As we highlighted in a recent article, every company is a technology company. And in our increasingly digital world, access to the right kinds of customer data can be a significant competitive advantage.
Consumer trust is essential to gathering that data. Unfortunately, low consumer confidence in the ability and willingness of companies to safeguard their data is a formidable barrier to gaining that trust. According to Pew Research, 91% of adults agree or strongly agree that consumers have lost control of how their personal information is collected and used by companies.
A recent article from Boston Consulting Group (BCG), “Bridging the Trust Gap: The Hidden Landmine in Big Data,” articulates this challenge. Coauthors John Rose, Frederik Lang and Alexander Lawrence reveal a startling statistic: Only about 20% of consumers trust companies to “do the right thing” with their personal data. In fact, 70% of consumers surveyed said they’d be unlikely to share data with a company they didn’t trust.
The cost of all this consumer skepticism takes the forms of reduced spending, declining revenue and higher attrition rates. According to research from BCG:
Consumers are now demonstrating that they will “vote with their feet”—stopping or significantly reducing spending—if they believe that a company has misused data about them or other consumers. As consumer awareness and concerns increase, we believe that data misuse has the potential to cut overall revenues by 10% to 25% in year one, dropping to 5% to 15% in year two.
To create a sense of trust among wary consumers, companies must radically rethink their approach to data stewardship. The BCG article highlights several ways that companies can become better data stewards, but the most important focus areas are transparency and data usage policies. Unfortunately, many companies aren’t open about how they gather and use customer data.
Trust through transparency
How can companies reverse this trend and foster a relationship based on trust with their customers? As a recent article in TechCrunch points out, companies need to realize that consumers want proportionate value in exchange for their personal information. The greater the depth of the information they provide, the higher the value they expect.
“…Most people understand that in order for digital services to work properly or stay free, they may need to allow the services to track some of their data. For example, maps have limited appeal when location tracking is disabled. There’s a trade-off between convenience and privacy with which most people are comfortable. That negotiation occurs between the consumer and the online site or service.”
When companies are up-front about what data they want to collect and how it will help them provide better, more personalized service in return, consumers are generally more willing to enter into this bargain.
Consider the online music service Pandora. To sign up, subscribers provide basic demographic and location information. As they listen to music on Pandora, they tag both the songs they like and the ones they don’t. The company uses this personalized data to tailor music recommendations to each subscriber.
Here’s the key: Pandora is completely open with subscribers about how it employs their data. To keep its service free, the company uses subscriber data to target advertising, so users see and hear occasional ads between songs. At any point, subscribers can upgrade to an ad-free version of Pandora by paying for it. This kind of transparency and value exchange goes a long way toward building trust and inspiring long-term loyalty—maybe that’s why Pandora has grown to more than 81 million listeners and remains one of the top music streaming services, despite fierce competition.
Practices and policies for better data stewardship
That said, transparency is only beneficial if consumers like what they see. Brands build trust by implementing responsible data stewardship practices and policies that put consumer data protection first.
Beyond telling your customers how and why you’ll use their data, you also need to give them control over what data is used. In addition, to assure the highest data security and privacy standards, you must look beyond current regulations and anticipate stricter data rules in the future. By publicly establishing and adhering to a clear set of data stewardship policies, you can help consumers perceive your personalization efforts as helpful, rather than intrusive or inappropriate.
Transparency builds trust. When your customers understand how you’re using their data and why, they’re more likely to consider you a trustworthy data steward—and they’re more likely to do business with you. According to BCG, “Consumer willingness to allow companies to use data in new ways remains roughly five to ten times higher among those who trust a company to prevent harmful uses than among those who do not.”
Want to dig a little deeper on this topic? Read about our best practices for balancing personalization and trust.