The Promise of Privacy - Forbesimages.forbes.com/forbesinsights/StudyPDFs/turn_promise_of_privacy_report.pdfTechnology-infused data collection and analysis can provide benefits to

The Promise of PrivacyresPecTing consumers’ limiTs while realizing The markeTing benefiTs of big DaTa

in associaTion wiTh:

conTenTs

Foreword ...................................................................................................................................................................2

Key Insights ..............................................................................................................................................................3

Methodology........................................................................................................................................................... 5

Insight One: Most Companies Are Actively Pursuing Data-Driven Business Strategies ............... 6

Q&A: How Zappos.com Stays in Touch With Customers .......................................................................7

Insight Two: Sellers Tend to Overestimate Their Customers’ Privacy Anxiety .............................. 8

Q&A: LinkedIn—How Privacy Can Differ When Dealing With “Members” Instead of “Customers” .............................................................................................................. 9

Insight Three: Sellers Believe Customers Are Willing Partners in the Exchange— and They’re Probably Right .............................................................................................................................10

Q&A: How Engineering Data Improves Product Performance and Customer Relationships at NetApp ..................................................................................................... 12

An Advertising Industry Association’s “Take” on Privacy .................................................................... 13

Insight Four: The Risk—and Cost—of Potential Privacy Missteps Cannot Be Overstated ........14

Insight Five: Seller and Customer Perceptions of Where and How Actions Are Being Observed Differ Significantly ..........................................................................16

Insight Six: Companies Are Working Hard to Track Their Efforts— and Most Say Their Data Programs Are Paying Off ...............................................................................18

Conclusion .............................................................................................................................................................20

For the second year in a row, Turn and Forbes Insights have partnered to survey consumers and marketers on their perceptions on a topic of significant relevance to the adver-tising industry.

This year, the focus was on privacy and how it is viewed and valued by both marketing executives and consumers. The study reveals that, while a small subset of consumers care a lot about privacy, what most are concerned with is security. This significant insight reveals a strong alignment with marketers’ concerns—they understand that a security breach can have a huge negative impact on consumer trust and can tarnish their brand.

Turn is proud to offer marketing solutions that address both privacy and security. We provide market-leading per-formance and ROI to marketers using only anonymous identifiers for consumers.

Turn takes its responsibility to our marketer and agency customers seriously. Equally important is our commitment to transparency and choice for consumers. As the survey dem-onstrates, this is a market solution everyone can agree on.

MAx OCHOA Chief Privacy Officer, Turn

foreworDTechnology-infused data collection and analysis can provide benefits to both marketers and

consumers. But fail to understand and respect privacy—and risk all.

Turn delivers exceptional digital marketing results and insights to marketing leaders around the world through a privacy-compliant, integrated software platform purpose-built for audience discovery, cross–channel media execution, and advanced analytics.

2 | The Promise of Privacy: RESPECTINg CONSuMERS’ LIMITS WHILE REALIZINg THE MARKETINg BENEFITS OF BIg DATA

key insighTsMOST COMPANIES ARE ACTIVELY PURSUING DATA-DRIVEN BUSINESS STRATEGIES

Customer data-driven business strategies are becoming the norm. Three out of five business executives—“sellers”—say they

are active in collecting, analyzing and acting upon customer data. Deeper analysis shows that the ranks of active participants

are poised for continued expansion. For example, 42% say they not only are taking significant steps to gather and analyze

customer data today, but are likely to do so considerably more in the future.

SELLERS TEND TO OVERESTIMATE THEIR CUSTOMERS’ PRIVACY ANXIETY

Eighty-one percent of sellers believe that their customers are either concerned or highly concerned regarding privacy. But

the reality is that executives may be vastly overstating the degree of actual customer angst. In a separate survey of general

consumers (B2C), only 47% say they worry about privacy. As for business-purchasing decision makers—B2B buyers—the

numbers are even more overstated.

SELLERS BELIEVE CUSTOMERS ARE WILLING PARTNERS IN THE EXCHANGE—AND THEY’RE PROBABLY RIGHT

Sixty-nine percent of sellers believe that their B2C and B2B customers are happy to share information if they perceive value

from the exchange. And customers seem to agree: 53% of B2C customers and 45% of B2B customers say they are generally

willing to share information when they perceive a benefit. But businesses—sellers—benefit most, and all sides seem to rec-

ognize it. Thirty-six percent of sellers recognize that the lion’s share of benefits flow to their own income statements and bal-

ance sheets. Another 18% say all benefit from the exchange, but mostly themselves. Customers seem to agree. Three out of

five B2C consumers also say it’s the seller who benefits most from the sharing of information. Nonetheless, the survey shows

that consumers notice key benefits, and remain content with the exchange even if the balance of value favors business.

THE RISK—AND COST—OF POTENTIAL PRIVACY MISSTEPS CANNOT BE OVERSTATED

Customers are calm about privacy issues for now. But sellers know that all it takes is one misstep to lose that goodwill.

