Feature
The Gist
- Awareness rise. Consumers' focus on data privacy surges.
- Trust balance. Personalization and data protection are key for loyalty.
- Openness wins. Transparency in data practices boosts customer trust.
Data privacy has transitioned from a mere backend concern to a cornerstone of customer-facing businesses. As consumers become increasingly aware of their digital footprints and data privacy regulations are put into place, brands must handle personal information with utmost care. This article delves into how data privacy directly impacts customer trust and brand loyalty, highlighting its importance in modern business strategies.
You Have the Right to Remain Private
Consumer awareness of data privacy rights has dramatically increased over the past few years, largely due to data breaches that have occurred to well-known brands such as Target, Activision and Chick-fil-A. Additionally, a 2021 Deloitte Data Privacy report revealed that 66% of those polled said that they are concerned about how the brands they interact with online use their personal data. Similarly, a 2021 KPMG report on Corporate Data Responsibility indicated that 86% of respondents said they feel a growing concern about data privacy, while 78% said they are concerned about the amount of data being collected.
Chris Jones, chief product officer at Amperity, a CDP platform provider, told CMSWire that the role that data privacy plays in shaping customer trust and brand loyalty in today's data-driven business world is critical. “Customers have become increasingly aware and concerned about how companies handle their personal information, especially in the wake of several high-profile data breaches.”
The consumer data privacy regulations that have been put in place over the past few years (GDPR, CCPA, etc.) have also increased the awareness that not only do businesses have privacy regulations to comply with, but consumers have the right to secure their data. To comply with the GDPR, websites have added various types of cookie consent popups that allow users to opt out of the use of cookies, a feature that most people have come to accept as a normal part of using websites.
Myles Suer, strategic marketing director at Privacera, a unified data access governance platform provider, told CMSWire that he remembers after the Target hack asking CIOs how Target couldn’t justify patching their software. "To my surprise, CIOs said it has been hard explaining to business decision-makers the value of cybersecurity and why enforcing privacy controls and protecting customer data is essential," said Suer.
Like all of the leaders we spoke with, Suer understands that there is no question that a compromise of personal information negatively impacts brand equity. "And brand equity impacts things like customer loyalty, margin, and perceived product benefits."
There has also been a move by the major web browser companies to stop allowing businesses to use invasive third-party cookies, which have been used for decades to track users as they move from one site to another. Instead, businesses have begun to use first- and zero-party data that customers willingly provide.
A 2023 report from MediaMath indicated that 65% of consumers ranked “misuse of personal data” as the top reason they would lose trust in a brand. Additionally, the report showed that 74% of those polled are more likely to trust brands that prioritize using personal information with a privacy-safe approach. "Privacy and customer trust are 100% core in today’s businesses. This is why a few years ago Target's new CIO said that another hack like they had experienced would eliminate their business franchise," said Suer.
Related Article: 10 Potential Data Privacy Pitfalls for Marketers
Consumer Data Privacy and Regulatory Compliance
In addition to the GDPR and other foreign data privacy regulations, the United States has quite a few data privacy laws of its own:
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HIPAA (Health Insurance Portability and Accountability Act): This act concerns the privacy and security of patient health information.
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FERPA (Family Educational Rights and Privacy Act): This act has to do with student education records.
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COPPA (Children's Online Privacy Protection Act): For children under 13, websites must obtain parental consent before collecting personal information.
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GLBA (Gramm-Leach-Bliley Act): This act requires financial institutions to explain their information-sharing practices to customers.
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FTC Act (Federal Trade Commission Act): This act enables the FTC to take action against businesses that commit unfair or deceptive consumer data privacy practices.
More recently, Congress introduced the American Data Privacy Protection Act (ADPPA), which has the goal of providing consumers with foundational data privacy rights, establishing strong oversight mechanisms and providing meaningful enforcement.
