It's been said that data is a form of currency in marketing. In this podcast, you'll learn how marketers and technology professionals can begin to not only shift the perception about data and privacy, but more importantly, prove the value within that exchange.
Hi everyone, and welcome to Two Guys and Some Data podcast. On this podcast, we don't just talk about data. We talk about how you can use data to make some money.
Larry Kavanagh: I'm Larry Kavanagh.
Allen Abbott: I'm Allen Abbott, and our topic today is marketing in an era of data and privacy.
Data, for marketers, it's become the DNA of how we build campaigns and meaningful consumer experiences, but for consumers it has become a dreaded four letter word. Today we want to talk about this notion of data as currency, and how marketers and technology professionals can begin to not only shift the perception about data and privacy, but more importantly, prove the value within that exchange.
Larry, let's start with a level set. With passage of GDPR in legislation in Europe and the continued leakage and misuse of data, Facebook, Cambridge Analytics for example, how has the domestic marketing environment changed?
Larry Kavanagh: All right, so we're going to start off with the downside. That's okay. Of course, the biggest reaction is the California law that was recently passed, but because that doesn't take effect until 2020 and because what's actually in that law is still going to be shaped, I think it's too early to really talk about that law in particular. I think your question is right on though, "What is GDPR and the privacy concerns bringing to the forefront that hasn't been there before that will shape probably future privacy legislation including the California law.
Since you say level set, taking a step back, in the US, what businesses have had to be concerned about, primarily boils down to two concepts. Notice and choice. Privacy policies provide notice of how a business would use a consumer's data. Choice is you give a consumer some way that they can opt out of future participation. The three new concepts that are now coming into the conversation are one, PI, personal information. That's things like, in the digital world, people think about it in terms of where you clicked, what device you might have used to visit a website, but it applies to things like your demographics. What's your age, what's your income. In the direct marketing world, transaction history is very important. Transaction history is also considered personal information. It's things that marketers would really use to describe and make decisions about whether to market to someone and what to send.
That type of information, in the past, you just had to notify people that you were using it. Now, the conversation's around how you protect personal information. That's one concept. Second concept is right to be forgotten. This one is, we in the US had the opt out concept, which meant no more data collection going forward. Right to be forgotten would require marketing technologists, marketing end brands and companies that use marketing data to actually erase retroactively information about a consumer.
This has big implications when you think about how models are built. They tend to use compiled data. You'd have to go back and sort of rip out individual transaction data, which is not something that in the US we've had to be concerned with before.
The third concept is naming who your data partners are. Naming who it is you share a consumer's data with, or sell a consumer's data to. That's would be another level of transparency that has not existed in the US today. That's the big scary things that could be coming down the pipe that I think marketers have to be thinking about and be conscious of. Allen, you're the research expert here. What does the research tell us about consumer data usage by advertisers?
Allen Abbott: Well, let's start with the marketing side, and how marketers and advertisers view this. A lot of studies we can look at here, and the CMO survey, which was done this year says that 42% of marketing decisions are made using analytics. Frankly, I was a little surprised at that number. I thought it would be higher, but certainly it's on the upswing. KPMG did a study last year and found that 61% of CEOs expect data analytics to be their greatest investment in technology in the next three years, and that is no surprise.
Almost 10% of budgets, of marketing and advertising budgets, are now devoted to marketing analytics, and it's the biggest single area of spend. That's from a Gartner study last year. 95% of marketers across brands and agencies are using first and third party data in their immediate plans, and that's from Bizarre Voice, and I'm wondering what the other five percent are doing, actually, but sort of like those surveys where the product usage. 98% of the people are using toilet paper.
Larry Kavanagh: Let's not think about that one too much, okay.
Allen Abbott: Yeah. Right. Yeah. 82% of marketers plan to increase their use of first party data. Marketers and advertisers are, for them, data is clearly here to stay, and the output of the data driven consumer experience is too valuable to let go of.
For consumers there's a trade off. The trade off is that the quality and the cost of products, the experience that they have with advertisers, a lot of that is going to be dependent on the availability of data about that that the marketer can use to provide a better experience. That's the dilemma for consumers to some degree, and probably more than just for the consumers, for the folks who consider themselves consumer advocates. The press, regulatory bodies, and just organizations that exist purely to protect consumer interests.
Larry, what are some of the really good examples of advertisers using consumer data effectively to both improve the effectiveness of their advertising, and also the consumer experience?
