Why changing legislation means companies need to rethink their data protection [Q&A]
Businesses have embraced the use of data to drive decisions and digital transformation. In many cases consumers are happy to have their details captured too, as long as they benefit from it.
But as more and more countries introduce privacy and data protection legislation, and as California clarifies some of its cookie-based tracking definitions, and increases enforcement of both intentional and unintentional violations under CCPA, enterprises need to tighten up their data handling.
We talked to Tim Glomb, VP of content and data at customer engagement software specialist Cheetah Digital to find out what businesses can do to ensure they collect data safely and don’t fall foul of the rules.
BN: Why has there been more focus on data over the last few years?
TG: I think brands are finally realizing that there is a better way. They don't need to rely on Google, Apple, Facebook, etc. to know what their customers think and what they prefer. The data that these companies have collected and offered for years was exciting for many marketers because it gave them a view into their customer base that they hadn’t had before. But in many ways, this made them lazy. They came to rely on this data and put too much emphasis on what they were able to infer about their customers based on certain demographic cohorts. For example, this person is 30 years old and lives in the Greater New York area, he or she must like XYZ…
This approach not only has limitations but it opens up the door to data privacy concerns as well -- which we are seeing with the advent of GDPR, CCPA, and Virginia's new legislation. There are upwards of 30 states now that have either introduced, passed, or have legislation in committee addressing consumer data privacy. And that's just the regulatory front. Google and Apple see the writing on the wall, and we expect other tech and telecom brands to follow suit by end of year. For consumers, the old approach is just too much.
Lastly, it's not just about the fact that there has been more focus on data -- it's what kind of data that matters. Brands are realizing that they can learn a lot more about their customers by collecting zero-party data that offers insights into their interests and preferences. And it's a win-win for everybody. Customer data is safer and more secure when it isn’t bought and sold between different parties, brands don't have to waste their customers' time with offers that aren't relevant to them, customers get spammed a lot less, and in the end, brands make more money because the connections they are making are more efficient.
BN: Does using third-party data create more problems than it solves?
TG: Absolutely. Hands down, no question. The challenge is, third-party data is data that collected about a consumer based on their online search behavior (among other things, such as past purchases). It is collected and stored by third-party data providers, which then sell that data to brands as well as hedge funds and investors who want a view into company performance. It's not only creepy as it puts the customer in less control and makes their innocent online behavior something that can bought and sold like a commodity, but it's increasingly less effective. With third-party data, brands can only infer what their customers may or may not want. It doesn't tell them what they actually want, nor does it provide any useful insight in what those customers value for future purchases.
Lastly, we're seeing the regulatory picture change right in front of our eyes. More and more states are now introducing privacy and security legislation, and for brands that rely on third-party data, they are going to have to adhere to a patchwork of different policies across all 50 states -- and that's just for this country. By embracing data ownership however, and zero-party data, brands can bypass all of these concerns as regulations do not address data that is voluntarily provided by a consumer to a brand.
BN: Does stronger enforcement of CCPA place brands at more risk?
TG: It does for those who are not taking compliance as seriously as they should. The challenge with CCPA, and the recent enforcement push in particular, is that it includes both intention and non-intentional violations. While non-intentional violations are much less than intentional ones ($2,500 vs. $7,500 per infraction), we are still talking about thousands of dollars for each mistake that is made. If a company violates the privacy of 1,000 customers on their distribution list for example, even by accident, they are likely going to be in serious financial jeopardy.
That's why I can't emphasize this enough -- it's time to drop your reliance on third-party data! Time to take off the Band-Aid and move on. The winds have been blowing away from this kind of data for years and brands that don't take notice are putting money into a sinking strategy -- which by the way, could also put them in legal trouble, as well as anger their consumers.
BN: How do you strike a balance between personalization and privacy?
TG: It's not easy as that is something that every consumer wants -- for the brands they trust and shop from to know who they are and understand their preferences, while at the same time not divulging too much of their personal preferences. After all, it’s scary what somebody can come to learn about you and the profile that social media companies have on us. It is possible however to have both. We know that data is here to stay as the reality is, we live in a digital world -- it's where we work, where we communicate, how we conduct business, etc. Knowing this, we advocate for zero-party data as that is data that is voluntarily provided in exchange for tailored marketing offers. This provides a way for brands to engage with their customers on a more personalized level, while ensuring that data is owned only by the company that collects it -- and nobody else.
BN: Is there a need to radically rethink how we collect and use data?
TG: If you asked me that question three years ago, I would have said yes. But I think the tide has been steadily turning and we are already at a place where marketers are rethinking their data collection strategies. Zero-party data is not new anymore, although it takes time to change habits. It does however represent a new way of thinking about things and we know that there are still too many marketers who haven't yet let go and are still prioritizing data collected by social media companies for example. For these marketers, yes we would say that they do need to start rethinking how they use data. But conversely, we are seeing more and more brands that are embracing data ownership, and this is most certainly the direction that things are trending in. at Cheetah for example, we work with major household names such as Marriott, Hilton, Vans, Starbucks, Disney, Walgreens, just to name a few. These are all companies who, to one degree or another, realize the importance of data ownership and are doing something about it.