Luxury Institute: Data Privacy is a Brand Reputation Issue, Not a Compliance Issue
NEW YORK, September 15, 2020 (Newswire.com) - Luxury Institute meta-research from across the globe indicates that the post-COVID-19 landscape for consumer brands, and especially for luxury goods and services brands, is a potential minefield due to rapidly escalating consumer concerns for personal data privacy. Consumers are becoming activists on many social issues, and all surveys conducted in 2019-2020 by credible institutions such as Pew, Ipsos and Microsoft clearly identify privacy as a sizzling hot issue across all demographics. Luxury Institute’s own 2020 global research shows that the affluent and wealthy globally share deep concerns for personal data issues. In the most recent survey conducted by Transcend, a data privacy infrastructure company, with 1,000 American consumers, a whopping 98% agree that data privacy is important in their lives. The results were similar across all demographics (98% males, 98% females, 95% Gen Z and Millennials, 99% Gen X, 99% Boomers). Income figures had a similar dispersion, dispelling the persistent myth that only older, wealthier people care about privacy. All segments of American consumers agree that data privacy will be even more critical in the next five years (94%). The pandemic has only accelerated those concerns.
Most luxury consumer brands, and many mass brands, are trying to be good citizens by approaching data privacy with a deliberate approach to implementation. However, that is wholly insufficient. Currently, legal privacy compliance has been delegated to lawyers and IT executives. These are well-intentioned domain experts, but they are not consumer experience or brand equity experts. They are not the brand stewards responsible for financial performance. Lawyers and IT executives have a paradigm of playing the data privacy game in a crouching posture. They play only defense. With privacy, they are playing not to lose, instead of to win. They fail to serve the best interests of the brand by advising that brands play the short-term, privacy fortress game. That approach puts the long-term reputation of the brand, and its survival, at risk in the digital era.
Milton Pedraza, CEO of the Luxury Institute, is a frequent attendee at data privacy conferences conducted by law firms and tech firms. In listening carefully to the attorneys and IT experts, Pedraza observes that many of these professionals feed their clients’ worst fears by reinforcing the myth that any regulation is expensive and bad for business. In the early automotive era, these same experts would probably not have recognized the empowering value of speed limits, stop signs, brakes, seat belts, and other innovative accelerant mechanisms. To the undiscerning mind, these appeared to stifle progress, yet, over time, they enabled far higher speeds and much longer distances, safely, for drivers globally. The same pattern is obvious with evolving financial and investment regulations. Consumer-facing executives in marketing, retail, e-commerce, CRM, consumer insights, customer service, and other front-line functions are being excluded from the privacy efforts. Whether this oversight is by default or by design, Luxury Institute believes this is a major flaw in managing what will be one of the defining pillars of brand reputation and optimal consumer experience. Privacy policy will be a critical brand revenue and profit differentiator in the balance of the decade. The brand and consumer stewards should be mastering ethics, privacy, data, AI, and emotional intelligence, and proactively leading and communicating, not trailing, the legal and ethical privacy policies and critical actions of the brand.
In the Transcend survey, three in five (59%) of American consumers admit they don’t understand a great deal about the ins and outs of privacy. Nine out of 10 (88%) are frustrated that they have no control over their personal data online. When some consumers have tried to get legal access to their data from companies, they have found the process outdated (73%), time-consuming and difficult. These are massive goodwill and brand reputation-building opportunities. They are not problems, or opportunities to deceive customers. Since 88% of Americans feel they ultimately own the data they give to companies, the lack of transparency in privacy policies, and the lack of access to their own data, makes them distrust the brands that are creating the obstacles. This perceived disingenuous brand approach has consequences. Americans describe brands that frustrate the process as untrustworthy (59%) and unethical (44%).
When brands stop playing defense on privacy, they will dramatically enhance their reputation and increase sales. American consumers state unequivocally (93%) that they will switch to a company that prioritizes data privacy. They prefer to buy from companies that always provide them easy access to their data (91%). And 39% will spend more (yes, more) with companies that allow instant access to control their personal data.
