whitepaper building consumer trust data...the key to trust is transparency, but there are three...

IN ASSOCIATION WITH

BUILDING CONSUMER TRUST

WHITEPAPER

TABLE OF CONTENTS

1. Transparency is the key to building consumer trust.................3

2. The new bargain.....................................................................6

3. The importance of consumer trust............................................9

4. Five ways brands build consumer trust..................................12

5. Who is responsible for data in the organisation?...................15

6. For consumers, ownership is about control...........................19

7. Conclusion.............................................................................22

8. Acknowledgements...............................................................23

Consumers expect great experiences today — from brands and, increasingly, from government — and that requires a sophisticated data strategy. It also requires consumer buy-in. There is a mindset shift from suspicion about “what are you doing with my data” to frustration, with “why aren’t you using my data”.

However, it would be a mistake to assume that consumers are willing to write brands a blank cheque when it comes to the use of personal data. When Deloitte released its 2016-privacy index for Australia last year it was clear in its conclusion: Australian consumers want more than mere convenience — trust is critical.

In fact, 94 per cent of those surveyed put trust before convenience. “Australians, whether millennials or baby boomers, want to be confident that the organisations with which they entrust their personal data are reliable, and that they treat their information with respect.”

The problem for company leaders is that whilst trying to build trust and treat information respectfully, those same consumers have ever-growing expectations about the quality of experiences they receive from brands — experiences that require huge amounts of data managed through very sophisticated systems and demanding real-time responses.

Research by ADMA and GFK in 2014 and due to be repeated in 2017, meanwhile, found that some consumers recognised the data/value exchange. These consumers were more open to sharing their information in return for benefits.

Transparency is the key to building consumer trust

BUILDING CONSUMER TRUST - WHITEPAPER 3

Break to New Mutiny


However, according to the study, “Consumers don’t always trust the companies they are sharing their information with. And, even though they are still sharing their information, they feel somewhat cautious about this, with many consumers only somewhat comfortable sharing their information with companies and with the different ways companies can use their information.”

The study suggested that much of this discomfort was driven by a lack of understanding of what companies do with the information they have. “In particular, consumers are unsure who their information is passed/sold onto. There is a perception that this opens them up to a number of potential risks (such as identity theft and scams) as they don’t know who these companies are, or if they can trust them.”

Three years later work processes have become heavily digitised, and more and more devices are producing data — particularly on the Internet of Things. The ability to marry that data to customer outcomes is more critical than ever.

After two decades of digital evolution, companies are still struggling to engender trust when it comes to their use of data. At the heart of the new data-driven bargain between a buyer and a seller is the issue of consumer trust. As brands strive to do more with the data consumers give them, the question they need to constantly be awake to is “what more can they do to build consumer trust?”.

These issues were covered in depth during a recent Data Governance Australia (DGA) roundtable in Sydney. The insights and the points of contention raised in that discussion are outlined in this whitepaper.

Three Pitfalls


The key to trust is transparency, but there are three common mistakes brands make:

1. It is important to collect only the data you need to fulfill the requirements of the consumer at that point of the relationship. Too often, brands treat that first step as an excuse to collect reams of data in the expectation that they will use it in future. Quite apart from creating unnecessary friction in the customer acquisition process, such an approach risks hurting trust at the very beginning of the relationship.

2. Use personal information to benefit the consumers - but be careful not to cross the line a line that might upset or confuse consumers. Brands need to put themselves in the shoes of consumers and test whether communications are useful and engaging.

3. In the expanding world of social media and digital marketing, consumers are more educated now about the likelihood that their data will be shared between companies. Again, transparency is critical. The fact that the information is being shared needs to be clear, as does the ability of consumers to make the choice about whether they consent or not.

Consumers have shown a willingness to share data, and they are more educated about its value and utility. The job for marketers is to ensure they not only ride the tide of ever-growing consumer expectations around great experiences, but that they take the lead in their own organisations to ensure the customer voice is heard when it comes to how the data is used and shared.