Eighty-five percent of sellers agree—63% strongly—that any significant breaches in customer data security would do great

harm to customer relationships, reputation and the bottom line. And the larger the company, the greater the value of its

intangibles (that is, its brands) and therefore the greater value at risk.

continued on page 4

COPyRIgHT © 2013 forbes insighTs | 3

key insighTs

SELLER AND CUSTOMER PERCEPTIONS OF WHERE AND HOW ACTIONS ARE BEING OBSERVED DIFFER SIGNIFICANTLY

Comparing the percentage of companies who say they are actually observing specific customer interactions to the percep-

tions of B2C and B2B customers—how often they “feel” they are being observed—shows significant disconnects. More than

half of sellers say they actively observe—that is, seek to obtain discrete customer data from—in-person interactions. But

both B2C (47% and B2B (29%) customers underestimate the degree of observation. When it comes to website visits, how-

ever, B2C and B2B customers overestimate the frequency with which their actions are being actively observed. The question

for sellers is whether there is a need to do a better job of disclosing when, where and how they are tracking customers.

COMPANIES ARE WORKING HARD TO TRACK THEIR EFFORTS—AND MOST SAY THEIR DATA PROGRAMS

ARE PAYING OFF

About four out of five executives, 81%, say their efforts are meeting or exceeding ROI targets. How do they know? Fifty-five

percent are actively tracking related metrics—with 19% indicating such analysis is “very rigorous.” Companies say they are

most successful in using data collection and analysis to assist with product development, pricing, website design and func-

tion, and call center operation. These efforts are also paying off in terms of more-optimized marketing spending as well as

product and service pricing.

continued from page 3


meThoDologyThe insights and commentary found in this report are the result of a research process combining surveys with

qualitative interviews. In September 2013, partnering with Turn, a provider of data-driven marketing services,

Forbes Insights executed three related yet distinct surveys: one for business-to-consumer (B2C) customers,

one for business-to-business (B2B) customers, and the primary or “main” survey for executives from “sellers”

to both of these segments.

THE SURVEYS

“MAIN” OR “SELLERS” SURVEY: • Number of participants: 129 • Executive title: Director of marketing (29%); president, principal or owner (19%); EVP, SVP or VP of marketing (19%); unspecified

C-level (19%); chief marketing officer (13%)• Type of company: B2C (39%), B2B (38%), unspecified combination of B2B and B2C (23%) • Revenue: $10 billion or more (23%), $5 billion–$9.9 billion (14%), $1 billion–$4.9 billion (29%), $500 million–$999.9 million (22%),

less than $500 million (11%)• Industries: Manufacturing (17%), banking, financial services (16%), life sciences and healthcare (11%), retail (10%)

B2C SURVEY: • Number of participants: 106• Age: 18-30 “Gen Y” (18%), 31-49 “Gen X” (21%), 50-68 “Boomer” (30%), 69 or older “Elder” (31%) • Gender: Female (51%), male (49%) • Income: $150,000 or more (38%), $100,000–$149,999 (14%), $50,000–$99,999 (17%), $25,000–$49,999 (13%),

under $25,000 (18%)

B2B SURVEY:• Number of participants: 115• Executive title: VP or director (28%), manager (23%), head of department (17%), head of business unit (6%), CIO (6%), CFO (4%),

CEO (3%) • Revenue: $10 billion or more (4%), $5 billion–$9.9 billion (7%), $1 billion–$4.9 billion (37%), $500 million–$999.9 million (27%),

less than $500 million (24%) • Industries: Manufacturing (18%), life sciences and healthcare (15%), technology (10%), banking and financial services (8%),

professional services (6%), transportation (5%)

INTERVIEWS

To review and illustrate the survey findings, Forbes Insights conducted a series of formal and informal interviews with 12 senior executives from various businesses, consulting firms and industry associations. Attributed or “on the record” remarks appear from:

• JIM BAER, senior director, data science, LinkedIn• RICH CLIFTON, EVP, customer success operations, NetApp• PATRICK DOLAN, EVP and COO, Interactive Advertising Bureau• TREVOR HUGHES, president and CEO, International Association of Privacy Professionals• DON PEPPERS, co-founder, Peppers & Rogers group • RONN SHAW, web analytics manager, Zappos


insighT one

mosT comPanies are acTively Pursuing DaTa-Driven business sTraTegies

Indeed, technology-enabled business strategies driven by cus-tomer data are becoming the norm. Nearly three out of five sellers say they are active in collecting, analyzing and act-ing upon customer data. Deeper analysis shows that the ranks of active participants are poised for considerable growth. For example, 42% say they not only are taking significant steps to gather and analyze customer data today, but are likely to do so considerably more in the future.

Another 23% consider themselves “middle of the road,” a group that gathers customer data and performs some analysis, “but not much.” Only 18% are inactive, but of these, a mere 6% say such strategies are inapplicable or perhaps inappropriate for their industry or its customers.

At the other extreme, 17% describe themselves as very active. This contingent says they are generating significant business benefits from capturing, analyzing and acting upon customer data—a group that we will refer to as the “very active” or the “vanguard” where appropriate (Fig. 1).

Surprisingly, the size of company appears to have little bearing on the degree of focus on customer data. Since data-driven strategies tend to benefit from scale—so-called “big data”—it would stand to reason that the larger the company, the more likely it would be to pursue such strategies. But the survey instead shows nothing so clear-cut. Instead, it finds that:

Smaller companies (under $1 billion) are: • More likely than average to be “very active” (23% vs. 17%) • Much less likely than average to be merely “active” (23% vs.

42%) • Twice as likely as average to be “inactive” by choice (12% vs.

