The Price of Personalization: Unpacking the Realities of Consumer-Brand Engagement in the Digital Age

By Gowthaman Ragothaman On Jan 24, 2020

In 2006, Clive Humby coined the phrase “data is the new oil” and since then this has become the catchphrase amongst marketers for the past 14 years. However, what went predominantly unnoticed is the further elaboration he gave on this phrase.

Like oil, data is “valuable, but if unrefined it cannot really be used. Oil has to be changed into gas, plastic, chemicals, etc to create a valuable entity that drives profitable activity; so, data must be broken down and analyzed for it to have value”. Even as consumer information quickly becomes an indispensable resource for businesses to aid in capturing the attention of the elusive customer, personalization and targeted marketing has had a very bumpy ride for the past decade for three main reasons: volume, velocity, and verification.

The days of mass, untargeted broadcasting is slowly giving way to personalization.

By 2025, it was estimated by the International Data Corporation (IDC) that worldwide data creation would grow to an enormous 163 zettabytes (ZB) which is ten times the amount of data produced in 2017. Though its volume has increased by tenfold, the velocity of this data will grow from the current share of real-time data at a rate of 15 to 30 percent in the next five years.

As the amount of data that we continue to collectively create and share continues to grow, so will our reliance on its use, as a means to offer better services and product offerings. In turn, global revenues for Big Data and Business Analytics (BDA) solutions were forecasted to reach $189.1 billion in 2019. A new update to IDC’s Worldwide Semiannual Big Data and Analytics Spending Guide also showed that BDA revenues will maintain this pace of growth through to 2022 with a five-year compound annual growth rate of 13.2% – by then, IDC expects worldwide BDA revenue will be $274.3 billion.

At the same time, cognisant of this emphasis on data collection and data analysis, consumers are becoming more sensitive to how their data is being used, and governments have likewise taken an unequivocal stand in their expectations for digital privacy to be respected. Since the introduction of the European Union’s General Data Protection Regulation (GDPR) over a year ago, several countries around the world have followed suit, using GDPR as a frame of reference as they too begin to craft their own data protection policies.

In the next five years, it is expected that at least two-thirds of the world’s population will be governed by some form of privacy regulations, each varying in how ownership and data processing practices are defined and interpreted. As the global privacy compliance landscape continues to evolve, it is the verification of the data that is now at clear and present danger – both for the owner and for those who are refining it for value creation.

Privacy or Personalization?

The days of mass, untargeted broadcasting is slowly giving way to personalization. This transformation in the way businesses deliver value to their customers in positively impacting demand through increasing penetration as well as consumption. Personalized experience is pushing advertisers to jump on every single opportunity to strategically connect with consumers via the vast array of channels available. When done well, targeted advertising provides a win-win solution for everyone by putting the right message in front of the right consumer at the right time in a more relevant manner––brands connect with the right audience and consumers are only shown products which they are interested in.

On the other hand, mounting regulatory focus on data collection practices and personal data privacy has contributed to increased scrutiny of data-driven advertising, indicating the need for a closer look at why data is being collected and how it will be refined. While data is largely essential to achieve the objectives of personalization in order to better enrich the experience of the individual, recent studies have shown that 62% of polled internet users are already wary of how brands handle their personal information, citing misuse of data as a leading factor for distrust.

Like oil refineries, data refineries, need to be extremely responsible in their process. Every single-walled garden across Search, Social and Commerce are under the scrutiny now on this responsibility.

On the last count, there are nearly 15 walled gardens garnering nearly 85% of the digital advertising business each having their own refineries to process every single experience of us, online. This is not to ignore the long tail publishers of more than 30 in number, who are also collecting customer information. In such an environment of chaos and insecurity, it bears merit to consider bringing data autonomy back to the user.

The concept of a Universal ID––a unique, interoperable digital identity that can be shared across all online experiences (read platforms) – could serve to address deteriorating consumer trust without compromising the benefits of personalization. By providing users with a standardized identity wallet, universal IDs could provide holistic and unified behavioral profiles which can be used by advertisers to deliver uniquely tailored experiences, while giving consumers more control over the type of data companies use in their ad targeting efforts. In short, privacy must be centralized with the owner and decentralized at the refinery, for a better experience for all.

Data and Decentralisation

Openness and authenticity are now critical to sustaining brand loyalty, and a transparent business-customer relationship is a key to building trust. Findings from a study by Sprout Social revealed that 73% of consumers would be willing to pay more for a product that offers complete transparency. Additionally, faced with the challenge of being privacy compliant when confronted with stringent data regulations across most of the countries in the coming years, Blockchain appears to offer a solution to tackle the issues surrounding digital data collection practices––security and transparency.

Unfortunately, with all the information about an individual being passed through various centralized servers and walled gardens, users often have little knowledge of how their data is actually being used. Moreover, integrating Blockchain technology can likewise prove advantageous for organizations in several ways––blockchain can facilitate the portability of consumer data and enable secure data processing through capabilities such as audit trails and traceability, and the use of consensus mechanisms.

The right to data portability––allowing individuals to obtain and reuse their personal data for their own purposes across different services––is one of the fundamental data subject rights in the GDPR. In order to comply, personal data could be kept private from the Blockchain in an “off-chain” data warehouse with only its evidence, a cryptographic hash, for example, being exposed to the chain.

In this manner, personal data can be deleted when needed without any further impact. This approach helps in centralizing privacy and decentralizing the refinery (read processing). As the volume increases ten-fold and the velocity doubles, refineries need to transform their processes to stand the test of time.

Implications for Marketers

A year since GDPR came into effect, we have seen a significant number of developments in relation to privacy laws around the globe which have been inspired by its scope and depth. For instance, Thailand enacted its Personal Data Protection Act (PDPA) earlier this year and India is poised to pass its new data protection bill after more than a year of discussion. In the United States, the CCPA is considered one of the fiercest and most comprehensive data privacy laws, bringing groundbreaking privacy rights to citizens of the Golden State––which ironically is home to the Silicon Valley tech giants.

Under this law, organizations will need to know where consumer data comes from, how it is used, and where it’s going, with special tracking of any selling of personal information. Failure to protect any Californian user’s information could result in severe fines of up to four percent of their annual global revenues.

In light of the CCPA, many companies have taken significant steps in their compliance efforts ahead of its upcoming implementation. Microsoft announced that it would honor the rights provided to Californians and expand that coverage throughout the entire United States, and Twitter has made a move to stop allowing political ads on the platform––highlighting the risks that internet advertising poses to politics amid the rise of misinformation across social media, which can be used to purposefully influence votes that could affect the lives of millions.

Despite this regulatory development being local in scope, it is certain to have global implications, particularly for the multitude of companies that are looking to engage with consumers not just from the land of its establishment, but across various geographies. And with many organizations now largely global as a consequence of the “digital economy”, brands and platforms have their work cut out for them in keeping their consumers satisfied when it comes to the protection of their personal information.

The power of personalization still reigns and in order to harness it, marketers will need to rely on new techniques to ensure consistent and compliant personalization to drive relevant contextual advertising. No longer limited to physical campaigns and single-streams of media, the industry would do well to adapt its practices in line with a new reality––one that transcends borders and platforms alike. By shifting its focus towards cultivating brand trust in order to prioritize ethical use of data and consumers’ right to privacy, we can hope to see a digital media landscape underscored by an ethos of greater trust and transparency.

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