Customer data strategy: Solving the direct to consumer puzzle
To optimize direct to consumer models and win against digitally native competitors, consumer products companies need a focused customer data strategy.
Narrowing down the top data privacy issues is tough because, just like data, there’s a lot to dig through.
So, let’s take the CX and CRM angle: Trust is a must for acquiring new customers and keeping the ones you have. In an era when data is the treasure, the dragon guarding the cache of customer information better be up to the task. (Or having customers won’t be a worry for long, because they’ll be gone.)
How do consumers feel about their data privacy?
Trusting companies with personal data has become a source of hesitation for the majority of consumers. Why? (No one is asking why. But, O, let us count the ways we mistrust thee…)
Consumer sentiment around data privacy issues and the way data is handled – especially by businesses – tells a grim tale. According to recent research of respondents among U.S. adults:
- 81% feel they have very little to no control over the data that companies collect about them
- 81% feel that the risks of companies collecting data about them outweigh the benefits
- 79% are very concerned about how companies use the data collected
- 59% feel they have very little to no understanding about what companies do with the data collected
- 63% say they understand very little or nothing at all about the laws and regulations that are currently in place to protect their data privacy
- 79% don’t believe that companies will admit mistakes and take responsibility when they misuse or compromise data
- 75% don’t believe that companies will be held accountable by government if they misuse data
Bleak and cynical don’t seem too strong here. We passed broken trust a while ago. Is anyone surprised? I hope not.
When so many people have so little trust in how companies use their data and feel that there are no real consequences for mishandling and misusing it – this should be a wakeup call.
Transparency, authenticity, and great customer service all go a long way toward building that trust with your customers. One way is to show that you take the mandate and responsibility for data protection seriously. Research by Gartner says that brands who put users in control of how their data is collected and used will reduce customer churn by 40% and increase customer lifetime value by 25%.
If your data dragon is slain and gives up the gold, even more valuable customer loyalty and advocacy are at risk.
Of U.S. consumers, 82% (and 75% of global consumers) say they will stay with a brand they trust, and even pay more (59% globally, 63% U.S.). Loyal customers are your best brand advocates, with 76% globally and 78% U.S. recommending your brand if someone asks.
Why is data privacy important?
Clearly, consumers are freaked out by the yottabytes of their personal data that has been collected, sold, and used for years without their really knowing or understanding the scope and depth of the data mining. The mile-long naughty-list of data breaches only stokes the flames of anxiety.
No wonder customers have trust issues after the exposure of data collection and management practices by tech giants like Facebook and Google, who have become such integral parts of our lives and society.
It’s like finding out that someone you know and respect has been up to some creepy and questionable stuff. And you’re facing a dilemma because you don’t want them in your life anymore, but it feels too late and you don’t feel like you can cut them out either. It’s unsettling.
Data privacy is important for organizations because of the risk of damaging brand reputation and increased customer churn. Additionally, the cost of fines and legal battles for noncompliance and violation will get out of control.
5 facts to make you smarter: Top data privacy issues
So, among the many data privacy issues for businesses to be aware of, the following five are among the top global data privacy issues:
- New laws and regulations: Since the implementation of the GDPR in 2018 and subsequent fines levied for data protection violations, it was only a matter of time before legislation passed in the U.S. States such as Nevada, Washington, Vermont, and California are proposing and implementing their own data protection legislation. California’s CCPA is already in-motion effective January 1, 2020, with enforcement beginning July 1, 2020. The consequences for noncompliance or violation have escalated to bigger fines and even jail time. Companies will be tasked with understanding and complying with regulations for any state in which they do business, which is likely to get cumbersome until legislation on a federal level is implemented. Make no mistake, one of the top data privacy issues for 2020 will be upcoming legislation and how businesses engage with it.
- Data security scientist: As the global issue of data protection evolves, the positions needed to effectively organize the management and protection of data will also emerge as need is recognized. In addition to the Chief Data Officer and the Chief Information Security Officer, the Data Security Scientist will bring more of the required expertise to the strategic collaborative effort.
- Employee training, education, and awareness: Data privacy and security management must be a clear and unified front throughout the entire organization. Every employee must understand and uphold the standard for information security, handling customer data as carefully as IP. Adapting practices and reinforcing awareness of best practices will take time, but providing necessary education, support, and resources to employees will always remain a top priority. Laws will be implemented and the landscape of data protection legislation will evolve, nationally and globally.
- Cloud solution security: Everything is going to the cloud. Much of it is already there. Cloud security has been a concern from the start. Vetting and confirming the data protection security level of your cloud solutions is still a necessity. An important part of cloud security will be adapting and leveraging AI and machine learning to the task of data protection within organizational frameworks and processes. Data protection and information security must be integrated into the Intelligent Enterprise.
- Third-party risk management: It’s one thing to ask your customers to trust you with their information and then to assure that your organization has the proper handling protocols and technologies in place. It’s another to also confirm that third-party companies you work with – partners, suppliers, service providers, and others – are doing their part to protect your customers’ data as diligently and maintain GDPR compliance.
California Privacy Rights Act: What companies need to know
The California Privacy Rights Act gives consumers more control over their data. Here's what businesses need to know and what they can do to win consumer trust.
Bonus content! (just enter your most personal information here)
Facial recognition: The technology is so good now that it’s a legitimate way to unlock your phone. With the widespread use of facial recognition for tracking and surveillance, the ability of AI to produce deepfakes is already uncanny. Keeping this data protected is already a high priority for preventing your face from getting onto the wrong body.
Mobile health data in the healthcare industry: Yes, HIPAA has been around for a long time and seems to have been effective. However, we’re providing ever more data to health-related apps, whether we enter it manually or through the sensors in our phones and other connected wearable devices such as Apple watch and FitBit (now owned by Google, whose Nightingale project has been harvesting millions of people’s health data because it can, so let that sink in).
Guess who owns that data, and who might be willing to pay for it.
Consumer access to their data: People are going to demand and get greater access to all of the information collected about them and expect a delete option for information they no longer want to share (even if they doubt it will really be erased).
Customers will consent to share their data less freely going forward, at least not without getting more in return. Because learning how much your Facebook data is worth individually ($.20-$.40) compared to how much Facebook fetches for selling the data of 190 million users in the U.S. and over 2.2 billion users outside of the U.S. probably won’t make your day. It’s almost like they’ve seen Office Space.
Respect, honesty, and empathy go a long way toward building trusting customer relationships. Companies who ensure data privacy and security will see the benefits of greater customer loyalty.
Despite the complexity of the situation, opportunity abounds for companies who go the distance to regain consumer trust with transparent and effective data protection measures in place. Get a good data dragon to guard the treasure trove of data that your customers entrust to you.
Giving customers confidence in the ability of companies to respect them, their data, and their privacy will become another great brand differentiator.
