When you collect data about your customers, who does it belong to? The answer isn’t straightforward. While many firms increasingly think of their data as a vital resource, data protection laws mean that they can’t treat it entirely as their own.
Other companies have positioned themselves as customer champions by letting consumers access the data held about them. And marketing thinkers have developed ideas for people to reclaim control of their data. Most of this, however, has left the vast majority of consumers unmoved.
That may be about to change. A combination of factors, including cloud computing, government intervention and the massive popularity of apps, are starting to rebalance thinking about the ownership and sharing of data. And proponents of data sharing see a raft of opportunities emerging as a result, for brands both old and new.
One immediate benefit, according to Moneysupermarket head of PR Susannah Clark, is that sharing data helps people use your services better. If people are paying for a service and not using it properly, and not getting value out of it, they’ll become disenchanted.
“Sharing of data makes it easier to match customers to the best services for them and builds loyalty,” she says. “An open dialogue also means you can work with customers to build better products and services for them.”
When buying products, data sharing could generate electronic receipts that customers can store in case they need them for an insurance claim or to prove a warranty is still valid, says Steve Smith, director of retail competition and regulatory strategy at Lloyds.
People sharing personal data with companies means marketing based on solid information rather than inferences, explains Drummond Reed, co-founder and managing director of personal cloud network the Respect Network.
“This increases my ability to share my information with companies,” he says. “So a department store could get information from me about my sizes and the clothing brands and colours I prefer. Then if I change that data – if I lose or gain weight – the app will ask if I want to share that change with my preferred suppliers and ask if I want them to make suggestions about what I could buy.”
Data sharing could also solve problems for marketers, including what Alan Mitchell, strategy director at agency Ctrl-Shift describes as the “nuclear no”; customers opting out of all communications with brands.
“Some companies have 50 per cent or 60 per cent opt out, and that’s a problem they have to deal with,” he says.
Mydex provides personal data stores for individuals. David Alexander, co-founder and chief executive, agrees that data sharing offers a more ‘granular’ response for customers than blanket opt outs such as the telephone preference service. He also believes businesses have the opportunity to strip out between 40 per cent and 75 per cent of the cost of a transaction by creating ‘trust relationships’ with their consumers based on sharing.
“Better customer relationships mean a better understanding of how value is created, better customer acquisition and better retention,” he says. “The only person who can give you a 360 degree view of the customer is the customer themselves, and that only happens when the customer takes part,” says Alexander.
This is just the beginning. Everyone in the space stresses the opportunity for brands and entrepreneurs to create compelling services. The lack of these, added to people’s reluctance to take part, has been one of the main factors in holding data sharing back. But apps can help with this, says Alexander.
“Apple created the concept of apps that you can download and that make your life better,” he says. “It’s empowerment by the downloading of information, and it’s inevitable in this space.”
Brands, particularly utilities and banks, are already creating apps that deliver value based on consumers sharing their data. It’s a move that has been driven at least in part by the rise of price comparison websites. Lloyds is at the forefront with its Money Manager, Bill Manager and Halifax Home Finder apps (see below). But other companies are still either afraid of sharing data with their customers, or don’t see the need.
“This is about fear and uncertainty,” Alexander says. “Do big brands really trust their own customers?” The fear is that the easier companies make it for their customers to compare them with their competitors, the more likely they are to switch.
At Lloyds, Smith takes a different view. “We were behind the seven-day switching service. We’re not going to rebuild trust in this sector if we avoid transparency, and if we believe we have the best products we have nothing to fear,” he says. “Quicker switching should be good for us.”
If apps are one crucial part of this jigsaw, government intervention is another, with the launch of MiData, part of the government’s Consumer Empowerment Strategy. Midata aims to give people more control over the data that companies have collected about them, allowing people “to view, access and use their personal and transaction data in a way that is portable and safe”.
There are currently 19 businesses and organisations signed up to the project, along with a further seven consumer groups and regulators representing consumers’ interests and concerns. The project launched just over 12 months ago and, according to a MiData spokeswoman, the bulk of the past year has been spent “talking to stakeholders about taking this on”.
The big step last month was the announcement that compliance with MiData could be made mandatory if the voluntary approach doesn’t produce the desired results (see box).
At the moment, MiData is focused on financial services, telecoms and utilities. Companies such as EDF Energy and British Gas are allowing customers to download some data, while in May this year Scottish Power released customer consumption histories in an electronic format designed to make switching easier.
