The False Tradeoff Between Customer Experience and Customer Privacy

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How would you answer if every company you dealt with asked you this question: “Which is more important to you? Customer experience, or your privacy?” If you’re a Millennial, you may not recognize the implied tradeoff. According to a recent Gallup poll, “44% of millennials in the United States believe that their personal information is kept private “all” or “most of the time” by the businesses or companies they do business with.” (Really…?)

This is the highest of all major U.S. generational groups – at the other end of the spectrum, we have the less trusting (and in this case, more realistic) assessment of Americans aged 70 and older. In this group, just 29 percent believe their personal information is kept private all or most of the time while 35 percent believe it’s kept private little or none of the time.

Across the United States, there’s a storyline pushed by marketers and the companies they work for that goes something like this: “Consumers give out information about themselves as a tradeoff for benefits they receive.” For example, a 2014 Yahoo whitepaper concluded that online Americans “demonstrate a willingness to share information, as more consumers begin to recognize the value and self-benefit of allowing advertisers to use their data in the right way.”

Sure sounds good. But to the contrary, most Americans don’t believe these tradeoffs are fair at all.

Most people are strongly opposed to the idea of trading personal data for more personalized experiences.

A recent report from the Annenberg School for Communication at the University of Pennsylvania spells this out with some stark and somewhat disturbing facts. The report, titled The Tradeoff Fallacy: How Marketers Are Misrepresenting American Consumers And Opening Them Up to Exploitation suggests that most people are strongly opposed to the idea of trading personal data for more personalized experiences.

In this study, 91 percent of Americans surveyed disagree (77 percent of them strongly) with the statement that “If companies give me a discount, it is a fair exchange for them to collect information about me without my knowing.” 71 percent disagree (53% of them strongly) that “It’s fair for an online or physical store to monitor what I’m doing online when I’m there, in exchange for letting me use the store’s wireless internet, or Wi-Fi, without charge.”

This said, like most narratives of this sort, there is a foundation of truth: This foundation is the increasing desire of your customers for ever more personalized experiences. In fact, personalization and customization are fast becoming customer expectations. But they don’t expect or want to give up their privacy to get it.

In answering the question “How do consumers feel about personalization?” Yahoo states that “Most consumers are not only aware of online personalization activity, they believe it brings relevance and efficiency to the content experience,” further suggesting that “About two-thirds of consumers are okay with marketers using online behavior and information for ads.”

Maybe. But this is a big tradeoff. And most of the time, it’s not voluntary.

Americans widely believe that there is little or nothing we can do to stop the wholesale use and misuse of our private data.

The word that best describes the privacy/personalization tradeoff is “resignation.” Meaning that regardless of the type or quality of the supposed benefits we received, Americans widely believe that there is little nothing we can do to stop the wholesale Hoovering of our private data, or the use and misuse of it by those entities which gather it. And they’re not entirely pissed off – yet.

Today, most customers are content to leave a trail of personal data behind them. They give Facebook and other social media like Instagram, Snapchat and others permission to not only store but also broadcast and resell vast amounts of data from their personal profiles.

Unwittingly, most customers give online merchants permission to remember their credit card number, transactions and web browsing activity. They don’t remove cookies from their browsers, making it possible for advertisers to track their movements online and target them with specific advertisements. And if they try to remove some of these tracking tools, some websites simply won’t work.

Any sane customer with the time and resources to quantify these tradeoffs would quickly come to the conclusion that it’s pretty difficult if not impossible to participate in the “internet economy” while protecting your private data. That’s because marketers hold this data, and aren’t at all transparent about the ways in which they use it.

But what happens when customers take control of their data?

“We are not seats or eyeballs or end users or consumers. We are human beings, and our reach exceeds your grasp. Deal with it.”

These words come from the The Cluetrain Manifesto, a collaboratively authored work first posted to the web in 1999, and published as a book in 2000. Doc Searle’s is one of the book’s co-authors, and uses these words to describe ProjectVRM, a research and development project of the Berkman Center for Internet & Society at Harvard University, which intends among other things to provide tools for individuals to manage relationships with organizations, and make individuals (rather than organizations) the collection centers for their own data.

This is a potential problem for companies that continue to hoard customer data, and use it for purposes which don’t usually help their customers. Maybe it’s not a problem today, but it will be. Eventually. After all, another trend driven by the internet is transparency.

Which brings us to a core principle of customer experience management: the ability to truly understand customer’s wants and needs, and appropriately meet their expectations in these regards. Implicit in this field of endeavor is the obligation to set customer expectations based on fact, not spin. On openness, not obfuscation.

As logical as the narratives of Yahoo and others that their customers are willingly abdicating control of their private data, it doesn’t square with the facts.

And the facts are this: If customers really knew what was being done with their data, they wouldn’t be happy about it (For example: 69 percent of Americans don’t know that a pharmacy doesn’t legally need a person’s permission to sell information about the over-the-counter drugs that person buys. Whoops!)

So what does this all mean for business?

Looking at your business “from the outside in” is more than just a marketing-driven line used to describe how a customer-centric company would act, if it were truly customer-centric. It means actually looking at what it’s like to do business with your business on all fronts – not just the customer journey, or your products or call center or other channel experiences. It’s about what your customers think, feel and do as they interact with you as a company that wishes to serve them.

We believe that openness and honesty is a critical component of the customer-company relationship. As such, improving the experience also means doing a better job recognizing what your customers would want your company to do, even if they don’t know anything about it. Yes, it might require a new way of looking at your world – through the eyes of your customers.

Every day, we see that those companies who best understand their customers – and act in their customers best interests at all times – are those that consistently beat their competitors. They do so by creating loyal customers, and strong relationships based on the understanding that customers are really who these companies are here to serve.