Brands need to give trust to earn trust. Americans may want transparency and control over their personal data, but they are not naive or obstructionist. This is a grave misperception of consumer attitudes. Consumers have experienced enough to know that data sharing can lead to major value creation opportunities for both parties when there is mutual trust. While 65% of all consumers want transparency, and 65% want to choose what they will share with companies, 40% would even be willing to update the information. The 43% of all consumers who want to delete the information, and here Boomers do outnumber Millennials and Gen Z (47% to 38%), do so because they have no clear visibility and have zero trust in how their data is being secured and used. That trend can be easily reversed. In fact, Boomers lead all generations in stating that brands that provide instant access to, and control of, personal data to a consumer are trustworthy (67%), care about consumers (68%), and are worthy of spending more (34%).
So, what is a brand CEO to do? Play offense, not just defense, with consumer data privacy. Numerous Luxury Institute white papers over the past few years have documented that the technology already exists to conduct Advanced Personalization. However, brands need to establish the foundation now for that bright future with a few simple privacy policy steps.
First, establish a privacy policy that is legal and ethical. Then, communicate the privacy and data utilization policy clearly without all the obfuscating legalese. Demonstrate that consumer data will be collected only by honest and clear, not coercive, or deceptive consent. Next, create personal data pods for consumers on their own devices, so they can download and control their data easily in a usable, structured format instantly. Ask consumers if the brand can use non-invasive Edge AI tools to provide them with learnings and key insights into themselves that improve their lives without violating their desires or values. Use those insights to generate predictions and recommendations that enhance the consumer’s life, that serve their best interests, and are delivered with emotionally intelligent humanity. Continuously seek, and embrace, candid consumer feedback on the actual value being created. Then, as real value is generated for the consumer using their available data, and the consumer’s trust increases, open up an honest and fiduciary dialogue about what additional data is needed in order to create even more personalized value. As more and more data is accumulated from the more trusting consumers, such as location, browsing, and other real-time data, reach out to the hesitant consumers and share use cases. Get real-life testimonials, when possible, about how the brand is building value with privacy and security for other consumers through ethical data sharing. In this case, rinse and repeat is a good thing. This is an iterative learning and trust-building process that never ends. It builds mutually beneficial long-term relationships and referrals.
The cost-efficient technology and Edge AI exist today to execute these rich relationship building processes. Luxury Institute is the first to recommend that brands master Edge AI (on-device AI) in order to optimize the elegant process that is required to build strong, mutually beneficial and thriving client relationships. The goodwill exists within most brand management teams and cultures to do the right thing, and now they have the tools to do the thing right. It is the time to stop playing win-lose with privacy policies and lay the foundation of trust and permission-based consumer data access that propels Advanced Personalization. Privacy policy is too crucial to the brand’s health and reputation to entrust to the naysayers. CEOs and their enlightened consumer-facing brand stewards must take control of their digital destiny now, or their more savvy and smart competitors will.
About Luxury Institute and the Global Luxury Expert Network (GLEN)
Luxury Institute is the world's most trusted research, training, and elite business solutions partner for luxury and premium goods and services brands. With the largest global network of luxury executives and experts, Luxury Institute has the ability to provide its clients with high-performance, leading-edge solutions developed by the best, most successful minds in the industry.
Over the last 17 years, Luxury Institute has served over 1,100 luxury and premium goods and services brands. Luxury Institute has conducted more quantitative and qualitative research with affluent, wealthy and uber-wealthy consumers than any other entity. This knowledge has led to the development of its scientifically proven high-performance, emotional intelligence-based education system, Luxcelerate, that dramatically improves brand culture and financial performance.
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Contact: Milton Pedraza
Email: mpedraza@luxuryinstitute.com
Source: Luxury Institute
