Ironic as it seems, thanks to questions surrounding ownership and privacy, big data is, in some respects, proving to be the rising tide that sinks all boats.
Every day consumers throw a collective potential fortune in personal data out the digital window. Even worse, retailers and consumer packaged goods companies, some of the largest beneficiaries of that carelessness, squander most of what is being given to them. If data really is the currency of the 21st century, it’s past time for consumers to learn how to cash in on their least utilized asset — themselves — and businesses to find ways to be more effective in the use of data.
Help is on the way. Just as we use insurance agents to mitigate ri sk, or financial advisors to help plan for retirement, there is a need for someone to manage the information we generate — “data agents” who will broker our consumer data in exchange for direct compensation; enforce rules about how that information can be used; and, as a result, improve retailers’ and consumer goods companies’ ability to craft truly personalized offerings and effectively reach target markets.
Our most recent look at the use — or misuse — of personal information found ownership and privacy at the heart of what has become a classic “lose/lose” scenario, for consumers and the industries that serve them.
Opportunities knock, but who’s going to answer?
Until fairly recently most companies assumed the transactional data they collected was theirs to do with as they saw fit. If consumers benefited at all, it was indirectly or in the form of digital versions of old analog marketing tools such as access to special deals, events, and coupons or other forms of discounts.
Consumer advocates looked at data differently. They argued that the uncompensated sale of transactional data violates a person’s rights in the same way copyright laws protect intellectual property. Using consumer data without paying, they said, or sharing it with or selling it to a third party the consumer may not even know exists, should be subject to penalties.
Regulators or lawmakers have finally weighed in, siding in large part with consumers. Individuals, they’ve ruled, own their own data.
Almost two years ago the European Union’s General Data Protection Regulations (GDPR) established comprehensive privacy and data security laws. The broadest consumer data privacy protection law in the United States — the California Consumer Privacy Act (CCPA) — goes into effect in 2020 and is the model for similar legislation introduced in Hawaii, Maryland, Massachusetts, Mississippi, New Mexico, New York, North Dakota and Washington.
These early rulings will be refined over time, but it’s clear that the window for retailers and branders to develop voluntary guidelines around consumer data protection, ownership and sale is slowly shutting.
This kind of legislation, and a genuine desire on the part of the retail and CPG industry to find ways to create personalized offers, provides both the need and foundation for the data agency industry. As with other emerging markets, first mover data agencies will capture the largest part of the opportunity, defining the scope and rules agencies will operate under, building scale more rapidly than their potential competition and — most importantly — capturing the lion’s share of the value of this largely untapped market.
Drowning of thirst in an ocean of data
Assuming you live a conventional life, you generate more than enough data to create a nearly perfect digital avatar. The problem is that your avatar is digitally dismembered, a piece chopped off by your health care providers, another by your financial institutions, still more by the government, retailers and social networks. As a result, parts of your avatar live on forever, trapped in a series of different silos.
If you are a consumer, this means the companies you buy from are only seeing the part of you that interacts with them or parts they’ve bought from other businesses. And, if you are a retailer or a CPG company, you never get to “see” your customer as a whole person, which in turn prevents you from offering them a mix or goods and services tailored for their specific needs, interests and values.
Everyone loses. Consumers get angry supplying data to companies that never seem to use it, that sell it off or that make them offers that demonstrate how little the company actually knows them, and businesses spend a fortune on the collection, aggregation and analysis of “big data” but aren’t reaping the rewards expected in the form of improved sales and consumer satisfaction.
Redefining the value of data
Three forces are redefining the future of data. The first is the replacement of an affluence-based economy by one based on influence, which has become the primary organizing principle of every aspect of consumers’ lives, including their consumption patterns. In the affluence model, ownership is the key to acceptance. Acquisition is the path to social status — the more expensive the object, the higher the status. In the influence model, society and consumption are driven largely by personal values. As the influence model matures, commercial advantage will be a direct reflection of “knowing” consumers better than your competition.