6%)

Larger companies (over $10 billion) are:• Only slightly more likely to be “very active” (20% vs. 17%—a

statistically insignificant difference) • Much more likely to be merely “active” (57% vs. 42%) • None “inactive” by choice

Behavior does vary by size of company, but the influence is neither intuitive nor linear. Put simply, the degree to which companies are pursuing customer data–driven strategies is inde-pendent of size.

There was a time when companies knew all of their customers intimately. But that, says Don Peppers, co-founder of Peppers & Rogers group, “was back when most businesses were sole proprietorships. Owners dealt with most of their customers on a first-name basis.” As businesses and society grew, such intimacy diminished. Ironically, says Rogers, in today’s information age, “companies can again collect and analyze data taking them back to that old-style level of intimacy on a massive scale.”

FIguRE 1.

Which of the following best describes your orientation toward gathering and analyzing customer data?

very active—the vanguard and active—and likely to do more

middle of the road

inactive “so far”

inactive by choice

59%23%

6%

12%


how zaPPos.com sTays in Touch wiTh cusTomers Q&A with Ronn ShAw, web AnAlyticS mAnAgeR

Zappos.com is a large online provider of shoes and apparel.

Why do you collect data? To improve performance and the customer experience.

What sorts of data do you collect? From website visits, we look at what browser and device are making the request (for example, Safari on an iPad), and referral information, which could tell us whether this was a web search or if www.zappos.com was typed directly into the browser. We also look at activity-based metrics—average number of page views or errors—that help paint a picture of the quality of the site experience. As for mobile, we track a lot of the same information as above, but it is trickier with mobile. And then we make use of vendors like Compete or Hitwise to gain an idea of what is happening on competitor websites, and on the Internet, overall. We also partner with research institu-tions to provide information regarding widespread perception of our brand.

What tools do you use to analyze this data? Our primary analytical tool is an internally developed appli-cation. It provides access to not only website data, but also financial and inventory data all in one common place, and is able to provide a unique, holistic view of our entire business. To perform more-complex analyses, such as customer segmenta-tion or website pathing, we utilize several products from SAS. We are also exploring several data visualization solutions, such as Tableau or SAS Visual Analytics.

In addition to the tools we use, there is tremendous value added by the way we look at the data we collect. For example, analyzing the site experience from the perspective of someone that is visiting you for the first time may paint a completely different picture than if it is from the viewpoint of a consistent shopper. This is highly relevant when we consider any primary metric like conversion rate or cart abandonment.

in what ways are you able to improve the customer experi-ence with this data? The data we collect and analyze goes a long way in determining how we treat visitors to the website. For example, is it better to send someone to a customized landing page or to an automati-cally generated set of search results when they search for their favorite brand? How about if they search for a general term like “men’s shoes”? We conduct website tests that split traffic

between different treatments and measure differences between those treatments, allowing the customer to tell us what gives them the best experience.

A lot of our internal analytical efforts focus on identifying anything that could be preventing a visitor from achieving their goal, which in our case is predominantly a visitor finding a product they like. We look for any areas of the website where a visitor, or group of visitors, may be encountering difficulties. When we find something, it is presented to the appropriate teams so we can brainstorm ways to change the experience in hopes of improving it.

From that, we will choose a set of candidates and design new experiences around the proposed changes and begin conduct-ing usability tests to see how our customers might respond. Once we get to the point where we feel good about what has been designed and developed, we will expose it to a ran-domly selected percentage of website traffic. Based on the performance of the different experiences, again, we can let the customer tell us if our efforts actually led to an improved experience.

What changes or improvements have you made in these areas as a result of data analysis? One area we have been working to improve is returns. Customers, today, can easily make exchanges by calling our customer loyalty teams. But we recently designed, launched and are in the process of testing a feature on the website that will allow customers to do their exchanges online.

To what extent do you believe customers notice and appreciate such improvements? We typically launch feedback surveys when we implement new features, and we always receive comments. From this perspective, there are definitely customers that notice. On the other hand, I am sure there are at least as many customers, likely many, many more, that do not consciously assess the experience. But data analysis definitely results in better, more effective, customized experiences, tailored for different users with different needs or wants. For example, site experiences that recognize individuals from warmer climates as opposed to cooler climates and adapt to show them more relevant content will be the norm.


insighT TWo

business eXecuTives TenD To overesTimaTe Their cusTomers’ Privacy anXieTy As sellers expand their use of customer data, they come in ever-closer contact—if not conflict—with issues of privacy. Trevor Hughes is president and CEO of the International Association of Privacy Professionals, a not-for-profit focusing on related and fast-evolving legal, public policy and commercial issues and practices. According to Hughes, “privacy is about manag-ing data. Businesses want to extract maximum value from data, but they need to do so not only within the boundaries of the law, but also within the privacy tolerances of customers.” Today, says Hughes, “more companies are becoming more aware of the need to pay attention to these issues.”

The study reveals that companies are indeed thinking things over. For example, 81% of sellers believe their custom-ers are either concerned or highly concerned about privacy. This figure rises to 92% among retailers—where fully 77% believe their customers are highly concerned. Moreover, 64% of execu-tives from all industries believe their customers would be even more uncomfortable if they understood how much was already known about them.

