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Data Privacy’s Journey From Cost Center to Growth Driver

6 minute read
Chitra Iyer avatar
From privacy paradox to privacy experience, the consumer data journey must go from compliance to profitability.

There are three elements of the privacy paradox as we know it:

(1) Customers are very concerned about how brands use their data online.

(2) Customers expect companies to know them and serve up the most relevant and timely experiences (which of course needs customer data).

(3) Despite their concerns about data privacy, customer actions online don’t always reflect those concerns. This HBR article tells us that most customers still impatiently agree to their data being collected and used in ways that they don’t fully understand, only because they want to complete their purpose on the site as quickly as possible.

Despite the three-cornered conundrum, the privacy challenge also presents a solid opportunity for CX leadership brands to build a distinct competitive advantage. Proactively adopting a privacy- and customer-first approach not only enables compliance, but also creates customer preference, and ultimately, better profitability. 

Unfortunately, data privacy’s journey from the realm of "cost and compliance" to "preference and profit" is not as simple as changing the text on your website’s opt-in messages. 

There’s a lot more to moving this iceberg. Here are the key considerations to make the journey as smooth as possible.

Training Business Stakeholders to Speak the Same Language 

Between legal (compliance), IT (operations and execution) and marketing (personalization and experience), a CX-led business needs to speak the same language on consumer data management. By working together and using all three lenses to define data management policy, they can ensure neither security, compliance nor CX outcomes are compromised. 

The difference between CX leaders and the rest, says Steven Chesser, president of data security company Veloci, is that for the former, the three pillars (of security, compliance and CX) are connected, and they concern all the functions. Everyone needs to have ownership toward understanding and improving the security, privacy and CX posture of the brand, and they need to do so on an ongoing basis, as the goalposts keep evolving and changing.

Yaagneshwaran Ganesh, director of content marketing at Avoma, a meeting productivity solution, says the privacy paradox is a classic case of Buridan's donkey, where one can't choose between two equally valuable options. “Great CX leaders understand it's not security vs. convenience. They bake the privacy and security aspects into the convenience design," he says.

Related Article: Is Less More for Customer Personalization and Privacy?

Building a More Diverse and Safer Data Ecosystem 

The phasing out of third-party cookies means marketers and businesses are adapting with approaches such as logged-in environments, says Thomas Adhumeau, the chief privacy officer of privacy management platform Didomi. Today, first- and zero-party data are already a necessity for marketers. Second-party data is an emerging option, with retail media — where retailers monetize their first-party shopper data by offering advertisers inventory on their digital properties — getting more sophisticated every day. 

Adhumeau says that while initiatives such as data clean rooms do offer brands a way to leverage second-party data, it’s still critical to first understand and ask for user preferences; and transparently inform users that their data will be shared with other brands. A robust preference management platform sets up a strong and compliant foundation for brands to safely monetize second-party data.

While the expansion in data sources is great news for marketers who want viable new ways to reach and engage consumers, it also offers an opportunity to rebuild a data strategy that puts privacy, security and personalization at the core.

Learning Opportunities

Making Privacy Experience (PX) a Key Element of Customer Experience (CX) 

It’s only a matter of time before every brand has a baseline compliance solution in place. But if you are building around CX, then choose a solution that not only meets compliance and regulatory needs but also helps elevate CX and trust. Simply put, as a responsible brand, choose solutions that enable the most user-friendly, transparent and easy ways for customers to understand and control what they are consenting to, online and offline.

As Adhumeau puts it, when consent and preference management platforms (CMPs and PMPs) give users more transparency and control over their data, compliance comes as a consequence of building the best possible experience for customers, not as an effort. However, he cautions, deploying a solution is only the first step. “From a technical standpoint," he adds, "anyone can start collecting data in minutes, and be synchronized with third-party software providers (CRM, CDP, DMP, etc). Building a comprehensive, cohesive CX — online and offline — by leveraging this data takes more effort.” 

A comprehensive PX also needs brands to prepare for Data Subject Access Requests (DSAR) scenarios, where users ask brands for details about their stored data and how it’s being used. Brands need systems that allow instant and complete visibility, so they can respond to a user’s data change requests across every online and offline touchpoint. 

DSAR is another way to gain consumer trust, not only because it elevates compliance, but also, says Adhumeau, because of what it says about the brand’s choice to build compliance and trust through transparency and user control.

Related Article: 6 Ways Marketers Need to Balance Privacy, Personalization

[Re]Integrating the Martech Stack

Integration and smooth data flow has always been a challenge for martech stacks. With new tools like consent management platforms and preference centers joining the stack, martech leaders need to reframe the idea of "evolving stacks" to serve three priorities: seamless CX (across devices, channels and platforms), consumer data privacy and data security.  

Ganesh suggests approaching integration at four levels: data, workflow, UI/UX and governance. This is the time to reassess the ease of integration and smooth data flow across your stack, and consider platforms and solutions that are built keeping all four levels of integration in mind.

Building for the Future

Needless to say, the data privacy and personalization spaces are both evolving rapidly. With a strong preference management platform in place, brands can explore new directions in contextual advertising. They also need to plan for privacy in the age of Web 3.0 and metaverse. The key is to keep experimenting to learn what consumers value the most in terms of privacy and personalization, as well as keeping pace with the evolving data privacy laws in multiple geographies around the world.  

Brands that invest in data privacy beyond compliance make transparency their default operating mode. They also empower customers with control over their data and will not only win more credibility and trust, but quite simply, much more business.

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