Every purchase from Amazon, every search on Google and every download from Apple’s iTunes store make a tiny addition to the stock of valuable data that each of those companies successfully use to drive their competitive advantage.
Each has pioneered ways to turn data into dollars by using it to create and target personalized offers, messages and services for their customers. And not only does the data allow those companies to develop and enhance the services they offer to customers, but it also enables them to negotiate more favorable deals with suppliers and partners.
Successful businesses have identified not only what to do with customer data, but also how to ensure their consumers continue providing it. So what persuades consumers to freely give their data to organizations for some purposes but guard it jealously from others? For example, banks’ customers are likely to be happy that their spending and consumption data is used to prevent fraud, but some may be less keen to have that same information used to generate targeted marketing messages. Understanding how customers feel about their data and developing approaches to gain their trust and increase their willingness to share are critical.
Most businesses recognize that data from and about their customers and, critically, how they use it is a crucial source of competitive differentiation. But many also experience difficulty in turning that realization into action and, ultimately, revenue. One of the reasons is that most traditional businesses collect data as a by-product of their principal activities or business goals. So, for example, banks process transactions, telecom businesses operate networks and retailers manage inventory and process shipments. Each of these actions will generate large amounts of unique proprietary data about the organization’s customers.
However, a combination of insufficiently developed data analytics capabilities and nervousness about customer reactions can prevent businesses from going a step further and using their data creatively to directly engage their customers or to partner with other organizations to create and target new offers and services.
Allowing perceived limitations or concerns to prevent more effective use of customer data would arguably be more than simply a missed opportunity. The ability that big data offers companies today to create competitive differentiation and value is unprecedented. But consumers increasingly understand that their data has value. Persuading them to share it requires businesses to offer something in return.
Businesses need to adapt their approach to take into account consumer attitudes and put data strategies in place that provide their customers with perceived value. One way to achieve this is simply to reward customers for their willingness to share data. Those rewards could take the form of direct payments. For instance, Google does this with its Screenwise Trends Panel whereby individuals willing to share their browsing activity are given a $5 cash voucher every three months. Other businesses provide upgrades to apps and software tools that consumers want in exchange for access to their relevant data. In these cases, the consumer sees value in the exchange and is happy to share. Enhanced service and support is another avenue that businesses should explore. For example, banks have access to vast amounts of their customers’ transaction data. The right analytic approach could enable them to use this data to provide financial management tools and advice that consumers recognize as valuable services. And in a sector where customer churn is seen as a major challenge, anything that can drive loyalty is highly prized.
The ability to persuade customers of the benefits of sharing their data is one key stage in realizing data’s value. But there are other strategies that businesses seeking advantage also need to consider and pursue. One of the most important is the development of collaborations and partnerships with relevant organizations. For example, as mobile payment becomes more common, telecom service providers may seek to collaborate with banks to offer consumers greater protection against fraud. By combining location data with transaction analysis, they can spot anomalous payments, which may indicate fraud. Customers feel reassured and increase their trust in both organizations.
Collaboration will also be very important in addressing another element of a more effective approach to consumer data: new technologies. As the technology landscape evolves ever faster, businesses need to keep up with developments that could offer them new ways to gather and use customer data. Mining social networks for evidence of individuals whose behavior, likes and dislikes closely match a business’ target customers is one example of how new technology is enabling pinpoint identification of potentially receptive new customers.
Today’s abilities to gather, mine and analyze information can unquestionably offer businesses significant competitive advantage. But they cannot take the availability of that information for granted. Achieving a business advantage from data requires more than the right technical approach. Understanding consumers’ needs and attitudes toward their own information and persuasively addressing their concerns will become increasingly important for businesses in their quest to turn data into dollars.