But the reality is that executives may be vastly overstating the degree of actual customer angst. Only 47% of B2C cus-tomers say they are concerned or very concerned. As for B2B buyers, the numbers are even more greatly overstated (Fig. 2).

All of this resonates with IAPP’s Hughes. “It doesn’t sur-prise me that consumers are saying they’re not worried,” says the executive. “Everything we’ve seen tells us that generally, cus-tomers want to trust the companies they do business with. In fact, their starting posture is: ‘I think you’re legit, and you’ll do the right things with my data.’ They’re trusting.”

Sellers themselves are significantly more concerned about privacy issues than are their customers. Asked about their own commercial lives, 57% of executives from selling firms say they

have privacy concerns, compared with only 47% of B2C con-sumers. This begs the question, do sellers know something their customers don’t?

A DISTRUST OF THE ROGUE INDIVIDUAL—NOT THE COMPANY

Even among those B2C customers who are concerned about privacy, the root cause may be less about a fear of monitoring and much more centered on worry that the wrong people might put information to the wrong use. Drilling deeper with those expressing privacy concerns, the top three most-cited fears are: • Crime—and the risk that criminals might access any collected

information (84%) • General dislike of having personal information and activity

monitored (78%)• Fear that an individual employee or the public could access and

misuse personal info (73%)In short, many concerns over customer data–driven business

activities are to some degree less of a privacy issue and much more of a call for heightened data security.

This is not to say that there is no distrust of business. Among B2C customers expressing concern over privacy, 59% cite a belief that companies will use the information to gain an advan-tage in the commercial relationship. And over one in five, 22%, cite a general distrust of business in general.

Age also plays an enormous role in the various perceptions. For example, participants from Gen Y were twice as likely to express distrust of business in general as the sample at large. But at the same time, Gen Y participants were also significantly less likely to cite a general dislike of sharing personal information or being actively monitored.

So the youngest B2C survey participants are more likely to not mind being watched even as they trust businesses much less. Sellers understand this; 71% of executives say they believe that the younger the customer, the greater the comfort level with sharing personal information.

As for B2B customers, just 31% express concern over the knowledge that vendors might be keeping track of their activ-ities. Indeed, 48% of B2B customers who don’t worry about privacy believe the information they’re sharing is not particu-larly sensitive, while one-third see an element of partnership in their supplier relationships, and 25% say they are taking similar actions with their own customers.

FIguRE 2. How concerned are B2C consumers by privacy issues?

sellers b2c consumers b2b buyers

Very concerned 48% 24% 11%

Concerned 33% 23% 20%

Total 81% 47% 31%


linkeDin: Dealing wiTh “members” insTeaD of “cusTomers” Q&A with Jim bAeR, SenioR diRectoR, dAtA Science

LinkedIn is the Internet’s largest professional network.

What sorts of information does Linkedin collect about its “customers”? LinkedIn provides a platform for members to establish their professional identities and connect with others to advance their careers. In creating their professional profiles, members share their work histories, responsibilities, publications, patents, professional certifications—whatever characterizes who they are. And that data is then used to present them with the most relevant opportunities.

how do you determine what content to “show” to members? What members see is driven by algorithm. Algorithms analyze the data and then provide our suggestions on what members will likely find of interest. We also do a great deal of work to ensure the quality of our data, and we refine the information presented to members based on observed usage. The idea is to move the chaff out of the way and continually improve the relevance of our recommendations.

other social media sites “sell” targeted advertising. how does Linkedin use its member data in association with advertisers? The defining characteristic of advertising on LinkedIn is that it is highly targeted. We work with advertisers whose products and services are closely aligned with the needs of our members. Because we know who our members are as professionals, we can show them ads that are actually relevant by enabling advertisers to target their messages with high precision.

how sensitive do you feel your members are to issues of privacy? We take privacy and data security very seriously. We give members full control over their settings and which informa-tion is visible to others. And we have dedicated teams for data security.


sellers believe cusTomers are willing ParTners in The eXchange—anD They’re Probably righT Sellers and their customers do generally agree on at least one key issue: there is value in sharing personal information. Both groups also agree that consumers should benefit in some way in exchange. Where disagreement arises is the degree to which either party benefits from information sharing.

Specifically, 69% of sellers believe that their B2C and B2B customers are happy to share information if they perceive value from the exchange. This figure rises to 77% among the most active in the survey, the so-called “vanguard.”

To a lesser extent, customers agree. Fifty-three percent of B2C customers and 45% of B2B customers say they are gener-ally willing to share information when they perceive a benefit. Moreover, 55% agree that “companies who are tracking my per-sonal information owe me some form of commensurate benefit.”

WHO BENEFITS MOST?

The IAPP’s Hughes agrees that an exchange is occurring and that it is likely conscious. But where nuance arises is in the rela-tive value. “I can’t take credit for it,” says Hughes, “but there’s a line I find very useful. And it starts with ‘Americans value pri-vacy’—they absolutely do.” But as for the price they expect in exchange, it’s often “50¢ off on a cheeseburger.”

The survey adds support to this view. Among sellers, 36% recognize that the lion’s share of benefits flow to their own income statements and balance sheets. Another 18% say both sellers and customers benefit from the exchange, but mostly the seller (Fig. 3). The rest say all benefit equally (16%), or most of the benefits flow to groups of customers (19%) or individual cus-tomers (11%). By comparison, three out of five B2C consumers believe it’s the seller who benefits most. Even they perceive the imbalance: in the information exchange, sellers benefit far more than customers. But does it matter to them?

