150720_forrester_brief when customers take control

Brief: When Customers Take ControlLeverage Contextual Privacy To Keep Your Competitive Edge

by Fatemeh Khatibloo and Thomas HussonJuly 20, 2015

For CusTomer InsIgHTs ProFessIonals

forrEsTEr.Com

Why read This reportIn the age of the customer, individuals have the power to drive market shifts that fundamentally change how businesses make their products and services and how they bring those products and services to market. The next phase of these consumer-led market shifts will result in massive changes to privacy and consumer data collection practices. This report will examine the impacts of these changes on customer insights (CI) professionals and explain how firms can build trust to retain competitive differentiation.

Key TakeawaysInnovation Is Powerful But Threatens Privacy If Left UncheckedThe digitization of everything is driving amazing, life-improving innovations -- most of which rely on data. But we dont have the right privacy controls in place for how that data is used.

People Care About Privacy, so They Will Look for Tools That Provide ItTheres a tension between the value of privacy and the friction of getting more privacy. some innovators are trying to bring this into balance and provide consumers with better, easier privacy tools.

firms must Take Privacy seriously To Avoid Being mediatedForward-looking brands will leapfrog the competitions privacy practices. Theyll leverage trust to become the stewards of customer data and interactions across myriad competitive brands.

2015 Forrester research, Inc. opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, roleView, Techradar, and Total economic Impact are trademarks of Forrester research, Inc. all other trademarks are the property of their respective companies. unauthorized copying or distributing is a violation of copyright law. [email protected] or +1 866-367-7378

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For CusTomer InsIgHTs ProFessIonals

Brief: When Customers Take ControlLeverage Contextual Privacy To Keep Your Competitive Edge

by Fatemeh Khatibloo and Thomas Hussonwith srividya sridharan, rebecca mcadams, and Peter Harrison

July 20, 2015

our exploding Data exhaust Threatens Privacy

Take a look around you as youre reading this report. Whether its your office desk or your bedside table, you probably have two to four smart devices within reach: mobile phone, laptop, tablet, smartwatch, maybe even a smart TV or other in-home sensor. We are all hyperadopters of innovative, life-improving technologies that create and collect an astonishing amount of data which creates new opportunities for CI professionals.1 In fact, the majority of todays innovations are critically dependent on data:

The Amazon Echo uses machine learning to become a virtual household assistant. amazons new voice-command device is groundbreaking. To interact with and respond to requests and questions tailored to the devices owner, it ingests massive amounts of data from open sources as well as the users amazon transaction history, and it applies natural language processing (nlP) algorithms. It can answer simple questions (what time is it?) and complete more complex requests (re-order cat food). While the echo is indeed revolutionary, the potential for privacy and security breaches runs deep.

retail technologies enable highly personalized experiences. Back in 2011, sK Telecom prototyped a shopping-cart-mounted tablet for grocery stores. users could connect the cart to their personal smartphone for a customized navigation map through the store, along with personalized coupons and offers. mondelz International, the maker of oreos and other snack foods, is testing smart shelves, which use facial-detection algorithms to provide demographically targeted offers right at the point of product selection.2 These technologies can drive revenues by delivering context-based, highly relevant offers; without careful governance, however, this can quickly cross into creepy territory.

Google Now acts as a cognitive prosthetic to simplify users lives. unlike apples siri, google now has already become an intelligent agent for many individuals.3 By mining a users gmail account, calendar, and location, google now can remind the user when to leave home to catch a

For Customer InsIghts ProFessIonals

Brief: When Customers Take Controlleverage Contextual Privacy to Keep Your Competitive edge

July 20, 2015

2015 Forrester research, Inc. unauthorized copying or distributing is a violation of copyright law. [email protected] or +1 866-367-7378

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flight, provide one-click shipping information for products she purchased, and inform her of local concerts or events she might be interested in even if shes traveling. google now is a powerful tool for a busy and connected modern person, but it begs the following question: How much is too much for one company to know about me?

