Data Utility Vs. Privacy is not an either/or option. How do you balance both?
In the big data-driven world, data analytics and data privacy are equally important. Just as the opportunity for enterprises to engage with consumers has grown in importance, the responsibility to secure consumers’ personal information has also gained momentum.
Richer data analytics and the better understanding of consumers resulting from this have become more important. However, the responsibilities that organizations have towards safeguarding the personal information of consumers have been steadily increasing.
The data-driven transformation of companies is already upon us. Data-driven companies have swapped approximately three-quarters of Fortune 1,000 companies over the last decade (recent Forbes article). Gartner predicts that by 2022, 90% of corporations will adopt data as a primary asset, and by 2023, improving data literacy will be incorporated in 80% of data and analytics strategies. In its 2020 letter to stakeholders, Adobe declared data as a key pillar of its growth strategy and named innovation in the field of data privacy and security as a top priority. Companies leading and influencing global markets are putting data at the forefront of their strategies to gain a competitive edge.
Safeguarding consumer data privacy can become a point of differentiation and competitive business advantage. Businesses should decide whether they want to continue viewing it as a compliance pain point view it as a differentiating factor to improve customer trust and reputation.
Privacy awareness amongst consumers and regulators is real and here to stay. Enterprises should be incorporating privacy in a foundational manner into their business processes. Deriving value from consumer data and providing privacy protection have equal roles in an organization’s success.
The tectonic plate of the privacy landscape is shifting
Data breaches and abuses are a stark reminder of the dark side of the cyber world. Data collection without consent and the recent history of high-profile data breaches have increased caution amongst consumers and individuals about their personal data. Regulators around the world have increasingly strengthened privacy protection and are giving control over data back to users. The GDPR is the European Union and CCPA in California are among the most visible regulatory actions. These regulations mandate that companies provide users with adequate disclosures and/or opt-in choices for collecting personal data. As other nations and states (in the US) consider similar regulations, companies should modify their data collecting, storing, sharing, handling, and processing strategies in a way that respects the privacy rights of individuals.
Fuelled by these regulations, privacy awareness is increasingly spreading amongst consumers. Privacy considerations influence consumer choices with those companies who support a privacy-first idea benefitting and companies who have a poor track record of protecting data privacy suffering. Consumer decision-making based on privacy considerations could dramatically alter the economics of data as we know it today.
This is evident from some of the steps initiated by market leaders to redefine their stance on consumer data privacy:
Apple’s AppTrackingTransparency (ATT) requires app developers to ask permission to track user data across other apps and websites
Firefox blocks third-party tracking cookies on desktop and Android by default
Privacy-advocating browsers, like DuckDuckGo, are witnessing a huge surge in popularity, for keeping searches private and not tracking users.
Privacy & data utilization can co-exist
While most customers are worried about ad personalization, sixty-three percent of consumers expect it as a standard of service when they’re being served promotional offers, according to a RedPoint Global survey conducted by The Harris Poll that surveyed more than 3,000 consumers in the U.S., U.K., and Canada. An April 2020 survey of 1,000 adults by Epsilon and GBH Insights revealed that as much as 80% of respondents want personalization from retailers.
For a company, complete user-profiles and data have profound benefits, such as improved products, greater engagement and customer retention, and higher ad revenue from targeted advertising. With limited or poor data profiles about users’ companies see higher customer churn and declining customer engagement. However, managing customer privacy the right way can boost growth for companies.
Organizations are investing in privacy. A recent survey of more than 500 data privacy leaders of large, U.S.-based companies conducted by FTI Consulting reveals 97% of organizations have planned to increase their spending on data privacy, with an average increase of 50%. Significant improvements in privacy will result in increased business value in the following areas.
Transparency & trust in a firm
Technologies today can quickly collect large amounts of data about customers, but if poorly done, can result in customers losing trust. Trust issues arise when companies tend to be opaque about the information they collect or resell without customer consent. This leaves consumers feeling uneasy and moving away to other brands they trust more.
To develop trust, companies should be transparent about the data they collect, how the data will be used, and offer consumers an appropriate reward in exchange for this. Companies should go beyond just the use of standard legal disclosures; companies should proactively educate their customers about how the use of their data will enhance products and services. Companies that get this right will win customer trust, business, and more access to their data, which brings us to the next point.
Business empowerment by zero-party data
Zero-party data is personal information that consumers proactively share with a company. These are survey data and information customers provide in relation to the betterment of a product for their marketing experience. Using zero-party data, brands give customers bespoke experiences most suitable for them, like personalized product recommendations, rewards, perks, or exclusive access. Zero-party data is fully consented to and allows companies to obtain consumer insights, as well as provide hyper-personalization without eroding consumer trust.
Perils of poor privacy practices
Poor privacy practices result in poor business outcomes. Time and again, consumers have clearly said that they deeply care about the way that organizations handle and use their personal data. In a survey conducted by UK Data & Marketing Association, 88% of respondents claimed that transparency about how their data was collected and used is crucial to them when sharing data with an organization.
Headlines of large global brands being hit with staggering eight-figure fines related to non-compliance around Privacy are common today. Since the GDPR came into force, companies under EU jurisdiction have paid more than $1.1B in fines for non-compliance with data protection policies.
A survey conducted by McKinsey on 1,000 North American consumers showed eighty-seven percent unwilling to do business with a company having information security challenges while seventy-one percent said they would stop engaging with companies that share consumer data without permission.
How to balance data harnessing and privacy protection?
Organizations have begun to consider if their data collection programs need to be scaled back. They have also begun to discuss if data privacy and value derivation from data can coexist.
There are many options for data-driven companies who want to continue deriving value from data while putting their customers first. Companies can consider the following steps to continue leveraging data as an asset:
Trust and Transparency: Respect the data privacy rights of customers such as the right to information, right to access, right to restriction of processing, right to erasure, etc.
Privacy by Design: Integrate privacy by design into all business processes. Begin software development or data processing with data protection and data privacy in mind
Data minimization. Lesser data collected means lesser regulatory compliance burden and lesser risk for privacy violations or data breaches. Studies have shown more than 90% of the data collected ends up never being used. Companies should develop a better understanding of their data, minimize the collection of personal data based on need and delete them post usage.
Privacy Enhancing Technologies (PETS) should be adopted to ensure the safety and privacy of the data during collection and usage.
Takeaways Organizations need not fear data privacy. Organizations should focus on building better data management practices that over time will improve privacy, security and lead to a better understanding of how to serve their customers. Organizations must develop a data culture that enables deriving value from data while providing privacy protection.