CUSTOMERS NOTICE BENEFITS While the degree of value they’re exchanging may be a

source of contention, B2C customers indicate that they indeed do tend to notice a degree of benefit from the active or pas-sive sharing of personal information. Benefits perceived include more relevant discounts and offers, personalized offers and the convenience of stored shipping information (Fig. 4).

insighT Three

FIguRE 4.

Benefits B2C customers notice

76%

62%

54%

49%

49%

43%

More relevant discounts and offers

Personalized offers

Stored shipping information

Recognition as a valued customer

Relevant product and service suggestions

More frequent and generous loyalty awards

When companies collect, analyze and act upon information obtained from their dealings with you, who benefits most?

FIguRE 3.

sellers b2c consumers b2b buyers

The seller 36%@ 60% 32%

All benefit—but mostly the seller 18% + 13%

All benefit roughly equally 16% + 14%

Groups of customers 19% + 18%

Individual customers 11% 2% 13%

@46% among B2C-oriented sellers+ Data points not comparable across surveys

“our company”“me”


Sellers, meanwhile, believe their efforts lead to better prod-ucts and better services, as well as money and time savings to their customers—all of which both B2C and B2B custom-ers value (Fig. 5). B2C customers are most likely to value money—discounts, special offers and the like—for their part in information sharing. B2B customers, meanwhile, tend to value better products, services, time or money savings equally. In summary, B2C and B2B customers want more price ben-efits requiring less time—along with better overall channel experiences.

As for their own rewards—the spoils or motivations for pur-suing customer data–driven business strategies—sellers say they value the achievement of greater customer loyalty (stickiness), greater marketing effectiveness and more optimal media spends (Fig. 6).

How important are the following in terms of providing an incentive for you to share personal information? (Very Important-Moderately Important)

FIguRE 5.

executives believe* b2c values b2b values

Better products (to meet their needs) 66% 62% 87%

Better services 64% 67% 88%

Money 60% 87% 87%

Time 57% 68% 86%

Improved retail experience 53% 68% N/A

Improved online experience 48% 71% 78%

*Percentage of executives believing this form of value accrues to customersN/A (Survey did not ask B2B about retail experience)

FIguRE 6.

Benefits for sellers

36%

33%

33%

25%

24%

21%

Greater loyalty (stickiness)

More effective marketing strategies

More optimal media spends

Better predictive capabilities

Premium pricing or optimal pricing

More effective retail presentation

15%

15%

15%

Higher barriers to entry

Better product and service concepts

Better product and service design and enhancement


how engineering DaTa imProves ProDucT Performance anD cusTomer relaTionshiPs aT neTaPP Q&A with Rich clifton, eVP, cuStomeR SucceSS oPeRAtionS

NetApp is a provider of storage and data management solutions with over $6 billion in revenue.

What sorts of information do you collect and analyze relating to customers? We do that in quite a few ways. Probably most interesting for today is our automated data collection. This is where custom-ers share performance and service level characteristics on the installations they have in place with us. It’s essentially a way for us to gather information from the real world and in real-time that can be used to monitor and improve the degree to which our products meet the needs of specific customers.

how does this work? Technology within our data storage and retrieval products en-able us to capture information on the health of the hardware, the health of the software along with some related characteris-tics about how everything is working within its overall environ-ment. This includes how the sophisticated “pools of storage” in the devices are getting along with other components at various capacities. Think of tracking the flows through the systems, and not just the health of the media (disks and flash). This data is automatically collected from our customers and goes into an extreme scale data warehouse. And from there, there we can do all kinds of useful things.

such as? For one thing, we can monitor and where needed, make adjust-ments to improve the reliability of a customer’s installation. Our systems are specifically designed for high-level resiliency, for example, through patented approaches to layered redundancy. One of those layers could break—and the customer would still be running fine. But now they’re at a higher risk of failure. So by sharing this information, we’re able not only to detect that soon-er, but also find the root cause and improve the environment.

What about product improvements? This sort of learning can absolutely go into improving our prod-ucts, and it does a lot. But another aspect of the data sharing is the way this can lead to better predictions for our customers. Some of the more interesting analytics we use look at thou-sands of events such as various combinations of load, tempera-ture of the system, health of specific hardware components, or how many systems are at one moment attempting to interact. Being able to look at such detailed information can help us move a customer from after-the-fact remediation to avoidance.

is this program mandatory? Not at all, it’s opt-in. But that said, we have a very high penetra-tion rate of customers who enable this capability. The point is, sharing information like this benefits our customers. Note, we’re not ever looking at specific data that belongs to the customer. All we see is metadata—information that relates to system performance and health only.

in what other ways do you collect/analyze customer information? We also have programs for “listening” to customers, for ex-ample, surveys and councils. We also try to correlate our auto-mated data with our sales data, creating context for conversa-tions with customers about other products and configurations that could better meet their needs. Overall, the more we look at data, the better it is for our customers.