Among the findings:

Markets are in a moment of transition. Traditionally, data issues were viewed through a single organisational prism: compliance.

Anyone who has ever read a privacy policy intuitively knows from the legalistic wording that the goal of the brand collecting the information is to stay firmly inside regulatory boundaries, rather than to educate a consumer to make informed choices.

In an age of consumer empowerment, however, this is the wrong approach. These days consumer trust is a business differentiator.

It is all part of the new bargain — consumers are generally willing to provide their data to brands in order to receive better services and an improved customer experience.

Research suggests consumers attitudes to data in a report called Attitudes to information sharing, privacy and trust. Among the many issues the study’s authors considered were the scenarios when consumers were happy to share data, and when they were not.


The new bargain

1. Two thirds were open to sharing their information if they were purchasing something from a company (63%) and/or if they were a member of a loyalty programme (64% amongst members of loyalty programmes).

A Question of Ownership


2. Half were open to sharing their information if entering a competition (53%).

3. Four out of 10 were open to sharing their information if requesting something such as a quote (42%) and/or receiving a special offer/discount (40%).

4. Three quarters were not open to sharing their information when considering purchasing something from the company (24%).

5. Over 80 per cent were not open to sharing their information in order to download or access special content.

6. And almost 90 per cent did not think they should have to share data just to access a web site. (Ironically, they share huge volumes of data from cookies — but this was less well known to most consumers.)

Brands also like to think consumers prefer more targeted advertising — contemporary evidence is less obvious on this last point and what data does exist tends to be a little self-serving.

Given these views, marketers need to take more ownership and ensure the customer voice is heard at all steps of the data-decision-making journey.

The final issue which we examined at length in our DGA executive roundtable is the issue of data ownership. Ownership in some ways is a misnomer.


The idea that a consumer would literally make decisions over every single instance of the use of one of their data points is impractical, and misses the more important point. Consumers do not want to “own the data” personally. Rather, they want ownership over how the data is used, and how it impacts on upon them. In other words the issue is really one of choice.

The compensation they are seeking for providing their data is not cash, but rather an experiential benefit. Digital natives expect brands to get it right, but they still care about privacy and expect companies to respect that and provide tools to help them make choices about how their data is used.

The modern corporation cannot compete effectively without a strong data strategy. Consumers want companies to make dealing with them as easy as possible. There is an expectation that companies should seamlessly marry the information they hold on a consumer into a world-class experience that makes it easy for a consumer to get to the point of purchase and to provide ongoing support in future.

However, sitting at the nexus of this relationship between buyer and seller is the issue of consumer trust.

Consumers want to know why companies are collecting information about them, how they intend to use it, how they can make decisions about how the data is used and, of course, what is in it for them. Ultimately, consumers want transparency and a fair trade.

Participants in the roundtable included executives from the fields of analytics and marketing, and they delved into four main themes:

1. The importance of consumer trust in the data-driven era;

2. How can brands build consumer trust;

3. Where does responsibility for data sit in the organisation;

4. For consumers, ownership is about control.

Trust is critical to consumer engagement — now more than ever. Increasingly, brands are competing not merely on the utility of a product or service, but on the whole experience across the customer’s journey.

In the “experience economy”, the engagement a brand can build with consumers and the loyalty this creates will provide a crucial competitive advantage.

Engendering consumer trust — and the increasing willingness of consumers to share data in return for a benefit — helps brands fulfill their customers’ needs, iterate new solutions to maintain their competitive advantage and, ultimately, drive higher sales and profits.

The days when data policy could be relegated to the IT department or regulatory compliance are over. Product cycles are shortening and increasingly marketing and advertising technology platforms are enabling brands to adjust the market conditions in real time.

Decisions often have to be made quickly in response to a hyper-competitive marketplace and old work practices can inhibit innovation.

That is not to say compliance and regulation do not matter. If anything these areas need to be more effectively integrated into the product development cycle.


