87% of consumers expect personalised experiences with brands, but only 17% feel like brands deliver
GDPR, the big data game changer – is now the time to innovate?
Have you ever thought, what am I getting in return for my personal data? Probably not, but this may be a question you will find yourself asking after May 25th with the General Data Protection Regulation (GDPR) laws set to dramatically shake up what companies can and can’t do with your personal information. Most significantly, whether it be location data, IP addresses, cookies, RFID data or even your date of birth, companies will now need your explicit consent for the use of your data. There is no doubt this is a game changer. Current estimates are that only 25% of consumer data is GDPR compliant, meaning companies in Europe and the US will have to change how they access audiences at scale.
However, as with all big game changers, unpredictability presents opportunity. Whilst GDPR is effectively handing the balance of power to consumers, there are strong suggestions that the dynamics of the data-value exchange (what you get in return for handing over your personal data) have already started to change. The growth in wearables and IOT devices, has meant the quantity and quality of individual data has improved; consumers are becoming more aware of the value of the data they hold; and businesses are starting to give a lot more back. For companies who are behind the curve in terms of using customer data effectively, GDPR should be viewed as a lifeline as it presents an opportunity to reflect on how to sustainably engage with customers and learn from businesses who are doing it best.
How are the dynamics changing?
Since the buzzword ‘big data’ was coined over a decade ago, brands have bought into the idea that big data will solve their problems by enabling them to get to know their customers on a seemingly more personal level. Not only has this failed to materialise, but the perception of consumers that they are gaining a more bespoke experience has been very blurred. In fact, Edelman’s Brandshare study found that 87% of consumers expect personalised experiences with brands, but only 17% feel like brands deliver.
Essentially, perception is the crucial ingredient. If the consumer perceives that their data is being misused in some way, they will be less likely to continue to engage with the business. On the flip side, if the consumer can visibly see they are gaining something of value from exchanging their data, they will be more likely to continuously offer it up.
So, here’s my theory; as an individual’s data becomes harder to extract and consumers become more mindful they are in possession of something of value, the more the data has the power to act like a currency. The higher the consumer values the currency, the more they will want in return for handing it over. Consequently, consumers will be more selective of what data they give to businesses making the data more valuable as a result. The balance of power in the data-value exchange will therefore further shift to the consumer making it increasingly more difficult for the business to sustain continuous engagement and personalise their offering.
Can business model innovation be the answer?
Many businesses are starting to recognise that customer data shouldn’t be taken for granted. Instead of purchasing large packages of bundled data collected by 3rd parties, several are starting to purchase tools that allow 1st party data capture and enable better understanding of their customers first hand. Whilst this is more effective, arguably companies should prioritise adapting their business models over adapting their method of collection. Looking at some of the most innovative business models in the last few years, those that recognise the data-value exchange and directly reward their customers for handing over their personal data have been extremely effective at gaining customer retention. Not only this, but the quality of data is better as the customer has a vested interest in providing information that is accurate and fit for purpose.
It would appear Vitality Health have obtained the perfect balance. When signing up, the consumer gets an Apple Watch for a fraction of the retail price and in doing so, willingly hands over a vast amount of personal health data for Vitality to price the individual’s health insurance policy. The ongoing price of the policy is then determined by how much the customer exercises, motivating them to be healthier and less likely to claim. The customer also gets personalised rewards, such as cinema tickets or free coffees through Vitality being able to track their health data. Clearly Vitality takes a hit on the cost of the Apple Watch, but the continuous engagement of the customer builds customer loyalty and a rich database which enables Vitality to push a myriad of products or partnerships through different channels. Ultimately, both parties win, but the perception is that the customer wins first.
Perhaps a less known example but great for different reasons is a Chinese baby nutrition company, Biostime. To increase customer engagement, Biostime created an online platform ‘Mama 100’ where mothers can directly participate via the Chinese WhatsApp equivalent ‘WeChat.’ Through the platform, mothers are asked for a variety of data points about their baby such as timelines, feeding frequency and baby temperatures. In return, mothers gain access to interactive online seminars, community forums and personalised expert advice about their baby’s nutrition. Whilst Biostime use the data to push their more expensive products by targeting points along the baby’s timelines, the mothers receive something they perceive more valuable than the additional money they spend on the products; this being expert advice at their fingertips.
What can be learned?
What Vitality and Biostime have in common is that although the use of customer data benefits both the business and the customer, the perception is that the customer wins first. Both business models have identified what the customer values and have offered this up for free in return for the customer’s data. This not only encourages the customer to continuously hand over valuable information, but also means the business is able to provide a personalised experience tailored to specific data points. The result is a community of strong ‘stickiness’ that encourages continuous engagement and customer loyalty. So, whilst GDPR will force businesses to rethink how they collect, store and use customer data, it’s also an opportunity to broaden the conversation to consider how a business model can be a mechanism to achieve customer-centricity.