most Data Innovators serve Too many masters

Theres a trope thats become popular recently: If youre not paying for it, youre not the customer. Youre the product being sold. and, unfortunately, this is the reality of an advertising-driven Web 2.0. silicon Valley tends to be most excited about the following models: 1) ad-supported business models and 2) business models that are well positioned to monetize massive amounts of consumer data. But this means that most of the innovation we see is from firms that are beholden not to their users, but to their paying customers advertisers. For example:

social networking sites monetize our affinities and social graph. Companies like Twitter and Facebook wont charge users for their services, lest they inadvertently cap their potential advertising revenues. Instead, they mine user interactions to infer interests and then create audience segments they can charge advertisers a premium for. For example, a woman who likes a Facebook page about pregnancy might start seeing ads about baby and maternity products on completely unrelated websites.4

Digital publishing is giving way to native advertising. as the sheer number of content sites explodes, and as traditional digital advertising loses trust and traction, publishers are having an increasingly hard time monetizing their content. so, theyre turning to native ads, which are designed to look like independent content created by the publisher.5 But these ads are quickly raising the ire of readers and triggering wide-scale investigations by regulators like the Federal Trade Commission.6

Brick-and-mortar businesses offer free services in exchange for tracking data. retailers, restaurants, and other physical-location businesses have watched their online counterparts glean massive insights about customers because on the Internet, everything is trackable. so, these firms are looking for tools like in-store Wi-Fi tracking and gamification apps to collect and track customer behavior in the analog world. unfortunately, most customers have no idea that using a stores free Wi-Fi or checking in on an app at a local caf for a discounted dessert means theyre handing over massive amounts of location data.

as People start Valuing Digital Privacy, They Will Demand Control

so, while business models become more dependent on monetizing data, consumers are starting to realize that all these free services actually cost them something very valuable: their privacy. as a result, theyre starting to demand a more equitable exchange. This kind of values-led consumer shift isnt new: People have already changed the direction of categories like organic foods by putting pressure on



July 20, 2015


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producers, retailers, and regulators. For example, these products used to be isolated to early adopters, but today 45% of consumers actively seek out organic food products, representing $35 billion in spending in the us alone.7 But what does this have to do with privacy?

The value of digital privacy is increasing already. Consumers are increasingly frustrated by the deterioration of privacy. For example, inadvertently granting access to their personal data is the single biggest concern of one-fifth of us adults who use the Internet.8 and its not just the boomers or gen Xers that care about privacy. In fact, millennials, often cited as the generation that has no concern for privacy, catapulted ephemeral messaging apps like snapchat to success and are active users of privacy settings on Facebook.

People use tools to reduce the friction of getting more privacy. as the intrinsic value of personal privacy grows, tools are emerging to help consumers protect their data exhaust better. For example, nearly one-quarter of us online adults use an ad blocker. and 14% use some kind of cookie-tracking/blocking service, like ghostery or Collusion for Chrome. While this number doesnt seem significant, it is a clear indication that individuals are willing to take responsibility for their own data exhaust and digital privacy.9

forward-Looking Companies Will Productize Privacy To reduce friction

as the value of privacy increases for people, a new market opportunity arises. Firms that recognize the need to reduce the friction in other words, the difficulty of managing our data exhaust can actually start to productize privacy. But while most marketers know the importance of maintaining customer trust, theyve struggled to implement practices like contextual privacy or privacy by design that would let them differentiate with privacy and trust.10 They fear it will hamper their access to insights and reduce their addressable universe of customers. Its no surprise, then, that only a small group of forward-thinking companies is productizing privacy. For example:

AVGs Privacyfix provides customers with a trusted digital privacy dashboard. aVg, a computer security vendor, already enjoys a trusted relationship with its customers. Today, it has extended its reach from security to privacy management with its PrivacyFix product. PrivacyFix is a user-friendly privacy management dashboard that lets customers see and manage their privacy settings for social networks, browsers, search engines, and more, all in one place and on all their devices.11

