You Break It, You Buy It: Why Trust Matters Most When It Comes to Consumer DataFebruary 7, 2019
A $60 billion plunge in market value in less than 48 hours. A $6 billion drop in Mark Zuckerberg’s net worth. Massive user disengagement and a surge in app deletions. In the aftermath of 2018’s Cambridge Analytica data breach, Facebook had ample evidence that it was facing a major crisis.
Yet, perhaps the most telling figure related to the scandal, in which tens of millions of users learned their information had been accessed inappropriately, did not concern any of these statistics directly.
One week after the data breach was announced, researchers at the Ponemon Institute found that 28 percent of Facebook users trusted that the company was committed to protecting their privacy. Before the breach, that figure was 79 percent. The following week, opinion rebounded slightly, then dipped again after Zuckerberg spent two days testifying before Congress about Facebook’s data privacy practices.
In response to public backlash about the scandal, Zuckerberg tried to strike a clear tone on his company’s failures. “We have a responsibility to protect your data,” he wrote in a Facebook post. “And if we can’t then we don’t deserve to serve you.”
Yet, Zuckerberg’s declaration of fault was only the beginning. As he later acknowledged, Facebook’s efforts to address data scandal would take time.
In subsequent months, Facebook’s stock price made a full recovery. The company even enjoyed growth in its daily active user base, reaching 1.52 billion people in 2018. Yet these positive developments have not erased the impacts of the breach from Facebook’s corporate memory.
By introducing new privacy tools and banning problematic apps, the company continues to make the case that it is worthy of the public’s confidence. Yet new data issues continue to emerge, thrusting Facebook’s flaws back into the spotlight. In the aftermath of the Cambridge Analytica scandal, the most pressing question remains unanswered: Can Facebook ever recover the consumer trust it so swiftly lost?
The Personalization-Privacy Paradox
As Facebook’s misfortunes suggest, customer data can raise uncomfortable ethical questions for the companies that collect them. With each new corporate data breach incident, consumer information begins to seem more like a liability and less like an asset. Do the benefits of data collection really justify the difficulties of data protection?
For the leaders of America’s most powerful companies, the answer is a resounding “yes.” One recent survey of Fortune 1000 executives found that more than 80 percent regarded their “big data” endeavors as successful. Moreover, research from McKinsey indicates that companies that leverage insights about customer behavior typically outperform competitors in terms of sales growth and gross margins. Some studies indicate that tailored marketing tactics informed by consumer information produce a return on investment five to eight times higher than standard approaches, increasing sales by approximately 10 percent.
Additionally, customer data are enticing precisely because they can be used so flexibly once obtained. Predictive analytics allow businesses to market to customers when they’re most likely to buy. Psychographic information enables an understanding of customers’ motives and concerns. Customer experience tracking can reveal deficits in your service delivery or sales funnel. For all the practical hurdles that customer data present, the wide array of potential gains is too powerful to ignore.
But if companies benefit from collecting information about their customers, the enterprise aligns with customers’ demands as well. As companies adopt increasingly tailored approaches to reaching individual members of their target audiences, personalization is the expectation among modern consumers.
According to one analysis, more than half of shoppers anticipate receiving a customized discount offer within a day of joining a company’s loyalty program. For brands that meet that standard successfully, the payoff can be substantial: Personalization boosts order size, customer retention, and “impulse” buys.
Similarly, researchers at Salesforce report that 59 percent of consumers expect brands to engage them in ways that reflect their past interactions. Clearly, you can’t re-engage a past or potential customer if their data disappear after each encounter. Accordingly, retaining consumer information is a basic requirement of excellent service in our digital era, not just a means to boost sales.
If consumers appreciate personalized approaches, however, they remain uncomfortably aware of the risks of surrendering information about themselves. Americans’ confidence that companies can secure their data is declining; 49 percent believe their data are less safe than they were five years ago.
Across industries, data security concerns are pressing: One poll conducted in the wake of the Cambridge Analytica scandal found that 78 percent of consumers feel a company’s ability to protect their data is “extremely important.” In the same survey, 75 percent said they wouldn’t do business with a brand they couldn’t trust to keep their data safe.