Few organizations reside as squarely in the privacy crosshairs as the Interactive Advertising Bureau (IAB). The group acts as an industry association for more than 500 leading media and technology companies that are responsible for selling 86% of online adver-tising in the u.S. As anyone who has ever executed a web search for camping equipment on one day, only to experience a mysterious two-week deluge of back-pack, tent and hiking boot banner ads, can appreciate, “Privacy issues are at the heart of what we do,” says EVP and COO Patrick Dolan.

The IAB works to set techni-cal standards, promote best practices and establish codes of conduct in areas such as personal privacy. But the group also seeks to influence public policy, educating leg-islators and regulators about the societal benefits of electronically rendered and closely targeted advertising. Overall, says Dolan, events such as the National Security Agency’s “snooping,” and more recently the revelations that E-ZPasses are being read at far more locations than just tollbooths, “make this a very interesting moment in the privacy debate.”

There is “always a degree of tension” between personal

privacy and the realities of “living in an era of massive data collection and analysis,” says Dolan. And right now, “privacy concerns are a little more elevated than usual,” he continues. But overall, says Dolan, “I believe many, maybe most, consumers and individuals are aware their behaviors are being observed by businesses.” However, they ascribe little or no ill intent to the activity, or at

the very least, says Dolan, “not enough to cause con-sumers to want to withdraw from the economy”—at least not yet.

But, says Dolan, things could change. “It is very important to maintain a balance between the objec-tives of advertisers and the degree to which consumers are comfortable with data-driven strategies.” In prac-tice, says Dolan, “companies need to find the optimal mix

between creating tailored experiences and more rel-evant offers and content, and risking they might alien-ate their customers.” Because IAB and its members are working with so much data, “we know these tools work and they’re beneficial to consumers.” Still, says Dolan, “companies have to be very respectful of pri-vacy, be very open about what they’re doing and not overstep their welcome.”

an aDverTising inDusTry associaTion’s “Take” on Privacy

“I believe many, maybe most, consumers and individuals are

aware their behaviors are being observed by businesses.”

—PaTrick DoLan EVP and COO,

Interactive Advertising Bureau (IAB)


As the saying goes, let sleeping dogs lie. For now, customer anxiety over potential privacy breaches is significantly lower than that perceived by sellers. But one of the likely rea-sons for this gulf is that sellers are actually more aware of just how much harm might befall customers should their pri-vacy be breached. Patrick Dolan is the EVP and COO of the Interactive Advertising Bureau, an industry association that regularly deals with privacy issues. As Dolan explains, “I believe that the companies gathering this [sort of customer data] realize the responsibility it entails, and the consequences for failing to live up to consumer trust.”

Indeed, 85% of executives in the main survey agree—63% strongly—that any significant breaches in customer data secu-rity would do great harm to customer relationships, reputation and the bottom line. And the larger the company, the higher the percentage of those who strongly agree. The insight: the larger the company, the greater the value of its intangibles (that is, its brands) and therefore the greater the value that’s at risk (Fig. 7). Commensurately, 86% of sellers agree that it is their respon-

sibility to protect customers’ personal data, a figure increasing to 100% among retailers. Eighty-three percent of sellers say it is their responsibility to protect customer financial data—a figure increasing to 93% among retailers.

As with any seller-customer interaction, communication is key. Fully 84% of sellers agree that it is their responsibility to ensure that each individual customer understands how the seller collects and uses their data. In accord, 64% already share a for-mal privacy policy with their customers and stakeholders—and 10% more say they soon plan to.

Even amid these warnings, indications are that some com-panies may not yet fully appreciate the degree of risk—and thus their actual exposure. More than half of sellers (54%) say that they believe customers’ barks are worse than their bites. That is, customers express concern about privacy, but don’t change how they act. Especially noteworthy, this figure rises to 63% among those who are most actively using customer data. This suggests that those most closely tracking customer reactions to data-driven actions are most likely to report that customers don’t mind sharing data.

Here, however, findings from the B2C and B2B customer surveys serve up cause for caution—specifically:

insighT foUr

FIguRE 7.

The larger the company, the greater the perceived risk Overall, 85% agree (22%) or agree strongly (63%) that privacy breaches are bad for relationships, reputations and the bottom line.

But the larger the company, the more likely it is to agree strongly:

49%

55%

78%

83%

Under $1 billion

$1 billion–$4.9 billion

$5 billion–$999.9 million

$10 billion or more

Overall,

63% strongly

agree

The risk—anD cosT— of PoTenTial Privacy missTePs cannoT be oversTaTeD

FIguRE 8.

How do sellers view their privacy responsibilities?

86%

64%

It is our responsibility to protect customer personal data

It is our responsibility to protect customer financial data

It is our responsibility to ensure that each individual customer understands how we collect and use their data

We share a formal privacy policy with customers and other stakeholders

83%

84%


B2C customers• 54% of B2C customers say their privacy concerns outweigh

any benefits derived from sharing information with businesses • 56% of customers are generally uncomfortable with the

amount of information companies know about them or could learn about them through their activities

• 47% are uncomfortable when they “notice” their personal information is being used to provide customized content or suggestions (for their benefit)

B2B customers• Fewer than a third (31%) of B2B customers say the benefits of

sharing outweigh the privacy risks • Half of B2B customers (50%) say privacy is a major concern

when making purchases or selecting vendors

The question becomes: just how sedate—and loyal—would customers remain following a privacy crisis? “Executives have got to realize,” says IAPP’s Hughes, “that if they step offside, if they get the privacy equation wrong, goodwill and trust evaporate.”

