Megatrends in Customer Data
The following excerpt is from The Age of Customer Equity: Data-Driven Strategies to Build a Sustainable Company. Available at Amazon, Barnes & Noble, Porchlight, and your local bookstore.
Social media was on fire in the early 2000s and started to peak right around 2007-2008. I remember it vividly because I was just married and well into my career. At the time, social media initially connected with those of college-age looking to meet a mate. Later, it was used to connect people more broadly. Finding relatives, old friends, colleagues, and acquaintances online was a way to connect or reconnect in an instant. Social media quickly spread to all age groups and around the world — so much so that the only demographics where it is still growing are the over 65 age crowd and in Africa (which continues to bring more people online).
This social media megatrend had a huge effect on customer data, too. It wasn’t simply that there was more data. Now the data was rich with the voice of customers advocating for products they liked and harshly reviewing the ones they did not. New digital tools sprung up around tracking brand words, competitors, and deriving public opinion from sentiment analysis.
Then, the first viral videos about customer experience emerged. One powerful example was the hit song “United Breaks Guitars,” which was released in 2009 and relates Dave Carroll’s personal experience on a 2008 flight. Carroll watched United Airlines’ baggage handlers abuse his guitar case. Because of mishandling, the guitar was delivered broken, and United refused to cover the cost of the loss over a lengthy customer service saga. Not only did the video go viral and embarrass United, but in the weeks following its release, United’s stock price fell 10 percent, costing shareholders $180 million dollars in value. The power of one customer’s voice was quantified.
The second data megatrend came from Mary Meeker’s annual Internet Trends report. In 2016, for the first time, mobile device usage overtook that of desktops. Today you might be hard-pressed to remember what it was like to always have to go back to your computer to look something up on the internet instead of just pulling out your mobile device. But in 2016, mobile was king, and customers were cementing its reputation. How? Stores were in a panic because so many customers were “showrooming.” This meant they were visiting stores to try out a product or get more information but then completing their purchases online where the same product could often be acquired for a lower price. The constantly connected internet mobile device was the pin that punctured the offline world with digital pricing transparency.
The impact of this transparency was—again—to increase customer power, but it also provided fresh streams of individualized data. Because people use mobile devices to instantly research products or look up reviews, it became an ideal medium for understanding individual behavior, sometimes called “intent.” Plus, mobile data is geographically contextual. That means a business owner can tell if you are standing within the store, around the corner, or if you are somewhere else when you search for relevant products.
Social media and mobile devices did not just create avalanches of big data. They added behavioral context attached to a person (whether identified or analyzed anonymously as part of a larger group) that dramatically increased both customer power and enabled the connection between marketing activity and customer equity. In other words, the era of customer-centricity would not be here without social media or mobile devices.
Years later, customers grew concerned about how much their social media, mobile devices, and web behavior as well as personally identifiable information (PII) was being used without their control or consent. The backlash created first the European regulations (GDPR) and later the U.S. regulations (CCPA). While the precise implications remain nebulous as lawsuits proceed and tracking methods change, we know companies who want to build a base of healthy customers can rely on two things:
The use of customer data must pass the “sunshine test.” In other words, if it were released as public news, it must stand up to rational scrutiny. For example, few customers would protest the desire of a company to announce new products to previous purchasers. But general consumers (not customers) could rightly protest the invasion of personal devices with text messages encouraging them to buy items based on their search behavior as they walk down the street. Consent must be clear.
Customers and consumers are willing to trade data for value. Asking for data without explaining the value to be returned is no longer acceptable. For example, most people have a phone number connected to their grocery store loyalty number which allows instant discounts at checkout. What would not be acceptable is if that grocery store sold individual purchase data to health insurance companies who then analyzed healthy eating habits and adjusted rates. The trade for value must be acceptable, approved, and permissioned by the customer before use.
In the quest for quality customers and new revenue streams, companies must not forget to pass the sunshine test and to limit the trade-for-value to its original purpose. Privacy regulations help keep this balance in place.