The Gist

  • Data control. Prioritizing first-party data helps marketers deliver personalized experiences while respecting customer privacy.
  • Privacy regulations. By 2024, 75% of the global population will have personal data protection, indicating the growing importance of data privacy.
  • Creating trust. Establishing first-party data relationships and providing value in exchange for customer data can help build trust and enhance personalization.

In an ever-more connected world reliant on digital technologies, data privacy concerns are growing. So much so that governments and consumers around the world are prioritizing ways to control how personal data is used. 

According to the technology research firm Gartner by the end of 2024, 75% of the world's population will have its personal data protected by some sort of data privacy regulation. 

At the same time, 65% of customers are looking for more personalized experiences with the organizations and brands with whom they do business. These competing priorities are making it increasingly difficult for marketers to reach customers the way they want to be reached with the personalized messaging and offers they desire. 

“It's much more limited now, both in terms of how you can get that data, how you can use it,” said Kelsey Robinson, a senior partner at McKinsey. “There's always been that challenge that personalization has had, which is how do you strike the right balance.”

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

First-Party Data and Building Trust

As the means of obtaining activity data from cookies (which are going away soon) and other online trackers as well as third-party suppliers become a privacy minefield, it is more important than ever to establish a trusted first-party data relationship in which your customers willingly exchange their personal information in return for something they value, said Robinson.

“[M]any brands treat the data as transactional for their own benefit [such as] offering a coupon in exchange for your email address or opting into SMS and rely too heavily on retargeting to make the sales conversion,” said Leala Shah Crawford, managing director of Deloitte Digital. "As a result, instead of feeling engaged, consumers often feel stalked by ads that follow them across sites or by daily texts and emails from a brand they barely know.”

Personalization Is ‘off-Target’

In a new Deloitte Digital report that surveyed hundreds of consumers, more than 50% felt personalization was off-target and didn’t meet their needs, interests or preferences. 

Growing Concern About Data Privacy

According to a recent study, “Privacy and Consumer Trust,” by the International Association of Privacy Professionals (IAPP), only 29% of customers globally felt they understood how the companies they do business with are using their data. Sixty-eight percent said they are somewhat or very concerned with online privacy.

Creating Value for Customer Data Exchange

The value customers receive in exchange for sharing their personal information could be something tangible such as coupons, discounts or special offers for exclusive events or services. Things like free shipping (which Amazon leveraged to great effect but is now ecommerce table stakes) also remain popular. 

Value can also be created through less tangible means. It could take the form of a health insurance company reaching out with advice and services to help a patient manage a chronic condition or prevent them from getting sick in the first place, for example. 

Customers Should Understand How Data Will Be Used 

First, ensure customers know how their data is used. Additionally, avoid excessive personalization unless necessary.

Think of Customer as a New Acquaintance

The best way to avoid this problem is to think about your customer like someone you have just met, said Nat Onions, vice president of customer experience at customer engagement platform provider

Learning Opportunities

“If you were to go on a first date with someone and straight away they say, ‘Hey, look, the menu’s red, that's your favorite color. And this restaurant was actually built in the same year that you graduated high school,’ I'd be out of there in a shot,” she said. 

No Oversharing Customer Data

And when someone confides in you, don’t share it with everyone you know. “If I opt-in for Dick's Sporting Goods’ emails ... that doesn't mean that I'm signing up for Nike to start emailing me,” Onions said.

Related Article: The Future of Personalization and 1st Party Data 

Institutionalizing Customer Trust

According to the McKinsey blog, “A Customer-Centric Approach to Marketing in a Privacy First World,” which was co-written by Robinson and her associates, the best way to institutionalize the creation of first-party trusted relationships is to establish a data relationship management (DRM) practice that revolves around four pillars: the invitation, data security, an ongoing dialogue and a value proposition. 

Getting New Data Relationships Right

For companies that get this new data relationship right, it can become a significant source of competitive advantage. According to the study, 66% of customers would be willing to share personal data to get additional value.

Data Invitation Protocol

Best practices for data invitation include using an omnichannel approach by reaching out across multiple touch points with personalized messaging. Use pre-prompts that explain the benefits and value the consumer will get in exchange for sharing their data — before you ask to track them.

Set up Data Security Center

You also want to create a customer-facing data security center that details what data is being collected, how it will be used and the ability to set data usage preferences. No one likes to feel like they are being watched or that their personal information is going to get stolen because of lax cybersecurity practices on the part of the vendor or their third-party providers. 

Transparency, Communication and Knowing Your Customer Data

To ensure customers that their data security is always top of mind, McKinsey recommends that brands do three things:

  • Make a list. Create a reviewable, detailed list of the data you are collecting and how it will be used. This should include data that comes from both the customers themselves and any third-party sources. You also want to give customers the opportunity to delete any data they do not want you to possess. The goal is to give consumers peace of mind that they are in charge of their data and not the other way around.

  • Be transparent. The second imperative is transparency. Build a data preference center and portal that gives customers granular control over their data and how it's used today and in the future. Allow them to opt out of any future data collection attempts and use cases. Giving customers control over their data can boost both trust and their willingness to share more data in the future.

  • Communicate regularly. And, finally, communicate regularly with your customers about how you are securing their data, any regulations that they may be impacted by, how you may be using their data in the future, and any other issue that they may find of interest. Most of your customers likely won't care nor engage with this content, said McKinsey, but it is still important to reach out to those who do. 

“The challenge is a lot of companies haven't focused on the first-party data relationship up until the last few years,” said Robinson. “And so the better companies are at figuring out how to both get that first-party data profile and get permission for it and make it clear to the user how they have control over it, the better they will be. That is where all of our clients are really focused.”