The importance of consumer trust


Consumer trust begins with perception. That perception is fed by the company’s actions — how it deals with customers and how it deals with customer data.

The good news is that all such relationships typically begin with a blank slate and good will on both sides.

With their busy digital lives, customers simply expect that they will have to share some information.

They appreciate and expect that the information being shared is for the benefit of both parties.

Think of it as the handshake that seals the deal.

There is a growing expectation that brands will want more information from customers, and customers will expect more back from brands. As a brand, you only get one chance to get it right. So this handshake becomes critical.

It’s what happens after that initial handshake that determines whether a brand can build a relationship or merely execute a transaction.

The level of trust is influenced by any number of factors — such as the nature of what’s being asked, and why the brand wants the information.

“One common problem is that brands make the mistake of trying to collect too

much information at the start. For the customer, it is not really clear why they

are being asked to provide the information.”

- Senior analytics executive, DGA roundtable

Often, the brand doesn’t know what it would do with it anyway.


This gets to the core of trust. If a brand behaves in a way that surprises people negatively, trust takes an immediate hit. However, if you do things that just make a customer’s life a little a bit easier, trust increases.

Take the examples of Facebook and Google — two companies that hold vast stores of data on customers and customer preferences.

Each offers an implicit trade-off to users of their services, whereby they provide a utility around social communication and search in return for personal information.

It is also worth noting that Facebook and Google are not especially highly rated in the corporate trust indexes in the US — they do not even make the top 100. The thing Facebook, in particular, does well for customers who have a constant online engagement with its platform is that it makes it easy to change settings regarding how that data is used. Interestingly Amazon, which uses data primarily for utility rather than to sell advertising, is in the top 20. The difference perhaps is that Amazon’s utility is immediately obvious to the consumer in the form of recommendations or breadth of product offering.

Newer sharing-economy companies like Uber and AirBnB also provide obvious and immediate utility.

What happens if your brand does not have an engagement proposition to trade? In that case, the issue is more about what’s reasonably expected of how the data will be used and how well this is communicated.

There is no hive mind — each consumer brings their own biases and experiences to the relationship. What one person finds convenient another might find creepy. And these perceptions evolve over time.

Think back to 1996. It was pretty creepy that an ad followed you around the Internet. Today it happens every day. For most people, retargeting is no longer the big issue it might once have been. Instead, poor retargeting is more of a problem.

This is why it is important for brands to put as much control into the hands of consumers as possible, and to make those choices really clear.

Very few brands take the trouble to ask consumers what they would consider a reasonable expectation for the use of data. The assumption is that the collector of data has a duty to notify the consumer what they’re doing with the data. Furthermore, consumers are smarter now and have an expectation that strong governance will be applied to the use of their data.


Five ways brands build consumer trust

Practitioners in the market offer some simple guidelines to help your thinking:

1. At the point of collection, disclose how the information is being used. Very few companies do this today and too many still err on the side of collecting more information than they need to deliver the service.


The thinking seems to be that they might use the information later. But such an approach risks confusing and alienating consumers.

2. Be less compliance-driven and focus more on the consumer benefit. In highly regulated markets such as finance, telecommunications and healthcare there is a danger that risk management via a compliance approach can stifle innovation.

In the digital economy, insurgents are often more willing to push up hard against the inertia of regulation — look at the resources that Uber has put into fighting the taxi industry worldwide, or AirBnB has spent negotiating regional bylaws around the world.

Or look at how Netflix conveniently ignored the use of VPNs to get around geoblocking while it built huge audiences in new markets. And right back to the days of Napster and music sharing, consumers have demonstrated that they have less regard for regulations than regulators or incumbents. Regulators are more typically consumer-led than concerned with protecting incumbency.

3. Make sure the value to the consumer is clear. Consumers have evolved their thinking rapidly in the 20 years since Netscape burst onto the scene.