Sellers should consider listening in instances where customer actions indicate enough is enough. For example, the B2C sur-vey asked participants how often—and in what manner—they took active steps to protect their online privacy. This includes actions such as declining to provide requested information or even aborting a transaction or registration owing to “too many questions.” The results show a spectrum of willingness to pro-vide—or avoid providing—information (Fig, 9), all of which amplify the warning that even if customer actions demonstrate only minor concern over privacy, this indifference could quickly turn to ire in the event of any significant privacy transgressions.

And as Hughes cautions, owing to the increasing instances where companies have access to personal data, companies in general need to “up” their privacy IQ’s. “In an informa-tion economy, privacy risks increase,” says Hughes. “It’s one thing gauging each customer’s or counterparty’s individual pri-vacy boundaries, but increasingly, there are legal and technical issues.” Privacy risk “isn’t just in marketing and sales, it’s also in production, R&D, HR—it’s an across the board challenge.” Accordingly, “a lot more people throughout a business need something of a privacy toolkit.”

FIguRE 9. How often? Steps B2C customers take to shield their online privacy

how often? always Usually frequently sometimes rarely/never

Decline to provide info 12% 24% 30% 21% 13%

“Abort” owing to too many questions 22% 16% 20% 29% 13%

Delete cookies to “hide” 11% 17% 21% 20% 31%

Use ad-blocker software 23% 20% 15% 11% 31%


Overall, the top locations for collecting customer data truly run the gamut across many customer “touchpoints,” including web-sites, call centers (think digitized content detection), in person and mobile devices. The top tools for data gathering include online cookies as well as “pathing” the active monitoring of how online visitors navigate the website (Figs. 10 and 11).

This amounts to a considerable degree of time and resources devoted to collecting customer data. But at what point will consumers begin to believe they are being watched too closely?

In seeking a balance, it will likely become important to do a better job at managing the perceptions of custom-ers. B2C and B2B customer perceptions, when compared and contrasted to seller insights, show that customers vary between overstating and understating the actual depth to which their actions are being observed.

Specifically, sellers report the percentage of companies who are actually observing specific interactions. Comparing this to the perceptions of B2C and B2B customers—how often they feel they are being observed—shows significant disconnects.

For example, 53% of sellers say they actively observe—that is, seek to obtain discrete customer data from—in-person interactions. Here, both B2C (47%) and B2B (29%) custom-ers underestimate the degree of observation. But turning to website visits, compared to reports from sellers, here B2C and B2B both overestimate the frequency with which their actions are being actively observed (Fig. 12). Indeed, this suggests that customers may not understand they’re being tracked in person as much as they’re being tracked online—or that it’s even possible to track in-person interactions to the degree that it is done.

insighT five

seller anD cusTomer PercePTions of where anD how acTions are being observeD Differ significanTly

FIguRE 10.

Where do you collect customer data?

65% 60% 53% 50%

49% 46% 44%

WeBSITe (86% among “vanguard”)

CAll CeNTeR IN PeRSON (67% among healthcare,

64% “vanguard”)

MOBIle (68% among “very active,”

66% manufacturing)

lOyAlTy CARD (61% among manufacturing)

SOCIAl MeDIA (61% among manufacturing)

DIReCT MAIl AffINITy PROGRAMS (61% among manufacturing)

44%


The question for sellers is whether there is a need to do a better job of disclosing when and where they are observ-ing customers. Customer perceptions may be “off” at the moment, but there is little evidence to suggest they truly mind enough to take action—even when overestimat-ing the degree of surveillance. Should one or more severe

commercial privacy breaches occur—whether specifically at “your” company or within business in general—such percep-tions may begin to matter.

FIguRE 11. How do you collect data?

Online tracking cookies 61% (88% retail)

Follow-on tracking 31% (cookies that follow site visitors)

Website “pathing” 58%

Loyalty and affinity programs 53%

Unique coupon codes 43% (75% retail)

Digital conversion of call center activity 38%

Video cameras 36%

Consumed audio and video content 35%

RFID 32%

Cell phone 21% (33% manufacturing) Note: 82% are also taking steps to correlate in-house data with third-party data.

FIguRE 12.

Are you being observed?

B2C

ACTUAL+

B2B

IN PeRSON

B2C

ACTUAL+

B2B

WeBSITe

B2C

ACTUAL+

B2B

MOBIle

B2C

ACTUAL+

B2B

SOCIAl MeDIA

B2C

ACTUAL+

B2B

CAll CeNTeR

B2C

ACTUAL+

B2B

DIReCT MAIl

B2C

ACTUAL+

B2B

lOyAlTy CARD

B2C

ACTUAL+

B2B

AffINITy CARD

likelyHighly likely

17% 30%

13% 16%

47%

29%

53%

18% 66%

23% 30%

84%

53%

65%

17% 46%

17% 17%

63%

34%

50%

14% 53%

19% 21%

67%

40%

46%

25% 34%

24% 15%

59%

39%

60%

22% 29%

17% 16%

51%

33%

44%

16% 57%

19% 20%

73%

39%

49%

18% 47%

14% 23%

65%

37%

44%

+ As reported by the main survey


About four out of five executives say their efforts are meeting or exceeding ROI targets (Fig. 13). Meanwhile, only 11% say such efforts are falling short. In essence, sellers are saying that invest-ment in collecting, mining and developing actions in response to customer data pays dividends.

