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This chapter is from the book

Value for Value

The ideas being put forth here are not new. The core ideas that we’ll discuss are at least 20 years old. However, since these ideas were first introduced into the public sphere, the landscape has irrevocably changed. Disturbingly, some of the ways in which these changes have occurred may have gone unnoticed.

First, consider the digital marketing platforms available to organizations today. Although consumers may be most familiar with Google as a search engine or a “free” email provider, at the end of the day, Google is an advertising platform. Likewise, although we may think of Facebook and Twitter as social networking products, these too are advertising platforms. We don’t pay a monthly fee or a one-time charge for the rights to use these tools. Rather, we pay every time we use the tools—each query entered into Google, each time we send an email message, each time we view a video on YouTube. With every Facebook post and each tweet we send, we’re paying these companies.

Online platforms will give way to the Internet of Things and connected devices. The notion of the “quantified self” is only beginning to become concrete, with fitness products and other forms of wearable technology. In exchange for what we learn about ourselves based on the data we generate, perhaps in pursuit of our personal goals, we adopt technology and share our data with the developers of the technology. In doing so, we’re paying with our actions, with the data that we produce. And there’s absolutely nothing wrong with that, so long as we’re aware of what we’re doing.

Consumer awareness took on broader significance with the revelations offered by Edward Snowden’s disclosure of documents that detailed the surveillance activities undertaken by the National Security Administration (NSA). Many had talked in vague terms about “big brother” watching us. Set in the aftermath of 9/11, the CBS drama Person of Interest presents a machine that can identify those involved in crimes before the events take place, gathering data through traffic cameras and other devices. In 2008’s The Dark Knight, Batman builds a machine that turns every cell phone into a microphone, allowing him to build a citywide surveillance system to aid him in finding where the Joker is located. Like these fictitious examples, the NSA’s surveillance activities may have been well intentioned. However, in the wake of the information that has come to light, there is increased interest in organizations being transparent about the data they are collecting and how such data are being put to use.

The interest in data transparency permeates the marketing field, as well as the regulatory environment in which companies must operate. In 2012, the Federal Trade Commission (FTC) issued orders to a number of companies to disclose information about data collection and usage practices.13 In a March 2012 report, the FTC urged companies to improve transparency in their data collection efforts. In the same report, there is a call to increase consumers’ knowledge about the data practices in which companies engage.

Despite the growing interest and potentially increased scrutiny, how exactly will organizations’ data collection and usage practices change from what they have been historically? And, more important, do consumers care? Whereas the answer to the first of these questions is something of a moving target, the second question is more important. After all, to what extent do consumers need protection against large organizations’ data-hording activities if they are informed of such activities and are not fazed by it?

Forrester examined the second of these questions in a 2012 study.14 Distinguishing between behavioral data (such as your online browsing history or your purchase history at a retailer) and individual data (for example, your address or Social Security number), it found that all age groups were more concerned about how companies used individual data, with older consumers more wary than younger consumers. The study also found that exclusive deals attract a majority of young consumers to share their data with companies, but the appeal of such incentives do not attract older consumers nearly as much. Mirroring this, the study found that a larger share of older consumers do not complete an online transaction because of something they read in the company’s privacy policy.

So what can be gleaned from these findings? It turns out that consumers are actually concerned with how companies are making use of their data. Although that might seem like a dark cloud hanging over marketing, it’s important to note that consumers’ concerns vary with the type of data being collected and across different consumer groups—and these data collection practices do appear to impact consumer expenditures.

As we’ll discuss, one option for organizations is to collect the data about which consumers are less sensitive and hence more willing to share. However, the key is for the organization to engage consumers like they would approach another collaborator. The consumers have something that is of value to the organization. With access to such information, organizations may change their practices. Marketing expenditures may be made with increased precision. Product lines may expand or contract. Consumers may see a more targeted message. New businesses may develop to meet the consumers’ needs. All these practices may rely heavily on access to the right consumer data.

If we’re willing to share data with companies, consumers have much to gain, as do the businesses that develop if they are successful. It is simply a matter of an exchange—consumers are more willing to share their data if it is clear what they are getting in return. That payment may be in the form of financial compensation or access to a product or service. The idea of an exchange, where value is traded for value, is straightforward enough. However, as recent events have revealed, a host of issues are related to conducting such a transaction.

At the same time, there are also issues focused on the protections that must be in place for consumers. Questions about the information that organizations should present to consumers and the measures that should be taken to ensure that consumers’ data are secure need to be addressed. Just as there is the potential for businesses to grow larger than we would have imagined, fueled primarily by innovative thinking about how consumer data can be used, there is also potential for such data to be exploited and considerable harm levied against consumers. And because of this, there is a legitimate question as to what the role of the government should be. Is a watchdog agency akin to the Consumer Financial Protection Bureau needed to oversee such exchanges? Alternatively, should market forces dictate who will and will not have access to consumer data and how much it is worth?

The next few chapters look at success stories that have emerged in business, where a good part of the companies’ successes have been thanks in no small part to the data provided by their consumers. We’ll also see how existing businesses have refined their practices by leveraging more detailed information about consumers. In addition, we’ll see the benefits that the public has accrued through the innovative work of government agencies using many of the same tools employed by businesses.

With these exemplars of what is possible as a backdrop, we’ll cast a critical eye on the current exchange in which consumers and organizations participate. Although this model functions well in some regards, we put forth reasons that suggest that it may be in need of updating. There are some signs that these revisions are already underway. Based on these harbingers, we’ll discuss the structure that may be needed to support the burgeoning data economy.

Taking into account the events that have unfolded in recent years—from Internet giants and social networking sites coming on the scene, to interest in data, infographics, and statistics going mainstream—this book is not an attempt to predict what course we’ll chart in the near future. However, given how we have seen organizations use data and current activities, there are indicators that suggest a potential direction—one in which consumers, businesses, and the public all stand to benefit.

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