Where once they would have worried about providing a credit card online, now they will happily scan their passports or provide direct links into their savings or PayPal accounts as long as the benefit is clear — and they trust the service!


4. When providing information such as a privacy statement, keep the information short, simple, and readable. In 2011, Miles Lothe famously translated Facebook’s entire terms and conditions into “brospeak” — imagine two 14-year-olds explaining the privacy policy to each other and you get the picture.

Sadly, his small piece of genius is no longer available, but the lesson Lothe provided is more relevant that ever: turgid and lengthy legalese simply discourages consumers from engaging with the privacy policy.

Worse, it creates distrust since it presents what should be a simple conversation — here’s what we will and won’t do with the data — in what amounts to a foreign language for most consumers.

5. When it comes to sharing data with third parties, make sure you get the requisite consent first — and ensure the consumer understands what they are agreeing to. If passing on information, where possible keep it at de-identified level (aggregated and anonymous). Finally, be cautious about selling personal information for a financial benefit.

The danger for businesses is that if, as a group, they consistently fail to meet consumers’ expectations for trust, governments will step into the breach. The downside of such a regulatory approach is overreach — where new rules actually unwind the progress that has led to better consumer outcomes.

With data becoming more critical to how companies work and compete, responsibility for decisions about how data is collected, used, and protected assumes greater importance.Too often, decision-making around data is viewed through the prism of risk-management and compliance. That may be a useful way to stay on the right side of the regulators, but it tends to have a dampening effect on innovation. And legalistic, compliance-driven content on your site is hardly the best way to open communications with a potential consumer.

Given that data is a key asset in creating better customer experiences, and in keeping up with the ever-rising tide of consumer expectations, there is an argument for a greater role for marketing and other customer-facing executives to take a more active role in decision-making.

Others go further, and say that with the kinds of issues at stake, responsibility for setting the strategy for how data can be used needs to reside at CEO and board level.

Indeed, there is an argument that boards will have little choice.

Increasingly, data will be seen as a core asset with a tangible financial value that needs to be protected and exploited. Walled gardens like Google and Facebook use the data they hold to develop and deliver a competitive advantage. And its not just technology or marketing businesses that do this.


Who is responsible for data in the organisation?


Take an industrial sector like farm machinery. Increasingly business models are emerging where the machines collect data as they are being used - for example water or salinity levels in the soil - and that data can then be sold to the farmers. John Deere in the US is an example of such an approach.

“Once we attribute a value to data, we’ll start to treat it better. It’ll be more

secure, because we’ll be valuing it, we’ll provide governance because we are

thinking about money.”

- CEO, analytics service provider

As the transfer of value from brand to data unfolds, it is going to be challenging for corporates to manage this transition. That is because the brand is an intangible asset on the balance sheet and data is not.

The CEO of a leading analytics company told the DGA roundtable that if boards can find a way to actively manage that transfer — where they can tangibly appropriate that value (of the data asset) — then they can assess whether there’s a market capitalisation benefit to doing the transfer more proactively.

At an operational level, CEOs are increasingly expected to take personal ownership of many of the data decisions, given how critical these decisions are to the experiences of customers.

According to management consultant McKinsey & Company, the changes wrought by big data analytics demand CEO involvement.

In a paper called Straight Talk About Big Data, McKinsey’s Nicolas Henke, Ari Libarikian and Bill Wiseman write, “Those who ignore or underestimate the eventual impact of this radical shift — and fail to prepare their organisations for the transition — do so at their peril.”

Chief Data Officer


And they caution that analytics can all too easily be delegated or reprioritised.

“CEOs are on the hook for performance, and for all of the potential associated with analytics, many leaders operating in the here and now are reporting underwhelming results.” - McKinsey and Company

They attribute some of these failures to an inability to change culture. “Critically, an analytics-enabled transformation is as much about a cultural change as it is about parsing the data and putting in place advanced tools.”

Companies are also creating a new type of executive to take day-to-day ownership of the issues around data. IT analyst Gartner contends that, before the end of this decade, 90 per cent of large organisations will have appointed a Chief Data Officer (CDO).

