By applying accepted norms of offline behaviour to the world of online advertising, companies can make targeted ads pay without upsetting their customers.
You wouldn’t like it if, having shared a secret with a friend, he or she then passed that information on to a third party without your knowledge or permission. Writing for Harvard Business Review, Leslie K John, Tami Kim and Kate Barasz explain that treating customers’ digital data with honesty and transparency isn’t just the right thing to do – it also helps drive sales.
People know they’re being targeted by ads based on their browsing history, and increasingly governments are regulating to ensure that firms tell their customers about the information they gather and what they do with it. Security breaches, and the targeting of “fake news” to sway political allegiances are issues that provoke considerable anger among the public. What companies and other organisations do with people’s data is a “live” political issue; it’s vital you get your approach to it right.
FINDING THE RIGHT BALANCE
While there’s little research that shows where the line between being helpful or invasive lies in the world of online marketing, well-established social mores from the offline world give us a hefty clue.
Amazon openly targets ads based on its users search histories and because customers see this as a way of enhancing their experience, they don’t generally have a problem with it. But when Target marketed products to women it thought, based on their browsing history, were pregnant, it sparked outrage. The difference lies in the extent to which these firms conformed to customers’ expectations about how their data should be used.
In terms of the commercial use of their private data, researchers identify a sliding scale of acceptability based on how personal the information you collected is, with data on sexual orientation, health issues, and finance being particularly sensitive. So far so good, but when it comes to their information being shared with third parties, customers are far more uneasy.
Consumers don’t like it, and are less likely to buy something based on an ad generated from information shared without their explicit consent. They also don’t like it (and are less likely to buy) when you use the data you’ve collected about them covertly to infer things about them – like when you use analytics or data from third parties to target ads at specific customers.
Using data inappropriately alienates customers, but the reverse is also true: being open and honest about your data gathering and use can actually make your ads more effective.
Many ads now feature a blue AdChoice symbol which, when the user clicks on it, tells them why this particular advertisement has been shown to them. Facebook has a similar ‘Why am I seeing this ad?’ feature. When you tell customers why they’re being shown a specific ad, as long as that sales pitch is based on data collected transparently, they’re more likely to respond positively.
In an experiment, the writers teamed with Maritz Motivation Solutions, which “runs redemption websites for loyalty programmes such as frequent-flier schemes, a context in which customer trust tends to be very high”. When the team told customers their ads were based on their browsing history on the site, “click-through rates increased by 11%, the time spent viewing the advertised product rose by 34%, and revenue from the product grew by 38%”.
When Facebook changed its settings to give users greater control over their privacy, it made their personalised ads twice as effective as before. As data collection becomes increasingly sophisticated, and the risks of data breaches multiply, the value of giving customers meaningful control over their information is only likely to intensify, resulting in bigger benefits for those firms whose consumers trust them to use their data responsibly.
And don’t forget the value of telling customers why you’re using their data – there should be a good reason. And if you can’t think of one, perhaps you shouldn’t be using it.
CODE OF CONDUCT
1) Steer clear of the personal stuff. There’s a reason why Google doesn’t let advertisers aim their ads at people’s sexual preferences or “personal hardships” and, similarly, why Facebook bars companies from advertising based on people’s sexuality, health status, or race. It’s private. If you sell products that fall within these sectors, ditch the personalised ads and, instead, pay to advertise on sites those customers are likely to visit.
2) Be transparent. At the very least, you should provide information on request about what customer data you gather and how you use it. Giving customers the option to opt out is likely to win their approval and may even help your ads to work more effectively. Cultivate an ethical, customer-orientated organisational culture that encompasses customer-data collection and usage.
3) Be Prudent. Just because you know something doesn’t mean you should use it. Stitch and Fix is a subscription clothing retailer, a firm which knows a lot about its customers – their height, weight, bra size, etc. It uses the data to deliver a highly personalised service: clothes that delight its customers and which, crucially, fit, direct to their door. If it were to use that information to target insensitive or inappropriate ads, the trust which makes the firm’s business model work would soon be lost.
4) Give justification. Online dating app Tinder mines Facebook to tell users how many friends they share in common with prospective dates. When it’s open and transparent, and users can see the benefit to them, they’re more likely to view third-party data sharing in a positive light. LinkedIn justifies its use of data by telling account holders how it makes its services more relevant. This is a good idea – as long as it’s true.
5) Ask the customer. The internet offers myriad ways to gather customer data, but the old ways are sometimes the best. Amazon and Netflix, for example, go direct to customers, surveying them to establish their preferences. Of course, analogue information gathering can be expensive, but mixing transparent data gathering techniques with more opaque digital methods helps create a fuller picture of the customer, and makes customers feel less surveilled.
The bigger the role of technology in our lives, the more the collection and use of personal data matters. We don’t know how today’s young people, who’re growing up in a digital world, will come to view the use of their personal data. But for now, it seems wise to apply that age-old knowledge – honesty is the best policy.