Larry Kavanagh: Now, we get sort of the other side of the equation, which is, data when used well, dramatically improves the consumer experience. One example you could use is Amazon, but I think that one's been overused and we've talked about that and Amazon brings up other connotations when you start talking about Amazon, so I'll talk about, instead, a company that I think is more generally loved by their consumers, even than Amazon. At least by me. Netflix.
If you think about, I suspect most of our listeners, if you don't have a Netflix account, you've probably got at least some streaming video account, and one of the things that pretty much all of the streaming video services provide are, start with just the easy one, the recommendations. There's a huge library of video content that has been produced in the United States, and any individual is only able to explore a tiny fraction of it.
Services like Netflix have done a fantastic job of paying attention to what things I tend to watch, not just do I start, but that I watch start to finish. In fact, something that I start and stop to them can be a negative indicator, that it's something that I didn't enjoy, whereas something that I watch from start to finish, I enjoy. They pay attention to what type of programming. Am I watching movies? Am I watching series? If I'm watching series, am I watching ones that are 30 minutes long? Am I watching ones that are an hour long? Am I watching ones that have multiple seasons? Am I watching ones that are more produced as sort of like a mini series in effect.
As a result, the types of recommendations that filter up are, I'm embarrassed a little bit to admit how many of them I wind up watching. That is sort of the counter side of this, is that Netflix is able to do this because they have a lot of personal information about what I watch, but because they have protected it well, there's no stories of it being breached, I don't have any suspicions that they are sharing this data beyond, they're not using this data for any other purpose than to try to give me a good experience, and to improve their programming, et cetera. They can improve their programming all they want, as long as it gives me a good experience, I don't care.
Because I don't have any suspicion of that, I don't mind it. I don't even think about it. It's more, I think, that it doesn't enter the equation. I just see the positives and I'm not concerned about the negatives.
Allen Abbott: That's pretty important for Netflix. You can learn quite a bit about somebody from what they're watching.
Larry Kavanagh: Absolutely. If you think about them, and what got Facebook pretty much in trouble was that the information that they released got used for a different purpose. Cambridge Analytics was using it to try to develop voter messages based on the things that I liked, and that's the part that really I think got Facebook in trouble was that that information that could tell Facebook a lot about me was used for a purpose that I never imagined or didn't even think of. With Netflix I don't have, today at least, the same suspicion or same concern, that they're using the data for anything other than to I would say help me find great shows to watch while I'm working out.
For marketers and technology companies offering these services based on data, the critical lesson is just to keep on improving the value of using that consumer data, but while also keeping it safe and keeping that whole idea of safety and security really out of consumers' minds.
Allen Abbott: Yeah there was a study done last year by Psych Core and 60% of marketing, IT, eCommerce decision makers list the customer willingness to share or not share data as the biggest data collection challenge, and consumers are more aware than ever that they're being studied and they're being modeled and that companies are using data to try to understand what they want when they want it. A lot of consumers understand pretty clearly which information is the most sensitive, and that's really what we're talking about here, is the PII, so you know, name, address, mobile phone number, date of birth, but even with that, 75% of those folks surveyed were willing to share that information with companies in exchange for products and services that they value if it's a brand that they trust.
To Larry's point, he's developed a trust with Netflix, as have I. I'm also a big user of Netflix since I travel a lot, and my default 9:00 at night thing is I turn on my laptop and put in my earbuds and watch an hour or so of Netflix programming.
Even more consumers, about 80%, were positively inclined to share personal data when they receive special offers or benefits from their willingness to share that data, and that included here, reward points and product recommendations. The conundrum is, as one journalist pointed out in the wake of the Toys R Us closing, I'll quote him. "People express discomfort at the thought of having their data exploited for commercial purposes, but then they mourn when their beloved brands fail to be commercially successful."
You can't have it both ways, or can you?
Larry Kavanagh: Having it both ways, I would address it slightly, I would change the question a little bit for you, or on you, which is, I think there's two ways to look at this, or two layers to look at. One is, so for sure, backing up half a step, as we talked about with Netflix, there are ways that this data can be used that frankly improves consumer experience, makes consumers happy, is exactly what I want. There are ways this data can be used that are off-putting, more than off-putting, which get in the way, become a barrier, to companies using that data effectively.