“Business leaders are starting to grasp the huge potential of digital business, and demanding a better return on their organisations’ information assets and use of analytics,” said Mario Faria, Research Vice President at Gartner.

“It’s a logical step to create an executive position — the CDO — to handle the many opportunities and responsibilities that arise from industrial-scale collection and harnessing of data.”

In fact ANZ Bank announced just such an appointment in February 2017.


Gartner say different types of organisations will have different requirements for the data chiefs, and they identify four in particular:

1. CDO Organisation as an Engine Room. The office of the CDO delivers operational data services that are focused on the needs of the internal users. It succeeds by monitoring any data market developments and building expertise in data asset usage, information management and analytics.

2. Everyone’s CDO Organisation. The office of the CDO focuses on the needs of internal users. But there is a strong push for data assets to be used aggressively by business leaders and individual contributors to break through traditional perimeters of business, and to drive transformation and new digital business models across the organisation.

3. CDO Organisation as a Business Service Provider. The office of the CDO delivers operational data services that are used by both internal and external users. The activities are expanded and integrated into a shared-service organisation that runs like a business.

4. CDO Organisation Is the Business Information, is one of the explicit external offerings of the organisation or is inseparable from the product line. The office of the CDO delivers internal and external data services that drive business transformation and differentiation.

But of course there are wider issues than how companies collect and harness data. One of the more interesting is also one of the most basic: the vexed question of ownership.

Late last year an international survey of over 10,000 consumers in 10 countries asked what price they would put on their data. In other words, how much they thought their information was worth.

Not much.

Responses ranged from $18 to $120. In Australia it was somewhere between $30 and $40.However, there was an interesting trend behind the headline data: the proportion of consumers who say their data is highly valued is growing across all markets. Around the world, the share of consumers who held this view increased from 31 to 41 per cent in two years.

So, while consumers assign relatively little monetary value to their individual information, they clearly recognise that data as an asset is growing in value and importance. There are two ways to think about data ownership, according to participants in the DGA roundtable: it can literally mean personal legal control over the data, and financial compensation for its use or distribution; or ownership can mean control, over the choices of how that data is used.

The roundtable participants clearly held the view that choice is the more important idea and, indeed, the evidence to date suggests that consumers care much more about the latter than the former.


For consumers, ownership is about choice


The Productivity Commission’s draft report on data availability and use certainly leans more toward consumer control over use than any idea of ownership.

According to that report, “A key element of the recommended reforms is to provide greater control for individuals over data that is collected on them by defining a new Comprehensive Right for consumers.”

“I actually think that the word ownership is problematic in this context because,

from a legal perspective, it’s very unclear. That’s why I think that trying to move

the debate away from the word ownership is important both from a consumer

perspective and the corporate perspective.”

- Marketing leader, DGA roundtable

This right would mean consumers:

– retain the power to view information held on them, request edits or corrections, and be advised of disclosure to third parties;

– have improved rights to opt out of collection in some circumstances;

– have a new right to a machine-readable copy of data.

Industry practitioners agree that the legal, regulatory and technical barriers to consumers having personal legal ownership over their data are largely insurmountable.

Ownership is a two-way street. Brands that collect the data also have a stake in ownership, and then there is information that they derive or create from the use of that data, as well as its conflation with other proprietary information sources.

Ultimately, information about an individual can also be information that a company has generated about the services or products that it’s delivering.


There is a balance to be struck — between the use of data by a company in relation to the services and the products that it delivers, and the consumer’s interest in making sure that things don’t happen beyond their reasonable expectations.

“If they own their data then every time they see an ad anywhere across Facebook, they have to accept that they want to see that advertisement. And there is data streaming going on all the time — for instance, on credit, risk, pricing, and marketing,” according to a senior analytics executive at the DGA roundtable.

