Data Privacy Can Be a Competitive Advantage – Commentary on the European Data Privacy Day
Published on 28 January 2016 | Author Stefan von Lieven0
On 28th January at the initiative of the Council of Europe, the European Data Privacy Day will take place for the 9th time. Goal of the Data Privacy Day is to strengthen the data privacy awareness with consumers in the EU. For companies, data privacy is not only a legal requirement but also an opportunity for a competitive advantage. In a digitalised economy which increasingly focusses on data-driven business models, user trust is an essential precondition for success.
The often used term of data-driven marketing already implies this. Data is an essential driver in digital business models and in marketing. Truly customer-centred services are no longer possible without the use of (personal) data and the integration of information technology. Users nowadays interact with a growing number of digital applications and generate data which vice versa is used by companies to optimise their marketing, service and the general customer experience.
If you mention personal data you must also mention data privacy. Personal data is an asset worth protecting. Companies therefore face the responsibility to deal with this asset in a sensitive manner and to fulfil the demands on data privacy and data security. Companies should always bear in mind the following: Data privacy is not only about abiding to the current regulations in order to avoid trouble with the law, it is also a competitive factor not to be underestimated.
Trust is the Basis for Business Success
Consumers, especially in Germany, have a strong awareness of data privacy, not only thanks to events such as the European Data Privacy Day. On the other hand, data scandals and occasional, agitated public data privacy debates have contributed to scepticism.
Companies should take this scepticism seriously since mistrust threatens the basis of many digital or data-supported business models. In a more positive light, the high sensitivity of consumers also shows: companies score higher when they focus on high data privacy standards and communicate these in a transparent way. This applies particularly in the international comparison, e.g., with companies in the US. It is important to gain the consumer’s trust. According to a study by the Ponemon Institute in 2015, 50% of German consumers only share data with companies they trust. A current study by Forrester Consulting comes to the conclusion that two thirds of global consumers are generally willing to transfer personal data to companies if they are rewarded with a personalised user experience. Even for interesting content or free access to services, users are willing to share data provided a high data privacy standard is maintained. 76% of Germans pay attention to who they provide which data of themselves, according to research by forsa.
Data For Added Value
What should companies therefore do to use data privacy to gain a competitive advantage? The precondition is, naturally, that they familiarise themselves with the legal framework requirements for the usage of personal data and implement it correctly. This means creating justiciable processes throughout, obtaining the adequate consent (opt-ins) from consumers within the framework of the data privacy declaration (e.g. for the creation of user profiles), as well as ensuring a suitable technical differentiation ability in the appropriated processing of data. Data privacy declarations (DPD) which are managed comprehensively, centrally and in compliance with the law are becoming part of the marketing task in order to be able to use this data.
To gain the consumer’s trust, two thing are important:
1. Transparency: In their data privacy/data privacy declaration, companies should describe clearly and in detail which data is to be collected, for which purpose it will be used, for how long it will be saved and how exactly it will be distributed, as well as which rights to information and deletion the respective consumer has. The clearer and the more transparent data privacy is, the better. Furthermore, it is recommended to create trust already at the point of collecting the data by using clear statements such as “Your data will not be shared with third parties.”. Further trust-building measures which should be clearly communicated to the user are e.g., privacy seal, certifications, geographic server locations, contacts for data privacy queries, compliance regulations or specific organisational and technical measures to guarantee data privacy and data privacy. A good example is set by companies who enable consumers to adapt their data and their opt-ins themselves.
2. Creating an Understanding of the Added Value: Trustworthy or not, why should a consumer provide his data to a company if there is no benefit to himself? The consumer should be offered a real added value, e.g., personalised offers which are adjusted to his interests, a user-friendly experience because a company which knows its consumers can relieve them from certain process steps (“If we know your location and your preferences, we can inform you about the best restaurants in your vicinity.”) etc. It is important to make the consumer aware that his data is necessary for the service provided. Companies asking for a large number of details which are not necessary for the service provided, tend to deter the consumer. An explanation why data is part of the agreement can also be helpful. Users understand that some fee offers must be web-based and therefore tend to be willing to give a consideration according to the principle of reciprocity, if they are explicitly asked for their collaboration. Research has shown an increase of consent by 26% when a statement like “We need your support! Our offers are free for you – with targeted advertising we can finance them better!” is used in contrast to an argumentation about the customer benefit of better advertising.
Free Checklist on Legal Queries in the Big Data Environment
You will find more information on the legal use of data in marketing in our checklist 23 Questions on Big Data and Law by artegic and Bird&Bird. This checklist will help companies to avoid legal pitfalls when handling Big Data. To the free download: https://www.artegic.com/big-data-and-law