Just because customers are sharing their data with you doesn’t mean they’re happily doing so. That’s one of the main conclusions of a recently published study by the University of Pennsylvania’s Annenberg School for Communication about the practice of collecting customer data for marketing and research purposes.
The study, The Trade Off Fallacy: How Marketers Are Misrepresenting American Consumers And Opening Them Up to Exploitation, quashes a common assumption among marketers that modern customers are happy to share personal information with companies in exchange for special pricing or more targeted and relevant communications. Instead, the study offers an alternative explanation for why customers share their data: resignation.
“Marketers are misrepresenting a large majority of Americans by claiming that Americans give out information about themselves as a tradeoff for benefits they receive,” contend the study’s authors. “To the contrary, the survey reveals most Americans do not believe that ‘data for discounts’ is a square deal.”
According to the authors, a large majority of customers—91 percent—disagree with the statement, “If companies give me a discount, it is a fair exchange for them to collect information about me without my knowing.” Most customers also don’t approve of companies monitoring their online activities in exchange for free Wi-Fi while at the store.
Study: 91 percent think companies shouldn't collect data about customers in exchange for discounts without telling them (CLICK TO TWEET)
“Only a very small percentage of Americans agree with the overall concept of tradeoffs,” the authors concluded.
So if customers aren’t too happy about sharing their data, why is data collection such a prevalent marketing practice? As it turns out, people allow companies to collect information not because they want to but because they feel like they have to, according to the report.
Collecting data has become so common practice in the digital age that many customers may think that they have no option but to comply. But part of the problem is that the general public lacks education on how to control their own data. A large percentage of Americans lack the necessary knowledge about how marketers use customer data. Most customers also overestimate the role of government in protecting them from discriminatory pricing, according to the report’s authors.
Education is not the only problem though. The report notes that people who are more educated about information-collection practices in marketing are also more likely to feel resigned about giving up their data.
The study makes it clear that customers actually don’t want their data mined without their consent—even with the promise of discounts and more relevant communications. Customers want to have control over how they share their data, with whom and how. According to a 2014 report, the data created and copied annually will reach 44 zettabytes (or 44 trillion gigabytes) by 2020. With organizations collecting that much data, there is an appetite for more transparent data-collection practices.
The bigger issue is that current marketing practices create what the authors call an “asymmetrical relationship,” an arrangement that has the potential to hurt a brand’s relationship with customers. When customers feel like they’re powerless, they’re unlikely to truly love a brand and they won’t hesitate to switch when companies that have better data-collection practices come along.
Marketers need to strike a balance between their need for insight and customers’ need for privacy and control. Being more transparent about how they collect and use customer data is a good start, but companies should take it further and ask for explicit consent.
Tools like insight communities where customers explicitly agree to participate can help companies gather insight while also building a mutually beneficial relationship with customers. In today’s business landscape, where customers are more empowered than ever before, companies need to adopt a permission-based approach if they want to avoid alienating the very people they want to learn about: their customers.