Instead, the more deliverable and (for brands) more acceptable notion of consumer ownership relates to decision-making over the use of the data. Consumers own the decision to provide the data and, at a general level, they can opt in and out of how that data is used — but data as an asset belongs to the brand.

This requires brands to be transparent about not only how they use the data, but also with whom they share the data.

Others say that they believe there is a level of understanding with consumers as to whathappens to their data, or how it can positively affect them and provide them with theinformation or the experience they require.

The Privacy Act also puts the onus of keeping the data up to date and accurate on the brands, yet companies have a vested interest in getting users to keep their own data up to date.

As one participant in the round tables noted, “So, you’ve got this conflict where some brands want consumers to be responsible for keeping their information up to date, either to shift cost or to ensure accuracy.” But of course the more work consumers are asked to do, the greater the payoff — and the level of control — they will expect.

The consensus from the DGA roundtable is that consumers want to know how, where, and by whom their data will be used. And they want a reasonable say in the decision making.

“That is where a lot of consumer interest is — I’ll give you the data but I’m going to be the person who decides one way or the other what you do with it.” - DGA roundtable participant

Consumer trust is a new form of competitive advantage. Brands increasingly compete on the whole experience of the customer journey — from research to purchase and then on to utility and support.

But to build great experiences, brands need something more from their customers than just a credit card number: they need data. This helps them to better understand and anticipate customer requirements, and to ensure that the services they put in place provide the minimum friction and inertia between the consumer and the sale.

Data will become more critical to the way companies do business, as it underpins the ability of brands to deliver great experiences. However, as customers are asked to hand over ever-increasing reams of data — either in the form of information they actively provide or as data about their digital behaviour — trust emerges as a central issue.

There are a number of steps brands can take to ensure they match consumers’ need for trust, starting with determining who is responsible for customer data, and how they want to use the data. Brands also need to think carefully about what data they are collecting and why, and how they communicate what they will do with that data to customers.

Practitioners in the field recommend simple guidelines, such as: always disclosing how information will be used; collecting only information that you actually need; focusing more on customer experience and less on compliance; and keeping communication simple and easy.

Finally, on the vexed question of ownership, the issue is less about literal proprietary ownership and more about providing consumers with choice over how their data can be used. Your customers understand that their data is valuable to you, even if they do not put a high price on it themselves.

Be clear about the information you need to deliver the service and be obvious about why. Don’t collect data you don’t need, and be sure to provide easily accessible tools to change and update customers’ preferences. Above all, recognise that trust — like the data itself is an asset that needs to be nurtured, protected and held closely for the good of the business.


Conclusion

This whitepaper is a result of the experience, ideas and thought leadership generated by members of Data Governance Australia (DGA).

With thanks to the members of the DGA.


Acknowledgements

Marit Andersen, Regulatory Affairs Manager, AANA

David Ball, CEO, Fabric

Warren Billington, Managing Director Australia, New Zealand and Southeast Asia, Signal

Alexander Blagus, Data Governance Analyst, UNSW Australia

Glenn Harrison, Managing Director, Conexum

Vic Hodge, Principal Consultant, Experian Marketing Services

David Lamond, Director Strategic Analytics, Insights & Research, Scentre Group

Paul McCarney, CEO, Data Republic

Michelle Pinheiro, Director Intellectual Property and Data Governance, Insurance Australia Group

Gavin Smith, Partner, Allens

About DGA


Reshaping our future every day, consumers, business and governments are harnessing the power of data to create change and improve our lives.

Our purpose is to be at the leading edge: on the future of data issues, advocacy to government, education and promotion of the benefits of data for consumers and businesses.

Key to our success are the benchmarks created around the collection, use and management of data, the availability of resources on global trends and thought leadership on data.

As the association for data, Data Governance Australia advocates at the highest levels of state and federal governments to ensure members interests are represented and industry standards established.

Data Governance Australia is the voice of the data industry.

whitepaper building consumer trust data...the key to trust is transparency, but there are three...

Documents