Apple makes privacy a selling feature and aggressively limits app data access. Tim Cook, apples Ceo, has made big waves in the past few months with his aggressively pro-privacy messages. and its not all talk with apple. The firm has baked a number of privacy protections into its most recent version of ios.12 In June 2015, Cook publicly touted apples strong encryptions standards, which limit the companys own access to user data, and stated that apple would never monetize user data.13



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Google Contributor lets consumers pay a monthly fee to cut out data-sucking ads. google is often lambasted for its problematic, over-aggressive data-collection practices. Just this month, the firm came under fire for questionable opt-in practices for its voice-activated search tool.14 But google was also one of the first firms to let customers download a copy of their data, delete their data, and modify their interests and willingness to receive targeted ads. Its now taken this approach a step further with a beta called Contributor.15 Participants can choose to pay a small monthly fee in exchange for sharply reducing the number of ads theyre shown.

Its Time To Take Privacy seriously

Today, most firms still have a data-hoarding mindset. They worry that by not collecting and using all the data they can, theyll be disrupted by someone more agile. as the tools that bring privacys value and friction into balance gain traction, the real threat of disruption will come from what we call mediator brands. These firms will:

Be highly trusted vendors to their customers. most of these firms will focus on business models that dont rely on data monetization or advertising; while there will be some exceptions, those firms will offer tremendous value to their users by mediating and simplifying their daily interactions. antivirus and security vendors are well positioned to lead here, as are firms like Dropbox and evernote, which could offer data security along with added-value services like task automation to paying users.

sit between individuals and brands. amazon already plays this role and is looking for ways to extend its reach with products like the Dash Button, which lets customers re-order certain fast-moving goods like laundry detergent, diapers, and paper towels with the touch of a button.16 Pinterest, too, has signaled its intention to become a mediator brand by launching Buyable Pins. This button lets users buy products they see on Pinterest without having to click through to a separate retail site.17 using these aggregator sites, consumers can limit the number of sites they must share their data with, thereby limiting how much data they leak.

Destroy the existing first-party data ecosystem as we know it. as consumers increasingly shift their interactions to mediators and aggregators, brands will struggle to collect first-party data that is, data generated by a direct interaction with the customer. This data is a marketers lifeblood it enables segmentation, marketing communications, and marketing measurement. If brands dont build trust and value into every interaction, they will lose customers and touchpoints to the mediators. If that happens, theyll be forced to rely on second- and third-party data for crucial marketing investment decisions, which will send them back to the stone age of marketing.



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recommendations

Implement Contextual Privacy or lose Your Competitive edge

Privacy is the touchstone issue of this decade. many have claimed that privacy is dead, or are waiting for regulators to hand down a set of rules around data collection and use, but this is the wrong approach. In fact, we believe that privacy and the basics of transparency, choice, and caution is tomorrows competitive differentiator.

To build trustworthiness, CI pros must help their firms implement contextual privacy, which Forrester defines as a business practice in which the collection and use of personal data is consensual, within a mutually agreed-upon context, for a mutually agreed-upon purpose. Its only by doing so that todays brands can retain access to first-party customer interactions and, by extension, the tremendously important first-party data they generate.

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acxiom

amyx+mcKinsey

app association

Changelab solutions

Facebook

meeco

neustar

Privowny

resonate Insights

sara Watson Fellow, The Berkman Center for Internet and society at Harvard university

supplemental material

survey methodology

For Forresters north american Consumer Technographics Consumer Technology survey, 2015, Forrester conducted an online survey fielded in march 2015 of 6,743 us and Canadian individuals ages 18 to 88. For results based on a randomly chosen sample of this size, there is 95% confidence that the results have a statistical precision of plus or minus 1.2% of what they would be if the entire population of us and Canadian online adults (defined as those online weekly or more often) had been surveyed. Forrester weighted the data by age, gender, income, broadband adoption, and region to demographically represent the adult us and Canadian online population. The survey sample size, when weighted, was 6,697. (note: Weighted sample sizes can be different from the actual number of respondents to account for individuals generally underrepresented in online panels.) Please note that respondents who participate in online surveys generally have more experience with the Internet and feel more comfortable transacting online.