As for how executives know how they’re performing, 55% of sellers say they are actively tracking related metrics—with 19% of these indicating such analysis is very rigorous. Executives further report that they are managing a wide mix of activity-specific metrics, process improvements (directly attributable to data efforts), directly observable customer metrics (such as retention rates or lifetime value) as well as intangibles (that is, customer satisfaction or improved R&D).

In terms of where they are achieving specific benefits, companies say they are most successful in using data collec-tion and analysis to assist with product development, pricing, website design and function, and call center operation (Fig. 14). But efforts are also under way to make improvements in a handful of key strategic initiatives. These latter include better informing media spending, informing marketing and

creating a more integrated cross-channel or “single” view of each customer (Fig. 15).

insighT six

comPanies are working harD To Track Their efforTs— anD mosT say Their DaTa Programs are Paying off

FIguRE 13.

FALLING SHORT 11%

34%

81%

47%

EXCEEDING

MEETING

Eighty-one percent of efforts are meeting or exceeding ROI targets

FIguRE 14.

Where are you obtaining benefit from customer data?

*Percentages equal the numbers of sellers who say they are proficient or very proficient in using customer data to inform, manage and improve each activity.

WeBSITe DeSIGN AND fUNCTION

PRICING

MOBIle DeSIGN AND fUNCTION

CAll CeNTeR

OPeRATIONS

PRODUCT DeVelOPMeNT

lOGISTICS

WARRANTy, ReTURN, RePAIR

ReTAIl SIGNAGe

ReTAIl DeSIGN AND

lOCATION

fUlfIllMeNT64% 48%

63% 34%

58% 35%

53% 41%

41% 39%


A good example of detailed performance evaluation comes from Zappos, a large online provider of apparel and footwear. According to Ronn Shaw, a web analytics man-ager, evaluation consists “primarily of revenue projections, cost savings or incremental revenue gained by website tests.” But much of the analysis is quantitative. Says Shaw, “We know we are consistently making informed decisions based on data, and we have an idea of what we stand to gain or lose with every decision made. Essentially, each analysis we conduct, utilizing the data we collect, can be tied to some type of recommendation focused on improving the customer experience.” Overall, says Shaw, the company’s experience shows that “improved customer experiences lead to added revenue generation.” (See Q&A: How Zappos.com Stays in Touch With Customers.)

All of this paints a picture of success: companies are actively measuring and seeing that they are benefitting from their data-driven strategies. It’s no surprise, then, that the survey reveals an increase in related activity. Three out of five sellers (59%) say they plan to accelerate their efforts in these areas. The remaining two out of five say they’re sat-isfied with leaving existing programs as they are—neither expanding nor contracting them. In short, these initiatives work, and the future will see more, not fewer, data-driven customer strategies.

How far are you in your journey to use customer data to…?FIguRE 15.

inform media spending inform marketing form a “single view” of customers

Achieving significant success 64% 67% 88%

Seeing business benefits 60% 87% 87%

Off to a good start 57% 68% 86%

See potential benefit but have yet to begin 53% 68% N/A

Have no plans in mind 48% 71% 78%

FIguRE 16.

Which of the following best describes your orientation toward gathering and analyzing customer data?

accelerate

about the same

slow down 59%

40%

1%


conclusion Consumers—B2C or B2B—want products and services that better suit their needs. They often notice

the ways a company’s various touchpoints can recognize them as individuals, and then adapt to

improve the customer experience. They appreciate customization that can save them time—and they

especially value discounts and special offers conferred as a result of intimacy. Though they meanwhile

perceive that the lion’s share of benefits from such intimacy flows to their corporate counterparties,

consumers are not overly concerned, as they believe most are worthy of trust.

Sellers, by comparison, are seeking to collect as much informa-tion about their customers as possible, and then mine that data for actionable meaning. They hope to gain insight to develop more relevant products and services. But at the very least, they mean to streamline and/or finesse processes—from sales to ful-fillment, and then back to repeat sales—in ways that enhance revenues, customer loyalty and ultimately margins.

Information—data—is the gateway to both sets of inter-ests. Sensitively mined and carefully processed, customer data can provide a wealth of insights that can incrementally or even greatly improve how well a business is meeting the needs of its customers. Data-driven intelligence—born of customer intimacy—generates performance.

If data is the gateway, the key is privacy. Customers on

average are more comfortable with exchanging information than most business executives realize. Striking a balance—knowing how much information each customer is willing to share in exchange for what—becomes paramount. Note, however, that in many cases, certain customers will be willing to share insights about themselves for a half-dollar discount on some future purchase. Data mining no doubt will be instrumental in sounding such tolerances.

No matter how intimate such relationships may become, they will at all times remain remarkably delicate and potentially volatile. Pursue trust and intimacy by all means, but under no circumstances take privacy for granted. The ability to balance the relationship between privacy and intimacy is becoming one of the most precious formulas any company can concoct.


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Documents

The Promise of Privacy - Forbesimages.forbes.com/forbesinsights/StudyPDFs/turn_promise_of_privacy_report.pdfTechnology-infused data collection and analysis can provide benefits to