Data is the new oil
As data protection rules are being tightened in many jurisdictions, how should companies ‘join the dots’ of the actions of the datarati?
Having just returned from the four day Loyalty World conference in London, it is not surprising that my head is buzzing with dozens of buzz phrases and important insights, writes Annich McIntosh
But the one that keeps pushing itself to the front of my mind is that “data is the new oil”.
This statement was mentioned many times during the conference, and has been attributed to several different people already, but it was probably said first by Michael Palmer in 2006 (or it may have been Clive Humby). No matter, it is a great phrase that really highlights why loyalty programmes have proved so successful and what it is that we should be focussing on.
But loyalty as a rewards and points concept is being challenged. There are many forces at work. New social media and online companies are using loyalty in a different way, to “suggest” courses of action rather than bribing to get them. New technologies are giving control to the customer, who is increasingly savvy and knowing. In the future, data that we now take for granted may only be available at a price.
“RIP loyalty, data the new king”
Tony Fish, who describes himself as an entrepreneur, author and investor took it one step further and commented: “Loyalty is dead in the new kingdom, where data is king.” Fish argued that the customer, (as in the purchaser) is no longer the end of the value chain, because the customer’s data has a greater value than that of his or her purchase. He also suggested that as customers, we will all begin to understand the value of that data, which will have different values, depending on what rights there are to exploit it.
He explained: “The customer may in future have a choice: No data, data available to one party, data available to several parties, data that can be sold.” Fish suggested that the customer may be bought, so that their data can be used.
Currently, research is estimating that 58% of people have no idea of the value of their data, but that the Millennial generation (screenagers is the new word for them) are different. “They already completely and utterly get this. They know the value of what they have got,” said Fish, “which is why loyalty is dead.”
Whether or not you agree with Fish’s contentious statement about loyalty’s state of health, there is no doubting that a big black cloud is hanging over the massive business opportunity of customer data. This cloud is legislation and regulation to control its use.
In Europe, the big fear is how the imminent EU legislation (due in its first draft early 2012) will affect the loyalty business.
Although full details have yet to be disclosed, the European Union is expected to announce, possibly as early as January 2012, that data protection guidelines across the region will be tightened to provide consumers with greater protection.
The warning was spelled out on November 8 in a joint statement issued by EU Justice Commissioner Viviane Reding and the German Consumer Protection Minister Ilse Aigner.
“In modernising the EU’s data protection rules, we believe that consumers must be more empowered than they are today. Users should be in control of their data,” the statement read. “This is why, in our view, EU law should require that consumers give their explicit consent before their data [is] used. And consumers generally should have the right to delete their data at any time, especially the data they post on the Internet themselves.”
Key to the new rules is an expected requirement to gain explicit and informed consent from individuals before storing their data, as well as informing them of what data will be stored, and how that information will be used. Consumers will also have the right to be “forgotten” on the Internet, and have all references to themselves removed.
Although the UK’s Data Protection Act already requires companies to seek permission to use personal information, in practice this may consist of just getting individuals to select a box saying they agree to a long list of terms and conditions.
Under the proposed EU legislation, conscientious organisations that make an effort to comply may have to delete information.
Customer control of data
Other policy initiatives that may be important to the loyalty business include the Midata Nudge Unit of the UK Cameron government, the US Kerry McCain Privacy Bill and the Canada Pipeda (Personal Information Protection and Electronic Documents Act) 2012. All will in some way work to give consumers control over their personal information. Many more in other regions are in the planning stage.
But future data legislation is not the only issue for loyalty marketers. A growing problem, is making sure that data is both acquired, and used to advantage. This was the strong message from Rupert Duchesne (right), president and chief executive of Aimia. He said: “The new coin of the realm in the business armoury is consumer data, and the challenge will be acquiring it from the datarati.” He warned: “If you don’t use their data, others will. If you don’t collect and use it, others will. The companies who fail to evolve their data strategy will not survive.” He said that customer data is as important a foundation of modern business as capital and labour, but that tracking and measuring that consumer behaviour, as they move between methods of interacting, such as online shopping, mobile interaction, social media and face to face, would be challenging for most organizations.
“There are 10 million millennium consumers with extremely high expectations. Transactional data is now the floor rather than the ceiling of expectations.”
The biggest data challenge is connecting the dots, in that for example, Foursquare may know where you are, Google could know what you are going to do next, and Facebook will know what you like, but it won’t know what you are going to buy.
At the same time, legislation may well make all of this more difficult.
“It is important to remember that regulations are being considered, and that in response we should be considering a system of data use ‘by permission’,” Duchesne said.
By 2020, the global volume of digital data is expected to have increased more than 40-fold.
Duchesne suggests that companies should not wait for policy makers to create new laws, and that consumer data rules can be developed now that embrace strong values and guidelines.
He offers the term TACT, to stand for Transparency, Added Value, Control and Trust and suggested that proposed data regulation is a call to arms. “There is a huge opportunity and a huge risk as the relationship between consumers and brands evolves. The revolution is being driven by digitalisation. New sources of data fragment business models, but a greater proportion of money is going to loyalty.”
Duchesne says that the best way to join the “datarati” is to deal with their needs, rather than to force feed them marketing. He also suggests that more alliances are needed between companies in order to collect and mine this data responsibly.
He said: “If properly employed, data values will benefit consumers first and foremost, but will also drive value and profits back into the enterprise.”
Who could argue with that as a proposal?