Companies Interviewed for This Brief

endnotes1 Forrester defines hyperadoption as the rapid and simultaneous uptake of unprecedented behaviors. For more

information, see the Will People really Do That? Forrester report.

2 mondelzs plans for smart shelves to hit stores in 2015. source: Todd Wasserman, mondelz Planning smart

shelves in stores by 2015, mashable, october 16, 2013 (http://mashable.com/2013/10/16/mondelz-smart-shelves/).

3 Intelligent agents are cloud-delivered digital concierges that are familiar with the user and her data, embedded into the users online relationships, and discerning enough to make decisions. For more information, see the How Voice-Controlled Intelligent agents Can redefine Computing Forrester report.

4 source: Cotton Delo, Does Facebook Know Youre Pregnant? advertising age, september 10, 2012 (http://adage.com/article/digital/facebook-pregnant/237073/).

5 Forrester defines native advertising as any form of paid or sponsored content that directly and transparently contributes to the experience of the site or platform where it appears, by aligning with the format, context, or purpose of that sites or platforms editorial content. For more information, see the Boost Brand engagement With native advertising Forrester report.



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6 To learn more about the risks of non-transparency in native advertising, see the native advertising: Handle With Care Forrester report.

7 Forty-five percent of consumers seek out organic foods, according to a 2014 gallup poll. source: rebecca riffkin, Forty-Five Percent of americans seek out organic Foods, gallup, august 7, 2014 (http://www.gallup.com/poll/174524/forty-five-percent-americans-seek-organic-foods.aspx).

and this has resulted in a $35.1 billion us market, according to the organic Trade association. source: american appetite for organic product breaks through $35 billion mark, organic Trade association press release, may 14, 2014 (https://www.ota.com/news/press-releases/17165).

8 source: Forresters north american Consumer Technographics Consumer Technology survey, 2015.

9 source: Forresters north american Consumer Technographics Consumer Technology survey, 2015.

10 Forrester defines contextual privacy as a business practice in which the collection and use of personal data is consensual, within a mutually agreed-upon context, for a mutually agreed-upon purpose. For more information, see the The new Privacy: Its all about Context Forrester report and see the How Will People Trust You? Forrester report.

11 source: Frequently asked Questions, aVg PrivacyFix (https://www.privacyfix.com/start/faq).

12 since its launch of ios 8 in 2015, apple has repeatedly and publicly emphasized its focus on user privacy. It has restricted the use of HealthKit data for marketing and advertising purposes, it has taken steps (like randomizing maC addresses) to protect iPhone users from Wi-Fi network tracking, and it has reaffirmed its commitment to never monetizing user data.

13 source: marilyn malara, apples Tim Cook blasts the practice of collecting, monetizing user data, uPI, June 3, 2015 (http://www.upi.com/Business_news/2015/06/03/apples-Tim-Cook-blasts-the-practice-of-collecting-monetizing-user-data/5731433341316/).

14 source: samuel gibbs, google eavesdropping tool installed on computers without permission, The guardian, June 23, 2015 (http://www.theguardian.com/technology/2015/jun/23/google-eavesdropping-tool-installed-computers-without-permission).

googles response to the initial story can be found here. source: samuel gibbs, google pulls listening software from Chromium, The guardian, June 25, 2015 (http://www.theguardian.com/technology/2015/jun/25/google-pulls-listening-software-chromium).

15 source: Kellex, This is google Contributor, Droid life, april 21, 2015 (http://www.droid-life.com/2015/04/21/this-is-google-contributor/).

16 The Dash Button is a small, single-purpose, one-button device that lets users order particular items with one touch. For example, one could place a Tide laundry detergent button right on her washing machine. Whenever shes running low, the customer would press the button to re-order. amazon Prime would deliver the product directly to her home within a couple of days. source: Introducing amazon Dash Button, amazon (https://www.amazon.com/oc/dash-button).

17 source: leena rao, Pinterest wants you to go shopping with new buyable pins, Fortune, June 2, 2015 (http://fortune.com/2015/06/02/pinterest-pins-buy-button/).

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