Companies, marketing and the good and bad sides of data

Data helps companies gain an insight into their customers and build successful business. Having rules for the use of data promotes trust, which is the most important currency of the future. Does your company know how to reach ethically aware consumers who demand value for their data?

Writer

Tiina Härkönen

Leading Specialist, IHAN - Human-driven data economy, Sitra

Published

Writer

Tiina Härkönen

Leading Specialist, IHAN - Human-driven data economy, Sitra

Published

Throughout my working life, I have been passionate about the development of customer relationships as part of business development. Understanding the needs and wishes of customers has been an essential part of that. Indeed, the best part of my career has been the development of the use of data as a tool for gaining deeper customer insights. Somewhere along the way, in spite of the good intentions, the focus on genuine customer benefit was lost when it comes to the practices of how data is used. What happened?

From the early days of data to digital marketing

Back in the 1990s, the collection of data was not very intense and marketing was simpler than it is now. Companies mostly collected information on people’s names, addresses and interests in their databases. Back then, companies mainly obtained their customer data directly from consumers and the customer contacts of companies. Individual customers often felt that they received a genuine benefit by disclosing their data – such as benefits related to products and services. Companies occasionally conducted customer surveys or bought new contacts from customer information companies when they wanted to expand into a new market.

By the time the 2000s rolled around, companies had accumulated significant repositories of customer data of their own. Data was also collected on people’s online behaviour and transactions. Everything seemed to make sense, and the collected data ended up being used by the “owner” of the customer relationship for further purposes. Companies began to talk about knowledge capital and the unique significance of customer data to a company’s competitiveness.

The trends in this period were characterised by companies growing their own data repositories. As increased knowledge capital improved the competitiveness of companies, they collected customer data and other data in their own silos. At the same time, marketers were busy trying to increase revenue every way they could, and they sought ways to bring products within people’s reach.

Digital marketing – and digital advertising as an element of it – proved to be effective. The best part was that you could gather data on the effectiveness of every marketing action you took, which is not the case when you put an advertisement on the front page of a newspaper, for example. This led to a digital bias, which means that digital tools were used even when other tools might have been more effective – simply because the results were easier to verify with data.

Customer insight at the cost of privacy

It later became evident that the verification of the results of advertising was sometimes questionable. The clicks and likes that were measured may have come from a group of bots. Nevertheless, the key is that advertisers only obtained a small proportion of the data used to build profiles and target groups that could be sold for a wide range of purposes. More importantly, this data has been collected behind people’s backs, in invisible networks.

Even more important is that nowadays the data is so detailed and sensitive that it violates people’s right to privacy.

Why should marketing and customer relationship professionals be concerned about what the international platform giants or data intermediaries do with data? Because it has an impact on the trust people have in companies. And because that trust is crucial to a company’s future success. There is a direct connection between the marketing practices of companies and the hidden collection of data on online behaviour. The advertising decisions made locally by companies either support the existing machinery of the platform economy and digital advertising or they don’t. Or do companies even have a choice?

Steps towards trust

The easiest option for a company is to turn to its digital agency. When they plan their next campaign, what will be offered as the digital advertising solution? Programmatic buying and the same old advertising platforms? If that’s the case, the agency is stuck in a rut. In addition to the major platforms, the range of digital advertising options offered could include, for example, alternative social media and search engines that respect the privacy of their users. Advertising tied to content and context is a good alternative for further development.

A recent survey from the UK found that 81 per cent of people prefer advertisements that are genuinely targeted according to individual needs. Most digital advertising these days is primarily based on profiling that is unreliable and violates the right to privacy. Is this more expensive than the current alternatives? It probably is.

Nevertheless, it is important to think about what kind of future a company chooses when processing data and respecting the right to privacy, and how the alternative operating models are tested.

Companies buy advertising space and audiences, so their demands from digital advertising providers are a crucial way to exercise influence.

Your next workshop dealing with the customer journey could also address the customer experience from the perspective of privacy. This would also create the opportunity to evaluate internal processes and applications in a new way. Building trust between customers and a company through open and continuous interaction – when taken far enough – is an effective way for a company to differentiate itself since people’s concerns about data collection are evident from numerous surveys conducted in Finland and elsewhere.

It pays to be an early mover

The companies that are seen to move in the right direction now will reap the biggest benefits – or at least be among the first to benefit. They will also look beyond the boundaries of their organisation to establish partnerships that operate transparently and share data with the consent of the individuals concerned as well as create new and successful fair data economy services.

To those people who are responsible for marketing, customer analytics, corporate social responsibility and brand management: get together and create solutions! Help create digital services, experiences and brands that are built on sustainable values and known for their responsible use of data. It takes drive and desire to change the old ways of doing things, but it also takes competence to find alternative solutions. The reward is a commercially significant prize: trust in the company.

 

Project

Sustainable business from data

Fair data sharing under shared rules creates a new competitive advantage. A fair data economy is built with the co-operation of companies that use data responsibly.

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