The Gist

  • Personalization challenge. Marketing leaders must create personalized experiences without overstepping customer data privacy boundaries.
  • Value exchange. Providing transparent, bite-sized experiences can encourage customers to share data willingly.
  • Collaboration importance. CMOs and CDOs need to collaborate in order to effectively utilize and manage customer data.

Marketing leaders are struggling to balance collection of customer data with privacy concerns and customer value exchange even though many have already established formal policies to manage customer data.

A Gartner survey of nearly 400 marketing leaders found that despite these challenges, marketers are increasingly focusing their attention on personalization efforts, with more than four in 10 (42%) respondents executing one-to-one personalized messages to customers. The study also revealed marketers are empowering customers to manage their data, while marketing leaders are turning to first party data collection to create immediate value for customers.

Alex De Fursac Gash, senior director analyst in the Gartner marketing practice, explained in recent years research has indicated that by and large, customers are comfortable sharing data if brands can provide a clear and transparent reason at the point of engagement.

"The other thing we have learned is that the type of data matters too," he said. "Perceptually, customers — and especially consumers — are much more comfortable with brands holding and using data that relates directly to information they have shared directly with the brand."

Comfort levels, however, drop sharply when companies hold and use data that falls outside of that binary relationship, for example, data that has been acquired, inferred or determined through browsing analysis.

Related Article: Sharing Revolution: Can AI-Powered Zero-Party Data Flip the CX Script?  

Customer Data Privacy and Personalized Marketing

Gartner research has also revealed that while there is perpetual risk to personalizing poorly, there is also great risk in over-personalizing and being perceived as inappropriate or creepy by target audiences. Hence, customer perception that data is being used at the point of engagement matters enormously.

De Fursac Gash notes personalized marketing is always a game of balance.

"Gartner has observed that the most effective strategic approach to achieving this balance is one that is based on transparent value exchange," he said. "This describes an approach that seeks to provide actionable help to customers through messaging and digital content, but that does so using a limited amount of relevant customer data transparently."

Davi Ottenheimer, vice president of trust and digital ethics at Inrupt, said an imbalance was created between marketing and privacy by an overemphasis on winning customer attention.

"Everyone competing in the same audiences for just attention turned into a race to the bottom, thinning margins and evaporating value while undermining trust," he said.

From his perspective, a far more sensible and profitable economic model looks at the bigger picture: intention. "It delivers real differentiation in return for real data, giving customers trusted connections based on truly individualized experience," he explained.

He added there have been dramatic shifts historically, where integrity in knowledge transfers starts reversing commodification.

"Consumers quickly shift from spending nothing and trying to hide from extraction, instead jumping into a more balanced relationship as beneficent," Ottenheimer said.

Related Article: From First-Party to Zero-Party Data 

Avoiding Overstepping Boundaries of Customer Data Privacy

Collecting first-party customer data has been cited as the most significant challenge for marketing in the foreseeable future. De Fursac Gash said this provides an interesting challenge, given the fact that personalization is fundamentally a data story (and especially a first-party data story).

"Practically, this means that organizations will need to push some boundaries," he noted.

First, companies will need to do more with less data, prioritizing what data is required and exploring what additional insights can be drawn. Second, brands will need to rethink the type of personalized experience preferred by customers.

Learning Opportunities

"Our research suggests that providing transparent, bite-sized experiences intended to encourage customers to share their data at the point of engagement is what resonates most with audiences," he said.

Third, the more brands can equip customers with the tools/platforms to help them see what data is being used and how to manage it, the more people will feel empowered.

Ottenheimer said data carefully curated by customers from many facets of their experience, delivered far more efficiently through safer relationships, reduces waste in the giant decaying piles of discarded data from stale queries.

"There’s no better way to create individualized experiences and respect boundaries than with an open standard enabling technical solutions for safe data interoperability — consent-based transactions," he said.

De Fursac Gash added that given the focus on driving personalization in recent years and the recognition of the foreseeable challenge of collecting first-party data in 2023 and beyond, it was surprising to learn that for a substantial minority of participants collecting first-party data in 2022 presented little to no challenge.

"This however is less a reflection of its perceived importance, but instead is more of a reflection of two things: the fact that it will be harder to collect unless they make some changes to their digital engagement, and the growing realization that customer comfort of brands utilizing first party data is generally high," De Fursac Gash said.

Collaboration Between CMO, CDO on Data, Personalization

Ottenheimer noted that when professional web servers first started launching, they tended to be something outside marketing departments, or even beyond IT management.

"There’s a technical component to progress in technology that thrives with the tinkering of an engineer, runs on the creativity of a developer," he said. "CDOs [chief digital officers] need to engage with teams who are looking at how the web standards have been expanding and adapting again, bridging their business with innovative and powerful new methods of distributed data management."

De Fursac Gash said CMOs will need to collaborate with other key stakeholders like CDOs to figure out how to prioritize existing and required customer data.

"As we have seen, some data is more helpful than others," he said. "Establishing a minimum threshold of helpful data is prerequisite to effective personalization."

There's also the issue of what data can and cannot be used for the purpose of personalization (type and quantity). For example, some organizations agree to set a limit to the number of data points used for personalized communications.

"These stakeholders must also figure out how to design digital experiences that encourage customers to share more of their info with them," he said. "Based on our industry observations, smaller or bite-sized interactions that are focused in scope and that are designed to help guide or explore resonate well with audiences."