GDPR Noncompliance and Failure to Manage Data Transparency Poses a Real Threat to a Brand’s Credibility

The topic of GDPR has been buzzing in boardrooms and in the back of minds for more than two years, but the May 25 deadline won’t silence the noise. It will only cause it to grow louder, as noncompliant companies are whacked by hefty fines – up to four percent of annual global turnover or 20 million Euros (whichever is greater).

Beyond that, noncompliance poses a real threat to a brand’s credibility. According to the RSA Data Privacy & Security Report, 72 percent of the US respondents said they would boycott a company that appeared to disregard the protection of their data, and fifty percent of respondents said they would be more likely to shop at a company that could prove it takes data protection seriously.

Whether brands have pored over the fine print preparing for the regulations or are rolling the dice on a potential fine, GDPR is no doubt forcing brands to think differently about the way they collect and use customer data, and all signs point to third-party data no longer cutting it. While many view GDPR as a costly burden, it presents an important opportunity.

Brands will need to think differently – and arguably, more wisely – about how they collect and activate data. This will lead to some established practices going away and best practices emerging that make the way data is aggregated and applied more transparent, and thus more effective.

Old Data Practices Don’t Work in a Post-GDPR World

Marketers are clearly willing to put the dollars behind better understanding their customers through their data. A study from the Interactive Advertising Bureau (IAB) and the Data & Marketing Association (DMA) compiled by Winterberry Group found that U.S. companies spent $10.05 billion on third-party audience data in 2017 and another $10.13 billion on third-party solutions to support that data. While third-party data has allowed marketers to capture ample information on their customers or prospects, buying large quantities of third-party data is flawed in many ways.

Time for Marketers to Steer Clear of the Cycle of Irrelevant, One-Sided Conversations with Their Customers

When it comes to the line of what’s appropriate and what isn’t, most consumers are more concerned with how a brand got information on them than what that information is. In customers’ minds, that’s the real differentiator between when a brand is being “creepy” and when it is being helpful.

For example, if someone is browsing vacation packages for an upcoming trip and the brand asks the preferred time of year, whether they are looking for a luxury or budget experience and whether it’s with friends or family, the brand can provide alerts for the package that best suits that individual’s needs.

And when that recommendation comes in, the customer does not feel like the brand is being intrusive; they recognize that they provided that information and are reaping the benefits from providing it.

Third-Party Data Is Often Outdated, Inaccurate and Irrelevant

Aside from the creep factor, third-party data is often outdated, inaccurate and irrelevant to what the company needs in order to create a better customer experience. It also isn’t at all unique to the brand—every other competitor has access to the exact same information. Because of this, many marketers have fallen into a cycle of irrelevant, one-sided conversations with their customers in which they bombard them with what they think they want, not what they really want or need.

Until now, most marketers were doing their best with the third-party data they had. But recent high-profile data privacy scandals like Facebook and Cambridge Analytica have citizens thinking more critically about how their data is being used. In fact, 49 percent of consumers have data privacy concerns, but 75 percent of consumers still expect digital personalization, so a privacy-personalization paradox exists in consumers’ minds.

Couple consumers’ mounting expectations with the GDPR deadline and brands are being confronted head-on by the urgency of getting their data best practices in order.

Declared Data: The Path to Data Transparency

Customer trust is incredibly important, and transparency will be the cornerstone of brand-customer relationships going forward. Declared data is the method brands are already using to gather relevant information directly from customers to understand their motivations, intentions, interests, and preferences by interacting with them directly.

First-party data is known to be relevant but unable to scale, while third-party data can scale but is often inefficient and irrelevant for the company. Declared data is the best of both worlds, eliminating the flaws and marrying the benefits of both means of data collection.

Rather than “renting” the often irrelevant data from third-party providers, brands can ask specific questions to create a bank of proprietary customer information. And because customers are willingly sharing this information with a brand, there is a two-way conversation that helps them understand why brands need this information and that it will be used to create a better experience. No more customers frantically wondering “how do they know that about me?”

Aside from fostering a more transparent customer relationship because the information has been explicitly given by the customer, declared data allows brands to be GDPR compliant and reduce the risk people will request the right to be forgotten.

GDPR is a true wakeup call for brands when it comes to how they collect and use data. As it becomes clear which companies prepared and which procrastinated their compliance measures, those who are not taking data privacy seriously will not only be at risk of penalties but of disenchanting their customers, hurting the brand’s reputation and building lasting customer loyalty.