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Will privacy fears affect data?

by David Krajicek , 13.03.2015

In 2015, the promise of market research—and marketing, in general—is bound up in our ability to build healthy and vibrant information ecosystems. Rivers of data feed campaign streams across the media and marketing landscape, shifting and readjusting in a real-time evolution. The goal: to know and connect with the consumer more often and more effectively.

But environments that took years, even decades, to develop can be disrupted in one or two dramatic, unexpected steps. A drought descends or some industrious beaver builds a dam upstream, and suddenly the system is barely functioning.

I worry that the same could happen in our data-driven marketplace. So many business models and revenue streams now are based on the free flow of digital data from thousands of sources. There is plenty that could go wrong. In fact, the very nature of ecosystems tells us that shifts and shutdowns are guaranteed. Even in man-made landscapes, change is inevitable.

I see market researchers as stewards of the data environment. They are used to having their arms deep into the information tributaries and can see quickly that the water is running low (lack of discriminating data) or growing too muddy (changes in reliability). Not only do they play a role in developing these ecosystems, but also, researchers can spot the obstacles that pose a threat to the health of those systems. From my perspective, an issue that looms large in our very near future—one that promises to impact carefully constructed information ecosystems—is privacy.

Beginning with the Target data breach, which has been followed by many other “leaks,” both large and small, the safety of consumers’ personal information has been front and center in the news. A simple Google search on “data privacy” turns up nearly  1 billion hits, including coverage by Foreign Affairs, TechCrunch, Forbes and The Atlantic. The TV show 60 Minutes recently devoted a predictably foreboding segment to the subject, taking Experian and other data miners to task.

“Ominous” is the prevailing mood of this coverage, a tone that has spilled over into social media, which has been abuzz with talk of the Facebook Messenger app and other perceived (if not real) sources of concern.

And yet consumers do not seem to be backing off of their online activities in great numbers. In a GfK study on the topic released earlier this year, 59% of U.S. respondents said that their concerns about data privacy had risen in the past year, but only 17% actually were avoiding online banking and just 16% were steering clear of social networks—with distinct generational differences in each case. One sentiment that did hold relatively steady across age groups: Roughly 80% favored stricter regulations on third-party use of personal information, the data-powered mill of multichannel marketing.

When asked which of 20-plus organizations and professions they trusted with their information, our respondents put marketers and advertisers dead last, trusted by only one in four people. By contrast, retailers ranked among the most trusted, despite the Target incursion.

Of course, it is more important that consumers trust brands than marketers or advertisers. If a CPG company leaks data, do consumers then stop buying its dish detergent or body wash? Probably not. Think about an automaker, however, and the stakes become higher: Every car is known by both its make and model. And if you are a digital company in any respect, the implications of data loss go up dramatically with personal or financial information.

What I see in our results and many other statistics on the subject is an issue waiting to ignite. In his bestselling book, The Tipping Point, Malcolm Gladwell defines the titular tipping point as “a moment of critical mass, the threshold, the boiling point,” and he says that each such inflection requires three ingredients (crudely simplified here by yours truly):

• Influencers who take the lead and inspire mainstream participants

• A memorable, or “sticky,” message

• Environments and societal contexts that encourage movement

While I do not see any of these factors in play around data privacy today, it is not hard to imagine a scenario that could change things. A series of major personal information leaks, all within a month or two, somehow leads to substantial, unprotected losses for individuals (environment). Their stories are told to great effect in major media (message), and a popular figure (influencer) decides to “take on” third-party data collectors and users. Companies retreat and data disruption ensues.

Today, the information ecosystem is being sustained by several unfortunate factors, rooted in misunderstanding and grudging acceptance. First, consumers may not know what they are agreeing to in those much-derided terms and conditions agreements. In a recent NPR segment, University of Chicago Law School Professor Omri Ben-Shahar reported that his latest mobile phone agreement ran to 55 pages and had so many typos that he doubts that the lawyers who wrote it ever read it again.

Second, while breaches continue to happen, people are (apparently) not losing their houses or retirement savings in the process. So while consumers know that something could happen, the “what,” “when” and “where” are nebulous and impersonal, which is related to the third factor: Even people who are concerned do not know how to take action.

Of course, upbeat marketers argue that, even knowing all of these things, consumers are, at some level, actively choosing to remain in the data mix because of the various benefits that ensue. Recent GfK research shows that, when asked what innovation means to them, consumers overwhelmingly choose convenience in the form of finding faster or easier ways of doing things. And convenience is, perhaps, the clearest benefit of our data ecosystem. Thanks to mobile apps, for example, we can check Facebook, Instagram, Vine, our bank balance and our credit card statement all in a matter of minutes.

But an ecosystem based on ignorance and passivity rather than empowerment is living on borrowed time. With information now at their fingertips daily, and much more accessible with just a little effort, consumers today are newly minted power brokers, making informed choices about products, advertising and bargain hunting that would have been impossible 10 years ago. We know that omnichannel shopping is extending way beyond HDTV purchases, turning up in the grocery store aisles with greater frequency.

If marketers, data scientists and researchers do not take proactive steps, they may be inviting regulations that could turn the digital business on its ear—oversight that four out of five people in our survey favored. Will 2015 be the year when data integration slows instead of picking up speed due to inaction by marketers? This does not mean that we need to beat a retreat from data use. We just need to appreciate fully how the dynamics are changing and adjust accordingly.

Here are three final thoughts for 2015 on the subject of data privacy:

•    Broadly, marketers and researchers as an industry need to be speaking clearly to consumers about what we are doing and why we are doing it.

•    We must get clear consent from consumers that is informed and educated.

•    Individual companies need to be very clear about the fact that they are collecting information, and how and when they use it. Don’t think of the legal implications. Think of the potential brand damage—a much more real and alarming possibility.

In an age of increasingly empowered consumers, the only smart approach to privacy is to remember a familiar mantra: R-E-S-P-E-C-T.

David Krajicek is CEO of GfK Consumer Experiences North America.

See the original unedited post in the November/December 2014 issue of Marketing Insights.