Privacy Please: Why Retailers Need to Rethink Personalization

| Point of View
Today, retailers face a significant conundrum. With the rapid proliferation of mobile, social media and in-store sensors, they are now sitting on a treasure trove of data. Walmart, for example, has about 30 petabytes of shopping information – the equivalent of nearly seven million DVDs. Retailers have all the data they need to create personalized promotions and offers. And consumers are very much in favor of personalization – survey after survey shows consumers increasingly expect personalized offers presented at the right moment.
 
But this customer data opportunity has a flip side:  the personalization that consumers have a taste for can rapidly deteriorate into something that they find unpalatable. This could be because the personalization exercise is perceived to stray into the consumer’s private domain, or because the exercise is clumsily executed. This report examines this invisible border between personalization and privacy and how retailers can balance this tension in their customer experience.  
 
We launched a comprehensive research exercise that analyzed over 220,000 conversations on social media to gauge customer sentiment on the themes of personalization and privacy for retailers. We collected data relating to 65 of the largest global retailers, collectively generating revenues of over a trillion dollars. 
 
The results are worrying: 
 
  • Consumers worldwide are strongly dubious of retailers’ privacy initiatives: 93 percent of all consumer sentiment on this subject was negative 
  • Security and invasion of privacy are key data issues: The report finds that the main factors contributing to negative sentiment are data security (76 percent) and intrusive behaviour by the retailer (51 percent). Consumer skepticism grew when trigger incidents occurred, including updates of privacy policies during mergers and acquisitions, or regulatory inquiries into a retailer’s violation of data security policies 
  • Striking the balance between privacy and personalization eludes most: Only 14 percent of retailers are perceived positively by consumers on both personalization and privacy initiatives.
 
We believe that the 14% of leaders who solve the personalization-privacy conundrum demonstrate best practice in three areas: personalization initiatives that give customers control and a clear value; using technology to drive customer satisfaction rather than just as an enabler; and a clear governance framework and practices on personalization and privacy.