in return for customer email addresses, to companies asking customers to log on to their websites using their Facebook login details, brands would definitely benefit from taking the time to explain to customers exactly what data is being gathered and how, and of course, why. As Lewis says: “It is a positive thing for brands to look at the opportunity that now exists to educate and inform people because that could just have an impact on their bottom line.”
Case study: Insurethebox
Car insurance company, Insurethebox enables drivers to take out an annual policy based on either 6000 or 8000 miles a year. If drivers need more miles they can top up their coverage in the same way they would with a mobile phone.
The product works thanks to an IBM analytics device that is fitted to the driver’s car, and records how far the driver travels and how well they drive. “To incentivise people to drive better they can earn bonus miles if they drive well,” says chief executive, Mike Brockman. “Speed is one important category, as well as how smoothly you drive and whether you drive for long periods without taking a break. Our portal measures various components and awards customers extra miles. On average our customers win 65 miles each month.”
The data is hosted externally, but Brockman says Insurethebox has an agreement that driver information comes straight into its data warehouse and is not shared with any third parties. Customers are happy to share this detailed data with the company thanks to the savings they make. “We save our customers on average £500 on premium,” claims Brockman. “Customers can log into their personal portal to view details and feedback on the journeys they have made and how many miles they have driven. The portal also acts as a direct communications channel to customers throughout the whole policy. “We talk to our customers at least 24 times a year and they can also communicate with the service team via live chats.”
The data gathered is also used to tailor the product to individuals. “When customers renew their policy we take into account how well they have driven to offer them a premium based on their own personal driving experience, so all of our customers are priced individually on renewal. Most of our customers get substantial reductions.”
Insurethebox has sold 110,000 policies since it launched in 2010 and Brockman claims that its renewal rate is “the best in market” at over 80 per cent.
Director of customer insight
Customers are looking for brands they can trust. How a brand collects and uses data is a big contributor to trust. At Sainsbury’s, we have one of the highest levels of trust in the retail market, but that means we have to keep working hard to maintain and build that trust.
Brand Match is a good example. Customers were telling us they were concerned about the price of brands in Sainsbury’s. That’s why we launched Brand Match. We add up their basket and, if it’s cheaper in Sainsbury’s than in Asda or Tesco, we tell them. If it’s more expensive, we give them their money back. Customers thought this was great and we’ve seen some real changes in price perception and behaviour, but they were still a little bit unsure. So after Christmas we rolled out a website where customers enter their Nectar card number, or till receipt number, and see exactly how the prices compare. Being open with customers about how we use their data is really important.
Nectar is also a really good tool for us. Customers can earn extra points by shopping at Sainsbury’s but at the same time in a very open way, they are giving us access to their data. Also, when customers log on to sainsburys.co.uk and enter their Nectar card details we display the favourites that they have bought before, so it makes it easier for them to shop. Customers really value that. We also lay out the online store with the things a customer bought previously rather than in alphabetical order. Making it easier for customers to shop by using their data gives them a real benefit.
What customers consistently tell us is that as long as we keep it secure, behave responsibly and they see the benefit of giving us their data, they are more than happy to share information.
NMA Explains: online privacy by Lucy Tesseras
The EU ePrivacy Directive came into force on 26 May 2012, following a year-long grace period, but 48 hours before the deadline the Information Commissioner’s Office (ICO) issued updated guidance on how to comply with the legislation.
The changes mean the ICO will now allow companies to get “implied” consent, as well as “informed” or “explicit” consent, from consumers prior to storing or using cookies, or any other tracking technology.