For Moneysupermarket’s Clark, the key thing about MiData is what comes next. “MiData is interesting, because it’s about giving people their data in a form they can use. It’s now at proof-of-concept stage, and the interesting bit will be what it actually looks like. It has to be done clearly or people simply won’t use it.”
It’s this need for simplicity that makes the rise of cloud computing such a key factor in the development of data sharing. At one level, the cloud is just a different way of enabling what went on before. But there are certain aspects of data sharing that work better in the cloud than otherwise.
“It’s a lot easier if things are done in the cloud,” says Sandy Porter, strategy and business development director at Avoco Secure, a company which specialises in cloud identity, privacy and security. “One of the key things is to provide data in a standardised format. If people just want to look at their data, that’s one thing, but if they want to share it with other parties with some limited controls, there needs to be a standard in the way it’s provided. Sharing also has to work across platforms – PCs, smartphones and tablets – which is so much easier to do through the cloud.”
Things are complicated by the fact that there isn’t one “cloud”. In fact, one of the key questions is how many there should be and whether consumers will use a number of different providers.
But as the area develops with established brands and newcomers offering not just access to data, but personal data stores to keep it in, there are problems to overcome. The first is identity; how do the people you want to share data with know you’re really you?
“There needs to be a secure identity component, and the easiest way to do that is in the cloud,” says Porter. “If you push loads of data close to customers, they’ll struggle with security, because the least secure place at the moment is the personal device.”
A number of companies now specialise in this, from online identity verification services such as Miicard to established brands such as the Post Office. There is also an initiative being run by the Department for Work and Pensions. Last month it announced providers had been chosen to design and deliver a secure online identity registration service for online benefit claimants.
“Theoretically this will have 100 per cent coverage of the population,” says Porter. “It will run in parallel with MiData, and in the medium term it could be used to provide people with an accredited identity for online shopping.”
All of this opens the door to a raft of new data services where people could have a cloud for their car, for example. Those marketers who can get it right will benefit.
Director of retail competition and regulatory strategy
Marketing Week (MW): What is Lloyds doing in terms of allowing customers to access their data and data services?
Steve Smith (SS): All the banks got into this around the time of internet banking, assuming that people would get into personal financial software. We built the functionality into the back end but it didn’t take off. There wasn’t enough customers could do with it.
Now we’re supporting MiData because we believe it’s the right thing to do. We’re also developing tools ourselves to help people use their data to manage their finances.
MW: What tools have you developed?
SS: Money Manager is one example. It automatically breaks down your spending into meaningful categories, such as entertainment, food and travel, using easy-to-read graphs that give you a fuller picture of where your money goes.
We also have Bill Manager; we have agreement with certain utility companies so people’s bills come into that tool. And then the Halifax Home Finder app is also in this space. It allows you walk down the street and use your phone to see which houses are for sale and their details.
MW: What are the technical or regulatory problems in making data available to customers in this way?
SS: The things that loom large are privacy and confidentiality. This sort of information is very personal to people and customers take a while to get used to the idea of data sharing, and they think about whether they can trust the companies involved. For example, with Bill Manager, customers need to be confident that’s the only use we’re going to put their data to. Once it’s explained, people can see the benefits, but privacy is their first concern.
The other issue is the use model. Do customers download data to their own device or does someone else manage their data store for them? Our model reflects our history, so it’s a download customers can store where they like. Fraud becomes an issue if personal data store companies come to us asking for data – you need a trusted identity to prove you’re who you say you are.
One of the advantages of data sharing is that the customer control embedded in it should mean it avoids data protection problems.
“In the ‘big data’ approach to identity, data protection is a big problem,” says James Varga, chief executive of digital identity verification service miiCard.
“We put the consumer in control of that data so they consent every time it’s used. That means we can jump over those problems.”
David Alexander, chief executive and co-founder of personal data store provider Mydex, agrees.
“The Information Commissioner is trying to make that abuse unacceptable; but it would be much more powerful to improve customer relationships by sharing data and having customers keep their data up to date.”
Potentially a more complex problem is that of data sovereignty, which means that data collected in the UK has to be kept in the UK. But Sandy Porter, strategy and business development director at Avoco Secure, which specialises in cloud identity, privacy and security, argues this is more a matter of data categorisation.
“The nationality of data isn’t a problem, because there isn’t just one cloud, there are lots of them. You can specify with your cloud provider where you want your data to be hosted,” he says. “The problem at the moment is lack of choice, but thing will evolve to give more. The pressure is on providers to develop this side of things.”