Raymond Velez, global chief technology officer at Publicis Sapient, a digital consultancy, told CMSWire that businesses should shift to a “progressive consent” approach when it comes to data. “This approach requires an opt-in consent model with ‘privacy by default.’ These evolving privacy regulations are intended to place the power of choice and visibility into how personal data is handled into the hands of the consumer,” said Velez.
Consumers prefer to be able to control their own narrative, something that data privacy regulations put back on the table. “Allowing consumers to opt out of data collection puts the power back in their hands and protects their privacy,” said Velez. “Businesses must earn the right to capture data and earn trust over time with their customers.” Velez explained that this approach to progressive consent can come in the form of clear communication around getting permission for cookies and describing how the cookie (or other privacy data) helps give the consumer a better experience.
"GDPR and various state regulations have added operational costs, but I believe the value of digital customer trust has also become clear," said Suer.
Related Article: The State of Consumer Data Privacy Legislation in 2023
Personalization vs. Privacy: Consumers Demand Both
In spite of the overwhelming need for data privacy, consumers also want the experiences they have with businesses to be personalized. Everyone likes to be recognized when they enter a store or restaurant. It’s not much different online — customers like to be recognized, respected and understood. For that to occur, a certain amount of data has to be shared by the customer — and fortunately, they are willing to do so if it results in personalization and a better experience.
Nagendra Kumar, CTO at Gleen AI, a generative AI startup, told CMSWire that as a brand, customer data privacy is always something to be vigilant about. "On the flip side, it is important to brand success to understand customer preferences and behaviors so you can offer the best experience to your customers,” said Kumar. “Consumers need to trust that brands will responsibly use their data to provide a highly personalized experience while simultaneously safeguarding their data from bad actors and invasive marketing practices.”
The 2021 Merkle Consumer Experience Sentiment Report revealed that 76% of those polled said they would take a brief survey upon visiting a website for the first time in order to have a more personalized experience. The report indicated that consumers are more comfortable giving out their behavioral data to allow brands to enhance their experiences. Similarly, the 2023 MediaMath survey indicated that nearly half of those polled are interested in sharing first-party data for a more effective and personalized experience.
Meggie Giancola, SVP of sales solutions and strategy at Vericast, a marketing solutions company, told CMSWire that data privacy represents a delicate balance between personalization and privacy, and companies must adapt swiftly to the rapidly changing regulatory landscape in this realm. "While consumers desire personalized brand engagement, they also value their personal privacy and data security. To navigate the paradox of personalization without compromising privacy, companies should focus on establishing direct engagement with consumers and obtaining their consent to collect information securely."
Data Privacy Transparency Is Crucial
When it comes to the use of data, transparency is crucial. Transparency allows customers to gain a better understanding of how their data will be used by a brand, which enables them to trust the brand with their data. Additionally, transparently informing individuals about data collection practices allows them to give informed consent. The MediaMath survey indicated that 59% of customers said their trust in a brand would increase if there was a disclosure regarding how the recipient of the ad was determined.
“Adapting to legislative and regulatory changes, marketers must convert their unknowns to knowns through transparent practices in data collection and usage,” said Giancola. “Brands that openly communicate about data practices can alleviate consumer concerns, fostering affinity and loyalty, thus driving growth.”
Being transparent about data privacy demonstrates that a business respects and values its customers' privacy. This builds trust and confidence among customers, leading to stronger and more positive relationships. It also puts customers in the driver’s seat by allowing them to choose whether or not they wish to share their data with a brand.
Jones said that to build and maintain trust, transparency is the key. "Brands must be open about their data collection and usage practices and ensuring compliance with data protection regulations signals to customers that their privacy is a top priority,” said Jones. “This transparency lays the foundation for brand loyalty, as customers feel reassured that their data is in safe hands."
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Final Thoughts on Data Privacy and Trust
Data privacy plays a crucial role in building consumer trust in a business. With high-profile data breaches affecting brands like Target and Activision, alongside regulations such as the GDPR, the message is loud and clear: Brands need to prioritize data protection and recognize the importance of balancing personalization with privacy. As trust becomes a brand's most valued asset, businesses must combine personalized offerings with ironclad data security.
