Imagine calling for a taxi every Thursday at around 19.00 hours. Then one day, a cab arrives in your street uninvited. The driver doesn’t make his presence known, but simply waits for you to request a ride, at which point he drives up to your house and says: “I had been expecting your call, so I showed up in advance. How’s that for customer service?” It would be a rather unsettling experience, wouldn´t it?
Creepy as this sounds, this is exactly what is happening online. Data-driven machines have all the technical know-how to provide personalized marketing experiences, but they lack the natural boundaries we apply in day-to-day human contact. This is perfectly illustrated by the well-known example of an online retailer who figured out a teen girl was pregnant before her father did.
Although this is a fairly old case, not much has changed since then: by tracking all and everything, we intrude in the lives of our customers without truly taking the time to get to know them, or to build up trust.
It appears we also lack relevance, as we blatantly bombard our target audience with hotel ads even after they have booked.
Why personal experiences are so important
Is our message to refrain from data collection? To stop creating personalized marketing and service experiences? Absolutely not. In fact, over the past decades, we evolved from highlighting quality (“Made in America!”) to emphasizing image (Apple springs to mind) to offering personalized experiences. The latter is beautifully illustrated by Carnaval Cruise Line, who turns the cruise experience into ‘a truly personal and compelling vacation’. After all, nowadays there are countless products to set you apart from your peer group. The best way in which retailers can differentiate is by offering outstanding encounters with their clientele.
In 2017, 40 percent of consumers switched companies because of poor personalization.
These experiences do, however, need to be centered around our customers’ needs. Our study on hyper-relevant customer experiences found that four out of 10 consumers switched companies in 2017 because of poor personalization, costing companies an estimated $756 billion last year. Fortunately, Adweek states that “the upside to doing personalization well is that 75 percent of consumers are more likely to buy from a brand when they’re recognized, remembered or served with relevant recommendations” – all of this made possible by data collection and utilization.
Data is the fuel of the knowledge economy
Data has indeed become the fuel of the knowledge economy. It allows us to use segmentation and apply a truly human-centric approach, where data-driven analyses, understanding different customer groups and tailoring messages come naturally. We can even go so far as to query customers based on the data we have, finding out exactly what they need and offering guidance accordingly.
Moreover, the value of data is shown in what we call social payment. Now that we are willing to trade our contact details and buying intent for services like Facebook and Google, data has become a new type of currency.
The risks of unrestrained data collection
Notwithstanding all the benefits of data collection, we should keep in mind not to collect data endlessly, as this approach comes with genuine risks. Let us list the potential risks below.
We should keep in mind not to collect data endlessly, as this approach comes with genuine risks.
Decreased returns of scale on data
Google’s chief economist, Hal Varian, states that collecting data does not infinitely lead to more value. Instead, returns of scale on data will eventually decrease as the information will stop being relevant to what you are trying to achieve. When you set out to get people to donate to charity, you don’t need to know their hair color.
Loss of revenue due to breach to trust
We completely agree with Varian. In fact, we would go further and say that collecting too much will actually make you lose money. After all, when you keep asking information from your clients they will eventually start questioning its use. If you cannot answer to their satisfaction, collecting data will lead to a breach of trust and, subsequently, to a decline in brand equity.
One need only check the exit percentages of contact forms or shopping baskets to see that asking for too many details will lead to increased abandonment rates.
Prioritization becomes harder
Moreover, collecting blindly without establishing a goal beforehand, will complicate the differentiation between valuable and dispensable data. The more ‘noise’, the bigger the risk of mismatched messages or services. After all, when you collect information endlessly, it will become increasingly difficult to understand what is truly important to your customer.
Limited Investment Security
Gathering endless amounts of data will also lead to higher costs for storage, maintenance, quality assurance and security.
It will slow your agile response to detect and respond to customer needs.
But there is more. Not too long ago, we collectively put into place data gathering systems, only for GDPR-legislation to catch up. Necessitating clients´ consent to use their data, massive updates or even replacements were required, all but rendering previous investments useless.
It turns out our world is evolving so rapidly, it limits investment security. Therefore, we need to make conscious decisions with regard to the information we collect and the tools we deploy.
Conflict of interest for organizations
Striking the right balance between maximizing shareholder value and maintaining customer trust is proving to be difficult. As much as we would like increase revenue per user, we must be careful not to damage the relationship we have with our customers.
Beware of customer backlash
So far, we have mentioned the risks from a company perspective, but there is also the customers’ point of view to keep in mind.
Social norms around data trading are still evolving
For one, they might reject new technological opportunities, as illustrated by Google Glass. People didn’t understand what the device captured when it was directed at someone, leading to awkward situations and uncomfortable reactions.
With social norms still evolving, the first company to try something new might fall flat on her face while the competition looks on and learns.
Treat customers online as you would in face-to-face communication
Furthermore, we once again refer to the risk of breaching customer trust: they won’t be thrilled if you use information to their disadvantage. When, for instance, cab fares are higher in areas where demand exceeds supply, be transparent about this or risk the wrath of affected customers.
Similarly, 41 percent of consumers find it creepy when they receive a personalized marketing message from a brand or retailer when they walk by a store. An additional 35 percent feel that way when they see ads on social sites for items they’ve browsed on a brand’s website.
Customers don’t appreciate attempts to gain an advantage by using information they didn’t provide directly. One of four consumers says brands and retailers have communicated in a way that felt too invasive. According to 64 percent of them, the brand had information the consumers didn’t share knowingly. More specifically, the Cambridge Analytica/Facebook-breach shows us not to use information that wasn’t obtained honorably.
Finally, when customers feel that you don't value their time and don't take into account what you should know about them, they will be put off. At the end of the day, we should treat our customers in the virtual space as we would in face-to-face communication.
At the end of the day, we should treat our customers in the virtual space as we would in face-to-face communication.
Our introductory example comes to mind: if you desire to create empathic experiences and to avoid being creepy, you need to be selective in our data collection, focusing only on what is relevant and deemed decent.
Unfortunately, the vast majority of companies seem blissfully unaware or choose to ignore this dynamic, either because they have only just started merging online data with their customer profiles in CRM systems, or because their focus is on enabling real-time personalization, instead of fostering interactions with genuine human beings.
Level up your data collection
Yes, the risks of collecting data indiscriminately are real. But done properly, the benefits are equally evident: you will be able to sort your thoughts on what you wish to achieve and offer the relevant, personal experiences that make your customers feel understood, served, and treated right. Furthermore, fastidiousness will lead to compact, applicable data sets, lower investment risks and cost limitations.
It is time to level up your data collection! In our follow-up article, we will discuss how to get started. Find out how Maslow's hierarchy of needs fits in with our story and learn how to create data-driven customer experiences your audience will love.