Consumers still squeamish about third-party data sharing
Even with generations of people now comfortable using technology for all manners of purchasing, a majority of consumers have not warmed up to the idea of having their data sold to third parties by loyalty programs. According to a study by the Pew Research Center reported by Advertising Age, only 47 percent were comfortable with loyalty program tracking and sharing data with third parties.
The study reported that older respondents were generally less comfortable sharing loyalty program data than younger respondents. The survey further showed that people with household incomes above $30,000 were less likely to be comfortable with data sharing than people with household incomes below $30,000.
The study went on to say that 32 percent said it was unacceptable for retailers to collect shopping data and sell it to third parties and 20 percent said, “It depends.”
For those hoping to avoid alienating customers, it may be important to look at the factors on which “it depends.”
An earlier survey reported by Business News Daily suggested that customers may avoid a loyalty program if asked for too much data up front. That article reported customers were turned off by programs that accessed social media status updates and offered rewards based on profile content or personal information.
In light of the recent survey, one reason these requests may overstep a customer’s comfort level is that they confirm the use of personal data. A comment by an Ad Age survey participant indicated that people may accept data sharing when they just aren’t aware of it.
“The ‘selling to third party’ part makes me worry,” said the survey participant, “[On the other hand], I have and frequently use a Safeway rewards card, which I suspect has just such an agreement.”
Resignation may be the most material factor behind public acceptance of such measures. Research also quoted in Ad Age and recently presented by the Federal Trade Commission indicated that 57 percent were “resigned” to data sharing, with only 32 percent stating they supported trading data for rewards.
Discussion Questions
How serious should loyalty program managers be about appeasing consumer privacy concerns? Would retailers be better or worse off implementing loyalty programs that do not make use of third-party data sharing?
Poll
BrainTrust
Ryan Mathews
Founder, CEO, Black Monk Consulting
Paula Rosenblum
Co-founder, RSR Research
Loyalty program managers should be transparent in their collection and use of customer data. Let customers know what is being collected and how it will be used. Many consumers are tired of traditional loyalty programs, particularly those offered by grocery and drug chains. They see a lot of high-low pricing and useless coupons printed on register receipts. Perhaps if loyalty programs meant more to consumers they would be more willing to part with their data.
Loyalty programs ought to take consumer privacy concerns very seriously indeed. I think most sentient people understand that if the CIA can be hacked then no digital data is ever truly safe.
The issue indeed is what lives in the realm of “it depends.”
There are really three major consumer concerns with data sales:
As to the second question, at some point in the future not participating in third-party data sharing may be seen as a plus by consumers who share the concerns I’ve just discussed.
On the other hand, that would mean that the retailers would either have to buy data, not sell it or create a data island and lose all those marketing opportunities.
The “Fear of the Unknown” enters into play here. If the consumers were educated on what it means to share data, that would be a good start. However, when the surveys ask things that sound like, “Are you comfortable giving away all your personal secrets?” then we would expect people to be wary. Additionally, I have seen that younger people are not nearly as afraid to opt in and share data as Baby Boomers are. I think we still suffer from the “Big Brother” syndrome. Plenty of Millennials don’t even have passwords on their phones.
I think retailers should take a head-on approach and share the benefits of knowing customers better, and market those benefits widely to help gain awareness of why retailers want to share data.
Of course, financial data privacy is still a major concern, however we’re not talking about that aspect of data sharing.
I am really surprised the subject of privacy and data sharing keeps coming up. Consumers of all ages have just said no many times. The dream that Millennials wouldn’t care has thus far not been borne out in any study.
Perhaps we would be better served as an industry by focusing on a better customer experience without the benefit of personal information. There are two things for sure: consumers want a convenient experience and, if they’re in stores, they would like it partly delivered by knowledgeable employees.
This isn’t a mystery. It’s time to get on with it.
Very serious. Consumers in the U.S. are normally willing to share their information when they are getting something of value in return. What value does sharing data with third-party vendors provide? It is not surprising that consumers do not want to share data for that promise of value. There is also no guarantee of how that data will be used. In addition, allowing providers to sell the data and make money on it offers no value to the consumers.
Most customers, me included, do not want or need retailers to “know me better” and even moreso if they surreptitiously share with others info that they’ve collected about me either directly or though my purchases and searches on their websites. There is no “loyalty program” or “benefit” or “you may also like” suggestion that is worth this level of invasion of privacy.
Smart retailers and savvy retail consultants should take a tip from the “we’re green” crowd and advertise “we respect and protect your privacy” as a reason for shoppers to consciously deal with them.
Data sharing is only likely to become more popular in loyalty programs as we oldies die off. Some of us are unlikely to ever agree and would far rather reserve our loyalty for those who respect our privacy and preferences. Retailers should absolutely respect this.
Take it very seriously. Besides the excellent points raised here already, my biggest concern about loyalty programs is the degree to which they may result in more hassles with spammers and telemarketers. One reason I never, ever answer my home phone anymore unless I recognize the caller ID, and keep making my spam filters stronger. Enough already.
Is there any middle ground here? That is, “know me better and serve me better, but don’t use my data for third-party sharing.” The only reason people would agree to a loyalty program (i.e. “rewards”) to begin with, is a kind of greed, or ROI. That’s why it’s called a loyalty program, right?
The world is getting way too scary already, with hacking, data stealing and worse. Am I silly for shunning socials like FaceBook because people are so blithe about putting it “out there”? Too much data and information available already — and as I said, scary for anyone to already know so much about any individual and their activities and life and contacts and … pocketbook, and personal info, and what someone had for breakfast, and what meds they may be taking, and on and on and on.
The key qualifier of this study is whether the consumer’s data should be “sold to third parties.” Shoppers today are generally agreeable to brands or retailers using their purchase data in exchange for providing them with relevant, compelling promotions based on their past purchases.
However, selling the consumer’s data to third parties breaks this “good faith” agreement. Brands and retailers should promise consumers that they will only use their data internally as part of their loyalty program. If they want to provide the consumer’s data to third parties, the consumer should receive additional benefits to compensate them for the use of their data.
As supplies of information decrease the price/rewards for sharing, legally or illegally, will continue to grow. Information Technology’s only purpose and justification is in the gathering and manipulation of data for profit purposes. The only thing more important than data is data reliability and accuracy. E-commerce is a numbers game that’s success is seen as a percentage of data population. To move the success percentages up consumer accuracy and demographic relevance must increase. Collecting, purchasing and reselling consumer data to use in updating a company’s prospect database is a time proven method to maintain and increase success. Buying and selling information is also the only proven reliable means to keep the costs of data acquisition down while growing the business.
There are many steps a consumer can use to limit the information available to governments and businesses. Searching for companies and government agencies with complete integrity and confidence for their customer information data files should never be considered a realistic goal. The consumer as in individuals and corporations must actively seek and learn what information is needed to complete a needed transaction and set strict standards of information limitations that will comply with these needs.