I think really the place to analyze this is across two different dimensions. One is the marketing technology companies. A lot of brands, a lot of retailers, in fact almost all, probably the 98%, use marketing technology companies to help them reach consumers more effectively, to provide the kind of recommendations that Netflix has built into their brand. Other smaller retailers or smaller companies don't have the ability to build their own recommendation engine like that so they use third parties to do it. One level is, what can marketing technology companies do to better protect this.
I think the second question is what can advertisers do? I'll take the first, but I'll leave you the second. Marketing technology companies, I mean, you raised the point a minute ago about PII, which is personally identifiable information, which is separate from this new concept coming into the US of PI, personal information. I think there is a huge opportunity, because the things that people distrust are when their PI, their personal information, is used or released when it's associated with their PII, their personally identifiable information. Who they are. What they do and who they are. When those things are released or misused in some way, is where frankly all of the problems come from.
One of the things that marketing technology companies can do, and something that, as you know, was one of the founding principles of NaviStone, one of the ways we actually engineered our entire marketing technology from day one, is complete, complete separation of PII from personal information. One thing that always surprises our advertisers is when we tell them that we don't actually have consumer PII. We have personal information, their browsing history, what they click on, and we use that to model, but for us, that's associated only with like an anonymous number, an anonymous identifier, or to use the term more correctly, an pseudonymous connector. We don't actually have any PII, so the way we're designed prevents the kind of breach that like an Equifax had where people's names and addresses were released with their personal information.
We only have the personal information associated with a pseudonymous number that allows a different data partner who only has the PII, but not the personal information, to then be able to enable the type of marketing that we do for folks. In direct mail, that concept has never been done. We are like the very first company in direct mail to ever do this, and I think that this is the type of thing that marketing technology companies need to think about. We've been kind of cavalier about PII and PI, and I think that has to change.
That's what I think marketing technology companies can do. What about advertisers, Allen? What do you think they can do?
Allen Abbott: There are a number of things that we strongly advise our clients to do. We also strongly advise them to do it in English as opposed to legalese. Probably one of the biggest or the most off putting things at least for me about some of the privacy policies, for example, is that they're clearly written by lawyers, and they're not written by marketers, and there's something inherently wrong with that. At least, that's my perception. Don't get me wrong, I understand the legal has to have a part in this process, but they don't have to be the author necessarily.
Anything else, Larry?
Larry Kavanagh: Since I took the marketing technology side of it, I would say that advertisers ... You talked about the legalese that happens in privacy policies. There's another place where there's a lot of legalese and that's in the agreement that advertisers sign with marketing technology companies. With most advertisers may not be fully cognizant of is that whenever you put a marketing technology company's tag on your website, that marketing technology company has the ability to collect all of the click stream data that's on your website, what page someone visits, as well, things like what device they use. There's a lot of data that become available to that marketing technology company.
The way a lot of marketing technology, frankly, agreements are written for advertisers, really is even more confusing than privacy policies in terms of how that marketing technology company is going to sue that data. At NaviStone, we've taken the approach, and we say it very clearly, we cannot use any data that we collect on someone's website. Not just PII, because we don't collect any of that, but also personal information. We don't use any data we collect for anything other than helping the advertiser we're working with.
When you read a lot of marketing technology agreements, they'll say things like, "We don't use any PII on your site." But they really are silent about the personal information, and that's what they're using a ton of. Anyone has any website that has the Facebook Like button on it, Facebook is collecting the fact that someone visits any page that you have the Like button on. Facebook will tell you they don't collect someone's PII. They don't have to, they already have it.
People have the Facebook cookie, so you might feel good about signing that agreement, "Oh, I've protected my consumer's PII," but you've just given away all of the browsing and personal information that's there. Not saying you shouldn't put marketing technology, we're a marketing technology company, we want people to use marketing technology, but I'm saying that I think from an advertiser standpoint, look hard at those agreements and push for the approach of we won't use PI as well as not PII on a site. I think you might be surprised at how much push back you get from some marketing technology companies when you take that stance.
Does that make sense?
Allen Abbott: It does. It makes great sense.
Larry Kavanagh: Excellent. That will do it for this episode of Two Guys and Some Data. We'll be back shortly with more tips for using data to help you actually make more money. In the meantime, if you want to read more from us, check us out at navistone.com/blog. If you enjoy today's show, head over to iTunes and leave us a five star review. Thank you for listening. I'm Larry Kavanagh.
Allen Abbott: I'm Allen Abbott. We'll see you next time.