Self-expression flourishes under the influence model. Mass consumer markets depend on shoppers who by and large “want” what they think everyone wants. Influence economies, on the other hand, thrive on personalization, values and trust.
But those values are a moving target, since younger shoppers — Millennials and Gen Zers — are comfortable opting in or out of traditional categories from ethnicity to gender, creating a near limitless number of potential engagement points for businesses, and just as many ways to alienate a customer.
Changing consumer demand doesn’t stop with what is sold. Consumers expect every step of their shopping trip — from in-store experiences to online connections — to deliver personalized convenience, forcing branders to create seamless, channel-agnostic offers.
Finally, these are technologically sophisticated consumers who know their data, want to be in charge of who uses it, and how, and expect to be compensated on their terms for its use (see figure 1).
This continues to put pressure on companies currently selling data, intensifying demand for a new economic model that allows consumers to profit from the data they generate.
That’s where the data agency comes in.
Talk to my agent
Today’s data collection and processing models are set up to restrict consumer participation. They also limit potential rewards to discounts and similar artifacts of the mass marketing era.
That just doesn’t work anymore.
Consumers’ increased understanding of the value of their data and the legal and regulatory complexities associated with data ownership, use and transferability requires the specialized services of highly trained data professionals, acting as both advocates to consumers and brokers to businesses and other users.
As a result, we see the emergence of data agencies as all but inevitable. There’s just too much potential money on the table for it not to happen. We conservatively estimate the initial U.S. data agency market to be worth $7.5 billion and believe it could easily reach $20 billion in five years.
Our analysis, based on conservative estimates and the current value of the U.S. data broker and digital advertising markets, found every individual generates at least $1,000 worth of personal data a year. To be viable, a data agency would need to serve a minimum of roughly 25 million consumers.
So, assume an agency has the ability to capture 60% of each of those consumers’ current data value, or $600. If as much as half that value ($300) is returned directly to individual consumers, we are still looking at a $15 billion gross market that is worth $7.5 billion to an agency or agencies.
The idea of a data agency built on a foundation of trust, scale and access to data buyers isn’t such a stretch. Similar models already exist in the banking, collegiate sports marketing and real estate industries.
The importance of trust can’t be overstated. To be successful, agencies will need to provide consumers with transparency into use and benefits and control over the types of data shared and ensure easy access to simple tools that allow them to edit privacy settings (see figure 2).
Data agencies will be stand-alone business units. In addition to scale, they will need significant financial and technological resources, speed and agility. Anyone thinking about entering the agency arena is well advised to think about building capabilities and explore acquiring start-ups with complementary capabilities.
What would it take to become a consumer data agency?
As we see it, there are three elements: economics, technology and partnerships.
Nothing happens in business without capital, so you need to begin by evaluating the investments required to launch and the options needed to accelerate revenue. Next, because you obviously need data, you should design the mechanisms for consumer engagement and acquisition.
Even while the economic issues are being addressed, it will be time to work on the technology, starting with a critical and objective assessment of your current data capabilities (management, architecture, analytics, hardware, systems). The role emerging technologies like blockchain might play in enabling the consumer experience also needs to be carefully evaluated.
And last, but certainly not least, your technology design and business practices need to prioritize the consumer experience, build trust through transparency and provide easy interface.
Partnership skills are invaluable because they allow you to achieve scale, accelerate launch and bridge capability gaps faster than the competition. Any serious look at building a consumer data agency should include exploring the viability of strategic and tactical partnerships, even in terms of otherwise “unnatural alliances” with key players, in order to rapidly develop scale and mitigate risk.
Today, consumers aren’t capturing anything approaching the full value of the data they help create. Not only can a consumer data agency begin to rebalance information economics in favor of the consumer but it will be a highly sustainable business in its own right.
Remember, however, this opportunity won’t last long. Failure to define a market yourself leaves the job to your competitors or the government.
Greg Portell is a partner and the global lead of the Consumer Industries and Retail Practice at Kearney, a leading global management consulting firm. He can be reached at [email protected] Wade Bjubrey is a manager in the Consumer Industries and Retail Practice at Kearney. He can be reached at [email protected]