The Future of Digital Marketing In a Data Privacy World

Perhaps the most revolutionary development is that brands are recognizing the need to provide value for data.

This can be service or opportunity to win rewards or 'information mileage plans' rather than financial payment, but to build the trust required, the era of 'free data' is ending for those desirous of monetizing customer information. JL


Lara O'Reilly reports in the Wall Street Journal:

Increased data scrutiny “will accelerate” the importance of collecting information directly from consumers. Marketers will have to enhance customer relationships. Providing value for data becomes more important. Brands should offer consumers benefits, recommendations or services based on the information the company has on them. “If we think about this as regulatory compliance, we miss the opportunity. If we figure out how the customer wants to connect, we (can) connect and inspire them."
Companies have long collected data on consumers to determine what people want and who their potential customers might be.
But for anybody doing in business in Europe, how they go about collecting that data just got a lot more difficult. And corporate marketing departments are rushing to figure out what to do next.
What changed everything? The General Data Protection Regulation, which puts consumers in the driver’s seat when it comes to protecting their private information online.
Broadly speaking, in many cases, companies around the globe must ask European citizens for their consent before collecting personal information. They can collect only the data they need to do a specific job, and when they’ve got it, they face a host of restrictions on how they use it. Among other rules, they must also delete data when they’re done with it—or when consumers ask them to.
That isn’t all. The rules for “third party” data also are getting more complicated. Many marketers don’t collect customer data themselves, so they use the information from other vendors, to help them target ads. Now they must make sure those vendors are in compliance with GDPR standards. Obviously, keeping an eye on all those third parties means a lot of effort and expense, so some marketers have said they would just use fewer vendors instead.
The problems of keeping track of customer data were highlighted in Facebook ’s Cambridge Analytica data leak, in which an outsider shared the social network’s user records with other firms. After an outcry over the leak, in March Facebook took steps that it said would “help improve people’s privacy.” Among them: ending a program that let brokers target specific groups of Facebook users on behalf of their advertiser clients.
Those changes—combined with GDPR—meant a blow to some advertisers, such as consumer-product companies, that do not have reams of first-party data on their customers and depend on third-party data firms.

Into new territory

As a result of these changes in rules and attitudes, marketers are scrambling to figure out how to collect more data directly from consumers.
Many are looking to the idea of building trust with consumers by not just asking for information but giving people something in exchange, such as access to loyalty clubs that offer special deals or forums where they can interact with people who share their interests. Or they might put customer data to better use by sharpening the products and services they recommend to people.
In a presentation to advertising executives at a conference in New York in May, Terence Kawaja, CEO of investment bank LUMA Partners, said increased data scrutiny “will only accelerate” the usage and importance of first-party data—collecting information directly from consumers. That in turn means marketers will have to look to enhance their direct-to-consumer strategies where they have more control over their customer relationships.
For many marketers world-wide, GDPR has been the driving force to re-evaluate how they gather data from consumers, but it is something they should have been doing anyway, says Mike Katz, CEO of New York-based customer-data platform mParticle.
“The level of trust [you receive from consumers] is based on a commitment to the quality of that customer experience, where you don’t need to go out and create some gimmicky tactic,” Mr. Katz says. “What it boils down to is, there has to be some sort of equitable value trade-off.”
When SAP, the enterprise-software company, emailed customers to obtain consent for collecting and storing their data, it found it got the best response when it asked in a straightforward way whether customers consented to being contacted in the future, according to its chief digital marketing officer, Mika Yamamoto.

A chance to connect

“If we think about this just as regulatory compliance, we miss the opportunity it creates,” Ms. Yamamoto says. “If we figure out how the customer wants to connect with us, we have a greater opportunity to connect with them and inspire them.”
The stakes are huge. Not only are company sales on the line, but noncompliance with the law could lead to fines of up to 4% of a business’s world-wide revenue or €20 million (about $23 million), whichever is higher.
For many marketers, the first step was simply to let people know that the situation had changed. In the weeks leading up to May 25, when GDPR came into force, inboxes world-wide were jammed with emails from companies they may never have remembered interacting with—from major consumer brands to the hotel they stayed at eight years ago. Consumers were barraged with information about “changes to our privacy policy” or encouraged to opt in to receiving further communications, with prize draws, discount codes and freebies dangled as incentives.
Some experts see those kinds of lures as the way forward: building relationships with customers by giving them rewards in exchange for personal information.
It is a strategy some marketers have been using for years with great success. Sportswear maker Nike Inc.’s SNKRS app, launched in 2015, has evolved into a community for sneakerheads and style-seekers, offering access to limited-edition sneaker releases and Pokémon Go-style scavenger hunts. As more people engage with the app, Nike says it has been able to build a picture of its users’ tastes as they fill their profiles with their favorite styles, make purchases and share their location with the app.
Last year, for example, Nike held an Air Max Day “vote it forward” campaign to choose a new sneaker design. The company used data on which consumers voted for the winning shoe to target them with an exclusive offer to buy the winning pair, the Sean Wotherspoon Air Max 97, to ensure the biggest fans of the shoe got the chance to buy it first.
By studying user behavior on the app, SNKRS has helped Nike become “much more targeted of certain communities or certain territories that were underserved,” says Adam Sussman, Nike’s chief digital officer.
The athletic-gear maker also uses its NikePlus program as a portal to SNKRS and other clubs and apps, offering members additional content, offers and services, such as tracking workouts. The program has attracted more than 100 million members who tend to shop via the apps, and spend more than three times as much as the average guest on Nike.com, according to the company. (Nike has updated its website and mobile-app privacy policy to meet GDPR rules.)

