Prioritize communication to survive the data rights paradox

There’s an interesting paradox unfolding in the world of digital commerce. On the one hand, there is a growing demand among some consumer segments—particularly young consumers—for products and services that are hyper-personalized to meet their individual needs and circumstances, as opposed to a one-size-fits-all format that treats their individuality as an irrelevance.

While this demand is still nascent and personalization, especially unprompted, is still treated with trepidation by many, this is an important new way for companies to differentiate themselves within this increasingly important band of consumers. Opportunities to differentiate in this way are cropping up across all consumer-facing industries, from e-commerce to insurance. The most disruptive players—usually digital start-ups (like insurtechs) or tech giants (like Amazon)—are using consumer data predictively to target consumers more effectively and to fine-tune their offerings to individuals’ needs. Examples abound: Golf manufacturers, to take just one, have become very adept at targeting their ads at males over a certain income threshold and of a certain age, and more likely than not, in senior sales jobs.

Consumers expect customization, but do not want it

Although not all consumers are yet on board with this trend, they are nevertheless being conditioned by agile new enterprises to expect this level of customization, which puts pressure on slower-moving incumbents to follow suit and leverage consumer data to improve their targeting and tailoring. On the other hand, recent events have made consumers more aware than ever of how their personal data is being harvested, stored, and used, and what their rights are when it comes to privacy online. The General Data Protection Regulation (GDPR), which kicked in on May 25, gives consumers expansive rights over their data and more of a voice in how it’s used. This is backed up by potentially massive fines on enterprises that abuse these rights. Moreover, the Facebook/Cambridge Analytica fiasco has made consumers especially sensitive about the data being stored about them. As such, it’s becoming critical for enterprises that sell their products and services to consumers online to find the perfect balance between effective personalization and respecting customers’ privacy.

What the Cambridge Analytica affair has highlighted is that consumers quickly forget what they’ve agreed to give away access to—and that it doesn’t matter if a company was legally within its rights to use the data. If a consumer wasn’t fully aware of the terms and conditions they had agreed to, once the story hits the media, it won’t matter if the consumer was inattentive or negligent. It will be the enterprise that’s held to account. Before GDPR, this had only reputational implications. Now, they’ve become fiscal and legal, too.

The question for enterprises operating online isn’t which trend will win out—demand for personalized services isn’t likely to reverse or disappear, nor is the pressure for companies to switch to a consumer-centric approach to service and product design. The real question is: Who will do well in this new, contradictory environment? What needs to be done to survive?

Exhibit 1: Retailers’ top-ranked customer experience priorities, 2018

Source: BRP 2018 Customer Experience Unified Survey, n=500

Communication and transparency hold the keys to survival in this digital age

The answer is that those companies that combine proactive data usage and customization with utmost transparency and customer education campaigns will be the ones to keep their customers happy and boost their bottom lines. It’s not possible to change the status quo, so the most pragmatic solution is to hide as little as possible and be frank. Communications must stay open, and data policies must be kept at the front of consumers’ minds to avoid backlash and accusations of disingenuousness.

Getting rid of a ‘stick it in the small print’ mentality is essential—both for incumbents and start-ups—in the age of GDPR. Enterprises must recognize that GDPR is heavily weighted in favour of the consumer, and in this environment, companies can’t afford to stick the most important clauses in parts of contracts that are practically intended never to be read.

So, where can incumbent enterprises unused to customer-centricity and corporate transparency turn to for examples of how to behave in these strange times? Arguably, start-ups that have managed to combine a strong transparency ethos, high customer satisfaction, and cutting-edge service customization are the role models in this new environment.

Two great examples of this combined approach are:

1. US-based insurtech start-up Lemonade, which sells renters’ and home-owners’ insurance online and via mobile app, collects personal data to cut down the time it takes to be approved for coverage to 90 seconds and claims pay-outs to 3 minutes, and it is gathering customers at a massively impressive pace. Lemonade has managed to balance such hyper-targeting with customer trust and satisfaction at least in part to its ‘Transparency Chronicles’. In January 2017, Lemonade started issuing periodical ‘Full Monty’ reports that customers and members of the public could subscribe to receive by email, and which gave detailed (yet readable) accounts of Lemonade’s latest numbers, how they had been achieved, where it had fallen short, and what the company planned on doing next. Given that Lemonade’s insurance sales have soared from $0.6 million at the time of the Chronicles’ launch to $5.3 million by Q4 2017, it seems that this policy of openness is working very well.
2. Monzo. Monzo is the UK’s second best-funded digital bank, with $147 million in VC money. Monzo has stood out for some time due to its almost painfully honest company blog. Every time that it’s made a difficult or potentially unpopular business decision, it’s issued a post explaining the fiscal reasoning behind this, in a way guaranteed to gain the forgiveness of even the most indignant of users. Every time Monzo suffered a system failure or an outage, it would issue a self-lacerating explanation of what went wrong and what it was doing to fix it, as well as maintaining a constant dialogue with users on social media channels. Its recent post about GDPR and what it means for its users is arguably an exemplary way of explaining a confusing situation to consumers. It begins: ‘Exciting news… we’ve revamped our Cookie and Privacy policies! Wait, where are you going?! It’s fair to say they’re not the sexiest bits of writing, and traditionally they’re something that people don’t really read. But can you blame them?’ Fair to say that few high street banks, for example, would have the courage to begin what is essentially a legal post in this way.

Exhibit 2: Consumer contract word count comparison

Source: Monzo company blog

Even non-startups can change their ways

By this point many enterprise readers may be thinking that it’s not fair for them—household names and bastions of respectability with reputations to protect—to be held to the same standards as online upstarts with hardly any legacy or consumer awareness, who can afford to play it more fast and loose when it comes to self-deprecation and transparency. That’s a legitimate complaint, and the mega-banks, insurance giants, and telecoms behemoths, among others, of this world will not be able to be as playful or humble to get themselves out of tricky situations—it wouldn’t seem natural. But there are some things they can realistically start doing to retain their customers’ trust as they increasingly come to rely on their behavioral data to give them good service.

3. Make T&Cs comprehensible. Terms and Conditions contracts should be designed to clearly communicate to customers what they can expect from their engagement with the enterprise, and what their rights are; not to cover the company’s own back and hide the nasty stuff in the small print. Thanks to GDPR, those days are over. Even if the nasty thing the enterprise is supposedly doing is legal, that won’t save it: An angry customer with a Twitter account who can legitimately claim a company buried an important bit about them signing away their soul at the bottom of the last page will be the winner in the court (at the very least) of public opinion.
4. Hone communication skills. Customer-centricity isn’t limited to product design. Enterprises have to start thinking of their customers as individual human beings with lives of their own, rather than cash cows. Part of that means communicating any major changes to the way they access services in a way that they will understand and want to be engaged with. A practical first step would be to hire people with social media experience and general communication skills rather than focusing only on industry experience when seeking out fresh talent. Cultivating a consumer-friendly image will become increasingly critical for enterprises.
5. Talk to customers on their own terms. Anecdotes about getting a 30-page booklet in the mail once a year still abound when it comes to how incumbents choose to communicate with their customers. This suggests that many of them have failed to realize that most of their customers are now conducting their lives largely online, and unless enterprises are willing to speak to them in fora which they are comfortable with and use daily—namely social media channels and email—they cannot really be said to be trying.
6. Companies need to compete on the strength of their offerings, not the strength of their legal department. One big change particularly for subscription-type services is the shift to shorter contractual lengths and customers wanting to sign up month-by-month rather than annually. This puts an emphasis on service quality and delighting customers with the product, not locking people in, making it hard to leave and only communicating at the end of the contract period.

The bottom line: Enterprises won’t succeed unless their customer relations stop being a power struggle

For too long, the global economy has operated according to the logic that, once a company—regardless of which industry it’s in—reaches a certain size, reach, and recognition, it will have gained a certain imperviousness to customer displeasure, and indeed to customer demands. However, the arrival of small but powerful disruptors on their turf has turned the tables. These start-ups are setting the new standards by shaping their business models directly around their consumers’ wishes and needs, pulling the rug out from the biggest players. They are courteous to their users, and acknowledge in their DNA that, without their user bases, they would not exist or make money. Arguably, this is something the biggest enterprises have forgotten. It’s time to re-engage with consumers as individuals, rather than as adversaries to be outwitted. The least powerful companies could do, in other words, is to ensure their T&Cs—the basis of their customer relationships—are capable of being understood without a team of lawyers. Customers deserve that, at a minimum.