We know these are the companies we most enjoy working with. And we know their customers feel the same way. So. What kind of company does yours wish to be?

5 COMMENTS

  1. Interesting post, and you’ve raised some important points. Companies that seem to be most successful with customer experience haven’t taken an either-or, or guns-or-butter, approach with privacy issues. Rather, they’ve compromised on data, with customer input, on what information is requested, gathered and applied.

  2. Hi Michael H

    I agree with you completely when you say that a trade-off between customer experience and customer privacy shouldn’t be necessary. Sadly, the reality with many corporate customer experience programmes is that they are, if not explicitly, at least implicitly designed around these trade-offs.

    The underlying problem as you describe it so well is that customers have been led to believe that they will get newer products, better experiences and more personalised communications in exchange for their data, whether collected with permission or without it. Sadly, as the U Pennsylvania and numerous other research points out, companies are happy to collect the data from customers, often much more data than they can realistically use, but they are not happy to fulfil their part of the bargain in return. Customers have finally woken up to the fact that they are being taken for a ride. The result, as Aimia points out in recent research on ‘deletist customers’ is that customers are increasingly going dark on companies as they unfollow them, opt-out of communications and install ad-blockers. New legislation like the EU GDPR (which will significantly increase the permission burden on companies), MiData and PSD2 (which will both increase the openness and portability of customer data to customers themselves) will only exacerbate this problem for companies.

    If corporate customer experience programmes are to stop customers going dark then they have to be developed with value for customers in mind, rather than just value for companies. As you suggest, this means focusing on the outcomes customers are trying to achieve and the interactions with your company and others they use to do get them, and using these as a foundation for innovative new experiences that co-create value for both customers and the company. That still requires trade-offs between being too customer-oriented and too company-oriented, but that shouldn’t be news to anybody working at the front-line of experience design. Many of these trade-offs now include customer privacy elements.

    Until companies start to create experiences that optimise the value created for customers and for companies, customers will continue to go dark on those same companies. As Hume’s infamous Guillotine tells us, there is a world of difference between what ought to happen and what actually does happen.

    Graham Hill
    @grahamhill

  3. Contrary to the popular hype, companies don’t collect customer data out of magnanimity or from a sincere desire to improve customer experiences. They do it because 1) it facilitates automation (read: lower costs), and 2) the data has great re-sale value.

    What’s been interesting to see is how companies have bamboozled the public into relaxing their instincts for privacy. It has taken little more than a few years. People who would not have dreamed of telling a solitary stranger personal details just a few years ago are now providing far more intimate information to monolithic webpages. They are oblivious to who (or what) uses the information they provide about themselves.

    Marketers coined the term personalization, but to me, that’s terribly misleading. There’s really nothing personal about it, since what people are doing by giving up information – many times unknowingly – is making it easier for machines to interact with them. Instead, I’d rather call it machine-human interface. – more to the spirit of what’s actually going on, but a woeful noun for selling the concept. The same reason that large food producers prefer not to use the term factory-farmed on their packaging. A sunshine backed by blue sky, peeking out from behind a red barn surrounded by a verdant green field gives consumers a much tamer image, when compared to the actual picture.

    So it goes with personalization.

  4. Hi Andrew

    I don’t think it is fair to suggest that ‘companies have bamboozled the public’ into doing anything. The Faustian pact has always been clear: you give companies your data and in exchange, they will give you newer products, better experiences and personalised communications. This is a fairly clear value exchange that most customers freely entered into in the past. Customers may be lazy, but as legendary ad man David Ogilvy famously quipped, ‘the customer is not an idiot; she is your wife’.

    What has changed is that the customers have had time to assess the value exchange and have found it wanting. It is this that drives the majority of customers to reassess how much data they are willing to provide and what they expect in return, not the value exchange in itself. There is ample evidence that companies who do provide their side of the bargain go on to develop stronger engagement and more of a sense of trust in customers, which in turn increases the amount and type of data customers are willing to share with the companies.

    There is nothing particularly misleading about ‘personalisation’ either. In the past we all received personal service from the corner shop because the shopkeeper knew us personally. Better customers got better personal service. The development of modern corporations with their millions of customers mean’t the knowledge in the shopkeeper’s head had to be distilled down and implemented in technology and staff trained to use it. Technology allows companies to mix and match personalised products, propositions and communications for customers based upon what they know about them. It isn’t quite the smile of the shopkeeper at the corner shop, but personalisation helps otherwise faceless corporations to provide a more human face to their customers. And do you know what, recent research suggests that customers like personalisation, providing, of course, that it doesn’t become too personal. But that applies to the shopkeeper as well.

    Graham Hill
    @grahamhill

  5. Wow, what awesome commentary around this.

    Thanks to all of you – Michael, Graham and Andrew. Clearly this is an issue we’re each individually and collectively passionate about. And it’s hard not to be. When you listen to customers every day – as we all do – you see “unmet expectations” piling up left and right.

    It’s also easy to see the corporate point-of-view. Though I don’t believe there’s inherent ‘evil’ in the act of gathering up all this data, just laziness. I suspect (and have seen firsthand) that much of the time personal data is gathered just because it’s easier to gather everything up front and figure out what to do with it later.

    That said, I do believe that customers are often “bamboozled.” Some of the research-driven examples from the U Penn paper are pretty clear on that front. While I don’t see this changing anytime soon, I’ve been rooting for Project VRM for years – tools that “provide customers with both independence from vendors, and better ways of engaging with vendors.” Vendors of course being any entity or business which wishes to do business with a customer.

    While it’s a slow process on all fronts, as long as we continue to champion the voice of the customer from inside the corporations we serve – and educate our CX colleagues in the process – we’ll at least be moving in right direction. Towards what’s best for customers, while the companies that “get” this are handsomely rewarded for doing so.

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