The looming battle between data analytics and consumer privacy

Capgemini's head of data and insights talks about data analytics and the emerging of the Internet of Things and how these could trigger a consumer privacy backlash

Consumers have historically been happy to hand over personal data in exchange for value. But the rise of advanced analytics and the Internet of Things is bringing us to a point where they could well value their privacy more.

Capgemini Australia’s head of data and insights, Frank Windoloski, recently caught up with CMO to discuss the balance between privacy and the explosion of data and analytics capability, and where the tipping point will be for consumers between personalised marketing and engagement, and brands crossing the line.

Windoloski is responsible for the consulting firm’s analytics practice in the region and across A/NZ. His 20-year career has trammelled the analytics arena from the early days of business intelligence to today’s big data capabilities, and also included a foray into security.

According to Windoloski, customers have traditionally been OK sharing personal data with organisations in an adhoc, subtle way, a trend that started from the first customer loyalty programs.

“When the first retailer came up with a loyalty program, it was a simple proposition of giving you a card, and you’d agree for them to take your data for 5 per cent off purchases. Most of us agreed to that,” he said.

Similarly, Google’s offer of free email accounts to consumers in exchange for reading the contents of their emails was largely accepted too, Windoloski said – albeit by some who weren’t aware of all the details.

“But now it’s more pronounced – you’re dealing with situations where your broadband provider can tell you your full browsing history in the last five years, and declare an understanding of your personality, behaviours and desires based on that,” he said. “It feels as though it’s too intrusive.

“What you’re going to start to see is more of a push back from consumers because of the ‘bigness’ of what’s happening. With each of those small points, we accepted the journey, but as it becomes all-encompassing, it feels wrong.”

While Windoloski believed consumers will continue to give up their information in smaller-scale situations in exchange for value, the rise of the Internet of Things (IoT) and proliferation of connected devices will raise serious concerns around how organisations connect the data dots.

The problems really start to arise when an organisation can unify five or six different data perspectives on the same consumer, he said.

“There have been a few examples of people putting their hands up saying something is too close for comfort, but we’re not at the boundary where marketers realise they have to step back yet,” Windoloski said.

But it’s coming. Windoloski noted the introduction of IP-enabled smart fridges that will be able to tell us when we’re out of a particular product. While this in itself might be perceived as useful, uniting that data with intelligence from other devices around the home may well not be.

“If you combine that with a smart meter and the electricity company also knowing what’s going on in your fridge, and your broadband provider, who’s telling you what’s going on in your Web browsing, consumers could push back,” he said.

“We’ll make the trade-offs initially. The broader issue is that as the data gets bigger and bigger, the question of how personal it can be is the struggle.”

To what extent this data is used in product pricing could raise additional concerns.

“In the US, one of the larger telcos there is blatantly charging a different price for broadband which allows you to give up your data, versus not. That is creating a buzz, because it puts a dollar figure on giving away your data,” Windoloski said. “But it also opens up the question around how much you really want every single thing going through your broadband link to be scanned.”

The onslaught of regulation

One of the challenges is the lack of awareness around how much personal data is being given away. As Windoloski pointed out, many consumers don’t realise the array of data collection going on through digital activities, from game playing on Facebook to mobile apps. As a result, he predicted governments will become more active in regulating use of individual data.

“The IT industry speaks loudly and clearly on this and the feeling is consumers in the marketplace will regulate because governments have not been terribly effective in regulating,” Windoloski said. “It’s largely due to the fact that innovation in the IT industry moves so much faster than any government could.

“This approach is going to hit some barriers in the next 3-5 years because the problem is becoming so much bigger. Arguably, the IT is still innovating quite rapidly, so regulations will be out of date quickly after being put in place. But I do suspect there will be a need to, and regulation will have to be informed by industry as a whole.”

Organisations are largely well aware of protecting consumer data, and as Windoloski agreed, often have robust privacy governance processes already in place. In addition, organisations putting up business cases for new products or technology enablement usually discuss privacy in terms of compliance with existing regulations.

“What I haven’t started to see organisations grapple with is the issue of whether the things they’re doing are acceptable more broadly in the market,” he said. “We do market research on whether a particular product will have uptake, but we don’t necessarily do product research around the ‘macroscopic’ layer, or whether we’re going to be seen as a bad or evil company for taking this data and using it the wrong way.”

In a similar vein to direct marketing, where marketers are able to send campaigns to certain postcodes but not to a particular individual, regulation around where you can quantify data on a consumer digitally will inevitably have to be put around things like credit card transaction data, Windoloski added.

“The power of it is obviously enormous. It’s that level of sophistication that will start driving out some more regulation,” he said.

Sophistication lacking

According to Windoloski, what has kept organisations somewhat safe from consumer backlash so far is their unsophisticated approach to utilising the massive treasure troves of data they have. As a case in point, he highlighted banking institutions sitting on “a mindboggling amount of data”.

