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Why retailers are losing customers’ trust below the waterline

Like an iceberg, it sits below the water line of contemporary retailing – unseen, and yet threatening. It’s the issue of data security and brand trust, which, if ignored, can do a whole lot more than cut a hole in the hull of today’s business. It can keep you from the profitable blue oceans of customer data, insight and knowledge – today and tomorrow.

Admittedly, most of us don’t think first about data security and brand trust.  Neither do shoppers. As they come to the brand, they think about what they need and – most of all — what they want.  If it’s a boat, they’re thinking about all the things that are above the water line – room for guests, ease of operation, color of the cushions. They’re also dreaming about sunny skies above, family and friends around, and the wonderful taste of salt spray on their lips.

Probably, the last thing they’re thinking about is the fuel filter. That is, until the engine fails to turn and the boat becomes stranded. At which point the party ends and the skies turn black, regardless of the weather.

It can be the same way in retail with data security and brand trust. But that’s not a mistake we let you make.

As we’ve worked with retailers to identify tech enablers to improve their customer experience, we’ve vetted countless providers. Retailers love what new tech and what AI can do to improve the customer experience. As retailers focus on solutions to solve prioritized customer pain points “above the waterline” like facial recognition, they must not forget about the unintended consequences “below the waterline.”

Data is the new oil, they say, and more data can be today’s black gold fueling competitive retail advantage. And, it’s not just data volume but data volume with a focus, captured for its relevance to questions of operational process and consumer preference.

This combination of volume and quality fuels the machine learning and ever-advancing algorithms at innovators such as Amazon. This combination of volume and quality also inspires marketer visions of personalized offers.

Easy to say. But hard to do. Especially when consumers increasingly don’t trust retailers with their data.  And – even more important – when consumers are not responding to today’s retail data acquisition tactics.

A primary study of US shoppers in 2016 asked which industries were most trustworthy in protecting (and using, for the consumer’s best interests) personal data. Respondents could choose from eleven industries, ranging from banking to healthcare to government to retail and internet companies.

Most trusted?  Banks and healthcare. Least?  National retailers and internet companies.

Move forward three years.  A recent GlobalWebIndex study (find it here: https://www.globalwebindex.com/reports/trends-19) found that the last 12 months has had a profound impact on how US and UK internet users perceive the use of their data. Bottom line:  there’s even less trust than before.   More than 70 percent of US respondents said that they’re more aware of how companies collect and use their personal data than they were a year ago.  And 65 percent of US respondents – that’s two-thirds — said that they worry about how personal data is used by companies – a number significantly higher than in privacy-aware (but GDPR protected) Switzerland, Germany, or France.

This should be of concern to US retailers. A recent Forrester podcast reminded us that the misuse of data – and the resulting decrease in brand trust – can decrease customer retention by about 18 percent within a year and can lead to customer’s spending about 15 percent less (it also reduces customer advocacy of a brand).  PWC’s 2018 Global Consumer Insights Survey asked some 22,000 consumers about the factors (apart from price) that influenced a decision to shop at a particular retailer. Number one? Being consistently in-stock. Number two? I trust the brand. A factor rated higher than a convenient location, or unique products.

Let’s explore this a bit further. Every retailer, through point of sale transactions, collects an enormity of valuable data. Purchases, price-promotion, date, time, location, and so on. With such data, we can analyze assortments, pricing optimization and promotion-product lifecycles. Add store traffic (or even in-aisle traffic) counts, and we can measure conversion by store or department. It’s a treasure trove.

But it’s not quite personal. And that’s where trust comes into play.

Consider the marketing potential of a home address. Of a mobile phone number. Of an e-mail address or birthdate. According to a 2018 study by the US Advertising Research Foundation, 57 percent US adults are unwilling to share a home address with commerce brands. An even higher number – 65 percent – are unwilling to share a mobile phone number. And more than a third are unwilling to share personal e-mail addresses.

Consider the competitive advantage of those who have that data and the disadvantage of those who don’t.

There are those who think that retailers can convince consumers to share such personally-identifying data with an offer of some form of personalized offer or product recommendation. Unfortunately, that’s simply not trustworthy. The GlobalWebIndex study concluded that the suggestion of a “personalized” offer was the least effective motivation to share personal data. The Advertising Research Federation showed that a “personalized” offer had no impact on the data shoppers might wish to share.

It’s all about trust. How do you win it? 

The Sprosty Network will tell you that it starts with an attitude, one that says that all new business concepts should start with the end customer’s POV as the center of everything they do. When building a new customer value proposition, you have to see around the corner and go deeper to clearly understand what the consumer pain points actually are. Personal data may not be among the items that comes up initially, but as you dig deeper, it can be the gravitational pull that prevents your new idea from taking off. It’s about embracing the tenets and practices of the General Data Protection Regulation (GDPR) and data security as a brand benefit. It’s about giving your shoppers a clear, simple-to-follow guide on how to access personal data and how to delete it if desired. And making clear how and why personal data is used.

But this issue of developing and sustaining trust goes well beyond questions of data. It’s why Sprosty Network consultants pay such attention to such critical questions of customer definition, shopper journey, and operational process. For example, as we study consumer insights together, we’ll ask not only what we currently know about a targeted segment – but what we might want to know, as we think ahead about creating the greatest mutual value. As we develop together the customer value proposition (the CVP), we’ll take a hard look at brand authenticity, and what builds and burns the consumer trust that leads to personal data. And in our collaborative business architecture sessions, we’ll look not only at the processes needed to enable the brand vision, but whether those processes are sustainable (next year at this time?) and scalable (all stores, from A+ to D?)

We’ve found that brand trust in retail – the key that unlocks today’s personal data door – is most often the offspring of authentic value and consistent operational delivery. It’s products, services, and service that truly make life better today and tomorrow. And it’s the provision of all that value on a day-to-day basis through every phase of the journey, through every touchpoint, to every shopper.

Data protection.  Authentic value.  Consistent operational delivery. It’s what builds trust – and enables a brand-shopper relationship to grow from the transactional to the conversational to the intimate to a lasting bond. Which is where information (that’s data) is shared freely, because it’s for the betterment of both.

It’s kind of like building a best friend relationship, when you think about it. That’s why we at Sprosty Network ask questions that others don’t. We find value that others can’t. Which is why we study questions like this. On your behalf.

Send me more information about winning customers above and below the water line!

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Post By Jon Stine (1 Posts)

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