Biz Tip:

How Can Marketers Drive the Co-Existence of Profitability and Privacy?

How would you feel if you went to a shoe store to buy a pair of shoes and were asked for your name, address, phone number, and details of your smartphone? What if those details were then used to sell other products to you as you purchase the shoes– perhaps even the same shoes you’ve just bought?

When you buy shoes online and see personalized ads served back at you, should you feel any different? Online data collection to process transactions opens up a privacy maze. Your personal data, the clicks you make online, the sites you navigate to and take interest in, this all gets pooled and used to market back to you. Balancing the needs of the online service to ensure profitability often puts privacy on the back foot.

The question is, can profitability and privacy coexist and work in harmony?

Do Customers Actually Care About Privacy – the Facts?

Recently, the Brave browser, a private browser built to put privacy first, was caught out in a privacy debacle. The browser was found to be redirecting URLs entered into the Brave search bar to affiliate links that Brave then profited from. This caused outrage in the press but would users of Brave really care?

The only way to find out if customers do care about data privacy is to ask them. There are a number of surveys that have done just that.

A 2019 Cisco publication “ Consumer Privacy Survey” asked over 2,600 adults across the world about their attitudes towards online privacy. From the survey, four key insights were highlighted:

 

People care enough to act

85% of consumers want more control over their data. Almost half of the respondents had already moved to another company as they were unhappy with the original company’s data practices.

Customers’ attitude towards the use of data to drive new business models

Customers were generally negative about the use of personal data within new business models. Even if those models had societal benefits, the survey found that “Despite the potential personal or societal health and safety benefits associated with the models, 36% to 47% indicated they were not comfortable having their data used in this way”

Consumers value government input into privacy

55% of respondents had a positive view of the EU’s General Data Protection Regulation (GDPR) which sets stringent controls over personal data processing.

Customers want transparency of how their data is being used

Many respondents echoed this statement: “it’s too hard to figure out what companies are doing with my data.”

Further evidence that privacy matters

Another survey, this time from PwC, interviewed over 5000 consumers and identified similar attitudes. The PwC researchers found that:

• 85% of customers wished that they could trust their data with more companies
• 84% of consumers will not deal with a company if they cannot trust that company to handle their data respectfully
• 83% want more control over their personal data

What is perhaps more concerning an outcome from the PwC survey is the fact that “76% call sharing personal information with companies a necessary evil.”

Privacy is important for vendors too

On the retailer/vendor side of the privacy debate, a 2020 study from Cisco “From Privacy to Profit: Achieving Positive Returns on Privacy Investments” concludes a number of points:

• 70% of respondents found business benefits in applying the tenets of privacy, this included in competitive advantage.
• Sales delays caused by privacy and customer expectations are dropping. This drop is expected to continue to reduce as privacy regulations are enforced and customer trust established.
• Investment in privacy results in large returns – the study evaluated this using a Return on Investment (ROI) calculation.

Trust, Profitability, Creepy Ads, and Data Privacy

In the case of presenting online Ads, can you interact with customers, so they feel OK being advertised to? In turn, can profitability from online marketing be balanced against consumer trust issues and privacy?

The truth is, ads are not disliked by consumers. Research from Harvard Business School found that online ads are fine in themselves, as long as they are not ‘creepy’. In this context, creepy means the use of third-party data sharing and making inferences about people based on online behavior and website use.

A few experiments have thrown light on the reaction and behavior of consumers and personalized ads. In one famous study from 2014, researchers found that once customers understood that it was their data being used to target ads, click-rates dropped.

The result is that the personalized ad industry is losing ground with advertisers, not just consumers. Facebook, for example, settled for $40 million for allegedly bloating video viewership metrics by up to 900% to attract ad spend.

Squaring the round of advertisers, consumers, and platforms need impetus and trust; the mix of transparency and privacy looks like the best contender.

Personalized Marketing Attitudes

Going back to the opening statement on using personal data for marketing purposes. Some may ask, what does serving up ads got to do with privacy anyway? In 2019, eMarketer carried out a survey on consumer attitudes towards online marketing. The researchers found that over half of respondents were “concerned” about how tech/social media companies were using their data for commercial purposes. Interestingly, three-quarters of users applied ad blockers and only 10% felt comfortable with data being used for relevant ads.

Whichever way you look at it, most customers do not like the use of personal data to target ads at them. Personalized ads are already associated with poor company practices and a lack of respect for privacy.

This ultimately eats away at customer-vendor relationships affecting bottom-line profits. Those who continue to run with personalized ads that use consumer data may find themselves on the wrong side of marketing history.

Marketing and the ‘Privacy – Minded’ Customer

The age of the creepy ad is gone. The modern customer is a savvy internet user. They know about data tracking and behavioral inference. Companies need to respect the new ‘privacy informed’ paradigm of the 21st century and build structures that market without borders instead of dis-respecting user privacy. No one likes to think that information about themselves is being sold to the highest bidder.
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This marketing practice has only led to annoyance by consumers that will, in turn, lead to ignored ads and wasted money.

The time for choosing trust is now.
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Consumers want to trust companies. They want an organization to build a relationship with them without abusing that trust. Non-personalized ads offer a way to not only get your products out to a wide audience but to do so in a transparent manner, showing your organization has respect for personal privacy.

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