“If you have a mortgage and credit card, and a bank knows you don’t have a car loan with them, they’ll advertise to you to try and encourage you to consider them for a car loan. But it’s still fairly simple propositions,” he claimed. “Yet that organisation has all your credit card transactions for the last four or five years.

“There is a balance in terms of investing in the technology to be that sophisticated, but there’s also the balance in personalisation. If banks market to the consumer too well, consumers will possibly feel intimated that they know too much. It’s that balance they will ultimately have to struggle with.”

Sophistication in analytics is building rapidly, however, and it is going to quickly expose the fact that the data organisations have will be intimidating for many, Windoloski said.

“Right now, the sophistication is at a level where still feels friendly and we’re accepting of it. When it becomes a little more all-encompassing, I don’t think it’ll remain that way,” he said.

Sectors leading the data analytics charge

For Windoloski, banking and insurance companies have a leading role in analytics thanks to the data sets that hold. But he also flagged the utilities industry, specifically electricity companies, as another transformative player.

“Many of the things becoming Internet enabled will also need electricity,” he said. “Imagine a world, which isn’t that far away, when you buy a toaster with an IP address, and it’s plugged into the power outlet at your house, and that’s connected to a smart meter. This toaster is now pinging the electricity grid not only stating that it’s a toaster, but that I have toast at 7.30am. All of a sudden, the electricity company knows I like to have toast, or maybe they know I like both coffee and toast. So you can start profiling people based on whether that house has a hot versus cold breakfast.”

Utility companies are also already heavily invested in analytics, largely around asset management. By turning that capability around to the data coming out of the explosion of IoT, these organisations will gain a whole new data role, Windoloski claimed.

“You can only imagine how they monetise that by reselling it back to the manufacturers of all those electrical goods,” he said. “It’s a powerful trend which will create a fair bit of disruption in the utility industry. Some will say it’s not core business, others will see it as the avenue to expand.”

Another more obvious data-driven sector is insurance. Windoloski noted several insurance companies are talking about wearable technology and its impact on premiums.

“If you wear an Apple iWatch or a FitBit band that could tell me how many how many steps you take each day. My actuarials could determine that if you take a certain number of steps each day, you’re healthier therefore I can offer you an insurance premium that’s lower than your peers because you’re more active,”he said.

“Technically, it’s quite feasible and consumers arguably will look and agree to giving them their data. It’ll be interesting to watch.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+: google.com/+CmoAu

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Latest Videos

Launch marketing council Episode 5: Retailer and supplier

In our fifth and final episode, we delve into the relationship between retailer and supplier and how it drives and influences launch marketing strategies and success. To do that, we’re joined by Campbell Davies, group general manager of Associated Retailers Limited, and Kristin Viccars, marketing director A/NZ, Apex Tool Group. Also featured are Five by Five Global managing director, Matt Lawton, and CMO’s Nadia Cameron.

More Videos

Thanks for nice information regarding Account-based Marketing. PRO IT MELBOURNE is best SEO Agency in Melbourne have a team of profession...

PRO IT MELBOURNE

Cultivating engaging content in Account-based Marketing (ABM)

Read more

The best part: optimizing your site for SEO enables you to generate high traffic, and hence free B2B lead generation. This is done throug...

Sergiu Alexei

The top 6 content challenges facing B2B firms

Read more

Nowadays, when everything is being done online, it is good to know that someone is trying to make an improvement. As a company, you are o...

Marcus

10 lessons Telstra has learnt through its T22 transformation

Read more

Check out tiny twig for comfy and soft organic baby clothes.

Morgan mendoza

Binge and The Iconic launch Inactivewear clothing line

Read more

NetSuite started out as a cloud-based provider of Enterprise Resource Planning software or as NetSuite solution provider, which companies...

talalyousaf

NetSuite to acquire Bronto's digital marketing platform for US$200m

Read more

Blog Posts

Getting privacy right in a first-party data world

With continued advances in marketing technology, data privacy continues to play catchup in terms of regulation, safety and use. The laws that do exist are open to interpretation and potential misuse and that has led to consumer mistrust and increasing calls for a stronger regulatory framework to protect personal information.

Furqan Wasif

Head of biddable media, Tug

​Beyond greenwashing: Why brands need to get their house in order first

Environmental, Social and (Corporate) Governance is a hot topic for brands right now. But before you start thinking about doing good, Craig Flanders says you best sort out the basics.

Craig Flanders

CEO, Spinach

​The value of collaboration: how to keep it together

Through the ages, from the fields to the factories to the office towers and now to our kitchen tables, collaboration has played a pivotal role in how we live and work. Together. We find partners, live as families, socialise in groups and work as teams. Ultimately, we rely on these collaborative structures to survive and thrive.

Rich Curtis

CEO, FutureBrand A/NZ

Sign in