Carrying cards

Another way to offer customers rewards for doling out their personal information: loyalty clubs.
These efforts date back centuries to when merchants began dishing out tokens that could be exchanged for purchases at a later date. Now cards and apps for loyalty programs are ubiquitous, filling wallets and mobile phones.
One of the most successful by far is Starbucks . Of the 55 million people in the U.S. over 14 years of age who will make an in-store payment on their smartphones this year, more than 40% will do so through the Starbucks app, according to research company eMarketer. On downloading the app, users are invited to register details including their name, address, email and birth date. The app collects purchasing and location information, according to its privacy policy.
But marketers operating loyalty plans must make sure under the GDPR their customers understand what messages they will receive, and they must obtain unambiguous consent from consumers if the company plans to sell their data or share it with third parties, such as advertisers.
Often the techniques to procure data can be more rudimentary—from business-card-in-a-jar prize draws to retail assistants asking customers if they would like their sales receipt sent by email. The issue with these methods is, well, people don’t often tell the truth.
“The quality of data people have on that system is quite poor,” says Neil Saunders, retail managing director of research and consulting firm GlobalData, which is based in New York. Consumers often deliberately supply false details, especially when discounts are offered in exchange for sign-ups.
A survey of U.K. adults conducted in May by research firm Kantar TNS, for example, found that more than a quarter (27%) of those polled had created a secondary or temporary email address to avoid giving their details to a service, while nearly one in five had provided false details to get access.
To coax out more accurate information, Phil Sutcliffe, head of offer and innovation at Kantar TNS U.K., says brands should equip front-line staff—such as store clerks and call-center workers—with the authority to offer consumers benefits, recommendations or services based on the information the company has on them.
It’s a method companies have used in the past—just not as often as they could have, experts say. And people are more likely to give accurate information to a real person than when they’re filling in a form or dropping a business card in a jar.
“GDPR is helpful because you can be upfront with people that it’s your data, we will use as much or as little as you want us to and, by the way, this is the value you will get,” Mr. Sutcliffe says. “People talk about trust in brands in a similar way to which they talk about trust in people—it’s quite emotive—so it’s important for brands to embody those human qualities and to be quite real and vulnerable and transparent in terms of how they are communicating.”
Another type of “reward” that marketers can offer customers is personalized service. Mac Delaney, senior vice president of media investment and innovation at Dentsu Inc.’s data-marketing agency Merkle, points to Netflix and Amazon as examples. The more data they gather, the better the recommendations they serve up for shopping and streaming.
To procure consumer opt-ins, marketers need to ensure the products, service and content they offer deliver “consistent value and engagement,” he says. Providing value for data “becomes more important than a marketer simply telling the world how great their brand is.”

Watch out for fatigue

Still, some experts warn that marketers have to be careful not to be too aggressive in trying to win customer trust.
“Pretty much everyone is saying you have to have some kind of direct-to-consumer strategy,” says Matt Spiegel, managing director at MediaLink, a media and marketing consulting firm based in New York. “Will this get overcooked? Undoubtedly, too many companies will be trying too hard to be our best friend, and we will only be able to engage with so many at a time.”
It is also important that companies see customer privacy as a core value and not something added on as a marketing tactic, says Jacques van Niekerk, chief executive of Wunderman, a New York-based digital agency owned by advertising conglomerate WPP PLC.
Earlier this year, for example, Apple introduced a new privacy icon for its iOS and MacOS software that pops up whenever one of Apple’s apps asks for a user’s personal information—a feature designed to prevent phishing attempts.
“Rather than inundate consumers with data-privacy laws and updates to the point of consent fatigue, they are taking an educational approach to help consumers understand the data exchange and the benefits they will receive for opting in,” Mr. van Niekerk says.
He also points out that there has been an influx of proposed data-protection bills in the U.S. similar to GDPR—and marketers should push for a consistent standard. “Fifty different standards in 50 different states will be complicated,” he says. “Marketers will have to think about one overarching standard that will meet all of these different obligations.”