Personalization vs Privacy: Zero Party Data and the Future of Marketing

6 minutes
Neon sign reading, "Data has a better idea"

We’ve all heard it before: 

“Personalization is the future of marketing!”

“Consumers are happy to trade their data for more personalized ads!”

“If you aren’t doing personalized marketing, you’re already behind.”

But is it all true? In a post-Cambridge Analytica world, are consumers really all that happy to share their data with us? Are they truly comfortable with ads that clearly know where they live, what their interests are, what shoes they looked at, and what life event is coming up for them?

If we advertise to someone with the pinpoint accuracy of a Spotify Discover Weekly playlist, are we endearing ourselves to them or are we pushing them away? While data technology has given us immense opportunities in marketing, are consumers really ready to trade their sense of privacy for it?

That discussion is more nuanced and more important than ever before. Consider the fact that most consumers in the United States want stronger data privacy laws, yet 90% of consumers surveyed say they’re willing to provide data for a better shopping experience and 72% of respondents claim they only engage with messages tailored to their interests.

There are many factors to consider with this apparent paradox, and one that cannot be overlooked is age and generation. Younger consumers who grew up with the internet, like Millennials and Gen Z, are much more open-minded with the usage of their data. In fact, Millennials and Gen Z trust companies with their data 47% more than their Baby Boomer and Gen X predecessors. Perhaps this is simply a result of younger generations feeling more laissez-faire with data or perhaps it’s because they’ve grown up in a connected world, and privacy simply doesn’t mean as much to them.

Of course, one of the most important factors is a brand’s intention with consumer data. Brands should ask themselves: Is our use of data creating value through improving customer experience? If the answer is no, your data use is more likely to feel exploitative to the consumer.  And it’s best to avoid seeming like you’re using data the consumer doesn’t remember giving.

For example, Amazon and Netflix are two of the most trusted companies when it comes to consumer data. While both likely collect much more data than consumers know, consumers still trust them. Why? It might be because both companies make it seem as if they only use the data they’re given. Amazon shows product recommendations based on purchases and browsing history, which is data consumers know they’re providing. Netflix is similar – they offer show and movie recommendations, and since consumers know Netflix has their watch history, they’re grateful for accurate suggestions rather than suspicious of them. 

A consumer’s willingness to accept personalized marketing also depends on their overall familiarity with new technologies. Owners of smart home devices were found to be 16% less protective of their data and 12% more trusting of companies using their data. Granted, it does depend on which company is accessing that data. Here’s a quick breakdown:

Amazon was the most trusted company with 48% of consumers trusting them. This is likely because Amazon’s usage seems straightforward (even though its algorithm is actually quite in-depth) – you buy something, it recommends other things that are similar. It feels safe because it feels like they’re only using data you already know they have.

We’ve now established that consumers want the benefits of personalized marketing experiences, but they don’t want to feel like their data is being used as a commodity. So how do marketers walk the line between personalization and invasion of privacy?

Zero Party Data 

That’s where “Zero Party Data” comes in. The concept is simple – only market to consumers by using the data that they willingly and knowingly provide to you. While it may initially feel like the audience is smaller, the benefits of this approach are two-fold – consumers don’t feel taken advantage of, and the consumers who provide data are typically the ones much more likely to provide high-quality information, engage, and ultimately make a purchase.

The UK has already provided a great example of the efficacy of Zero Party Data – marketers that prepared for the GDPR ahead of time saw a marked increase in consumer trust, loyalty and engagement. In fact, when brands are transparent with ad targeting practices and inform consumers that product recommendations were based on information they shared, those consumers were 40% more likely to click on the items and 31% more likely to spend longer on a product page.

This is good news – with more and more GDPR-type laws being passed, it is good to know that there is hope for personalized marketing on the other side. And now that the California Consumer Privacy Act (CCPA) has gone into effect, we have our chance to do right by consumers stateside.

Here’s a quick rundown of what this new law requires of businesses:

It’s easy to understand the fear and apprehension that comes with knowing that the era of unfettered data collection is coming to an end, but it’s clear that when data is acquired properly, consumers are more inclined to appreciate personalization and potentially make purchasing decisions. Some US companies are already taking advantage of this new information – Walmart, Kroger, and Target are currently exploring ways to properly acquire and use the date that their customers want to give them.

So what does this look like in practice? Here are a few things to keep in mind when starting to work with Zero Party Data:

Whether marketers welcome the change or not, increased concerns over privacy are here to stay. Digital marketing has always been about innovation, and Zero Party Data provides an opportunity for marketers to do just that. While it may require more upfront work, it can ultimately lead to stronger relationships with customers.