The resulting view of consumer priorities is complicated: When it comes to companies collecting their data, consumers have great expectations of personalization and massive anxieties about privacy.
Accordingly, modern brands must thread the needle, gathering enough data to power service and sales while also guarding the data fiercely. Many of the world’s most powerful brands have fallen short of this demanding standard. Alongside Facebook, IBM, Equifax, and Uber have lost hundreds of millions of dollars due to data breaches.
Making reparations may prove even more costly: In 2018, Facebook, Uber, and Wells Fargo launched apologetic ad campaigns designed to restore public goodwill after high-profile debacles. Time will tell if these efforts prove effective, but it’s safe to say the cost of executing these campaigns would dwarf most businesses’ entire marketing budgets.
The question of consumer data, like so much of brand strategy, revolves around earning and keeping the trust of customers. Fail to form that trust, and your brand’s promises to protect consumers’ privacy will be met with skepticism. Additionally, if customers are wary of sharing their data, you’ll miss opportunities to understand their needs more clearly, and those relationships may flounder.
The essential challenge, therefore, is for your brand to convince customers you’re worthy of holding and protecting their personal information.
Long before digital data protection emerged as a central concern for modern businesses, the team at Brandtrust began studying the human realities underlying organizational challenges. Over almost two decades of work with respected global brands, we’ve welcomed technological change as a way to apply and expanded our learning. While each year brings new obstacles and opportunities for our clients, our pursuit of human truth remains steady.
In this post, we’ll share key findings of our research as they apply to gathering, using, and guarding consumer data. From helpful messaging strategies to concrete actions your brand can take to earn trust, this post can guide your company’s approach to this complex subject.
The competing needs of personalization and privacy are here to stay. Here are five ways to honor both priorities simultaneously.
Earning Information: Five Ways Brands Can Show Consumers They’re Worthy of Their Data
Transparency Is a Necessity
When it comes to building a trusting relationship on data use and protection, it helps to lose the legalese.
Research indicates that merely 1 in 10 consumers actually read the extensive service agreements brands ask them to accept. In 2018, academics from York University and the University of Connecticut asked individuals to evaluate a term of service agreement that included draconian measures such as giving up one’s first child. Ninety-eight percent of participants agreed to the terms without notice.
By embedding their data use and protection policies in a daunting wall of text, companies ensure that their customers won’t have a clear understanding of what they’re signing up for. As a result, nearly half of consumers feel unsure about how companies use their data. In this climate of uncertainty, it’s no wonder consumers regard corporate data policies skeptically.
Some companies, however, model admirable transparency in conveying the exact nature of their practices to customers. Fitbit has created a comprehensive and easily navigable resource for customers interested in how the company uses customer data. Apple takes a similar approach, covering key privacy concerns in a user-friendly fashion.
Our studies of consumer trust suggest that honesty is an essential component of building real relationships with your audience. But if you tell the truth in language so complex it can’t be understood, how honest can you really claim to be? To level with consumers about your company’s data policies, practice simplicity and clarity instead.
Explain the Exchange
If both privacy and personalization are top consumer priorities, then brands have a responsibility to achieve both. Consumers are attuned to this trade-off and willing to surrender their data when they anticipate concrete rewards in return.
One recent study from Columbia Business School found that 75 percent of consumers would willingly share their personal information in exchange for a valued product or service. Eighty percent would do so to receive a special offer or benefit.
Similarly, a 2016 Cognizant analysis revealed that two-thirds of consumers viewed their data as valuable commodities but were willing to share them in exchange for some concrete value. For contemporary consumers, transactions with companies are more than simply monetary: What do they get by entrusting a brand with their personal details?
If your company wants to work with consumers’ data, be clear about how you intend to improve the product or service they’ll receive as a result. Will your brand offer discounts or personalized recommendations? Will your service reflect their historical preferences? When consumers see sharing their data as a means to receive better service, they’re more likely to trust your brand’s intentions.
Just as importantly, let them know what you don’t intend to do. If you don’t plan to sell their data to third parties, that choice represents a benefit. If you promise not to overload their inboxes with unsolicited emails, all the better. When consumers make informed privacy choices, everyone benefits.
When it comes to data disclosure, people appreciate options: The capacity to adjust your privacy settings on the fly is understandably appealing. For companies requesting the trust of new customers, the power to make changes later can even be a key selling point. If you change your mind, that’s fine.
Yet, many companies advertise flexibility and deliver only frustration. Facebook, Google, and Microsoft have all drawn criticism in this regard, with many complaining that these tech giants make adjusting privacy settings too difficult. In a 2018 report, the Norwegian Consumer Council alleged that these companies engaged in “dark patterns” of design, such as burying menus that would permit users to share fewer data.
Is your brand actually empowering customers to take control of their own data, or imposing barriers to their autonomy? Don’t just pay lip service to privacy: Give your customers clear and easy tools to make adjustments they deem necessary. In terms of building trust, doing what you say goes a long way.
Be Proactive on Principle
If you watched any part of Zuckerberg’s testimony before the Senate in April of 2018, you’re all too aware that political processes can often lag far behind technological realities. This dynamic is surely concerning for consumers, but it complicates the ethical landscape for companies as well.
As the volume and variety of consumer data grow, brands will continually confront areas of legal ambiguity – or the absence of regulation altogether. In the words of Cameron Kerry, who helmed an Obama administration task force on consumer privacy, “As the data universe keeps expanding, more and more of it falls outside the various specific laws on the books.”
In this climate, it’s entirely possible to break consumers’ trust without technically breaking the law. Accordingly, brands must establish data privacy values proactively, rather than waiting for regulators to curb their behavior.
Our research has repeatedly demonstrated that consumers connect with brands on the basis of their values. Moreover, customers’ loyalty is driven by a sense that a company has their best interest at heart.
In terms of managing customer data, therefore, you must do more than the legal minimum. Take a look at your company’s ethical convictions and make decisive choices that serve the interests of your audience.
Many of the recent corporate data breach scandals have a disturbing element in common: The companies involved responded to the issue slowly and secretly. Equifax took nearly six weeks to tell the public that its data had been hacked. In 2013, Target acknowledged a data breach only after a security blogger had reported it.
Uber was recently fined $148 million for failing to report that its data had been hacked in 2016. Rather than taking the transparent route, Uber actually initially paid the hackers who had taken consumer data $100,000 to delete the information. When this choice later came to light, critics excoriated the company.
Data breaches will continue, and brands must consider how they would respond if targeted in this manner. While adequate security is the best possible public relations investment, you can take concrete steps to serve your customers and protect your brand’s integrity if this worst-case scenario occurs.
First, develop a plan: The slow, inconsistent, or ill-advised moves some companies have made could have been averted with more preparation. Don’t rely on your instincts alone when a crisis unfolds. Before the emergency arrives, spend time considering how you can honor your brand’s values even in your most challenging moments. That conversation is valuable, even if you never need to execute your plan.
Second, commit to rebuilding trust from the beginning. In the wake of its breach, Equifax initially charged customers fees to freeze their credit, prompting a sharp backlash from critics who alleged the company was attempting to profit from its own error. Equifax swiftly reversed its error, but the mistake added insult to injury for many customers.
If your brand fails its customers, don’t look for ways to save on costs in the short term. Rather, invest in the long-term process of rebuilding customer relationships. If that means profits take a hit, the loss will be well worth it in the long run.
From Data to Devotion: Growing Consumer Trust
Clearly, matters of data privacy are just one dimension of the ever-evolving relationship brands pursue with consumers. In many ways, however, this single issue highlights some of the essential themes of brand strategy: values, consistency, and trust. Without these principles, brands will struggle to create true customer connections.
Our team of brand experts and social science researchers employs a multifaceted approach, exploring overarching concepts pertaining to brand strategy and their specific applications. Whether developing new data privacy messaging or transforming the very basis of your business, our processes and expertise will prove relevant to your endeavors.
At their core, business challenges stem from human realities – the subject we’ve been probing for nearly 20 years. By producing meaningful conclusions, we empower organizations to act decisively. How much more could your brand do to earn your customers’ trust? As technology and industries evolve, that question remains essential.
To learn how our team has helped some of the world’s most admired brands seize new opportunities, explore our past work here.