A recent report from Deutsche Bank and Directivity found that Australian companies with the largest loyalty programs outperform companies with less comprehensive programs over the long term. As the Sydney Morning Herald reports, however, the success of loyalty programs in Australia has led consumer advocacy groups to demand that shoppers gain access to their program data. The debate begs a question being asked around the world: Is consumer data a corporate asset, or a public trust?
By Rick Ferguson
The Deutsche Bank report reveals what loyalty practitioners already know: "After analysing 205 companies with 428 different programs we have concluded that there is a linkage (albeit not the sole reason), with the most developed and largest programs delivering the best EPS [earnings per share] growth and returns and hence share price performance over the medium to long term."
With that success comes scrutiny, as regulators and consumer advocates argue that loyalty shopper data is not an asset owned by the company that collects it, but rather is the private property of the consumers engaged in the behavior. So says the Australian Food and Grocery Council, which argues that government should force grocers and other retailers to reveal shopper data and allow them to freely give that information to other companies whenever they like. Money quote from AFCG CEO Gary Dawson:
"People are essentially donating that data simply by their purchasing decisions or by enrolling in a loyalty program. But if you're regularly buying a range of products from one company and you can provide that transaction history to that company, you may be able to buy it directly. And if you had a new entrant like Amazon saying, 'We can offer you a better deal if you transfer the data to us', that could build a sale."
That view is echoed by the Australian government's Productivity Commission, which is expected to recommend in March a Comprehensive Right for consumers that would allow them to view any data held on them, request changes, opt out of data collection, and be advised of any third-party disclosures. The recommendations fall short of the AFCG's position that consumers should own their data, but from such tiny acorns, right?
There's nothing inherently wrong about the Productivity Commission's recommendations; consumers should know more about the information companies hold on them. Here's the problem, however, with positions such as the one advocated by the AFCG: If companies no longer own the data they collect, and are forced to share it not only with consumers but also with competitors, then the data will no longer hold value for them - and they'll stop collecting it. As the Deutsche Bank report reveals, companies engage in loyalty data collection because it improves their business results. Why harm the retail economy by regulating away a key driver of business results? The answer isn't to force companies to share their data with competitors; the answer is for competitors to collect their own data.
After all, consumers opt in to loyalty programs with full knowledge that their shopping habits will be tracked and analyzed. That data is then leveraged not only for business benefit, but also for consumer benefit: loyalty program members are rewarded and recognized for their loyalty, and data segmentation results in more targeted, personalized, and relevent offers designed to save shoppers time and money. Properly leveraged, loyalty data is an asset managed by retailers on behalf of their best customers.
Australia isn't an outlier; these same debates are happening all over the world, and regulators in every market are scrutinizing loyalty shopper data with an eye to building speed bumps on the road to Big Data. The key for companies to stay ahead of this conversation is to proactively adopt data privacy and usage policies similar to those advocated by the Australian Productivity Commission: use consumer data transparently. Tell your customers exactly what data you're collecting, and tell them explicity how the data collection will benefit them. Reveal your segmentation, and allow shoppers to self-segment when necessary. And most importantly, use the data for their benefit: personalize your offers, focus on relevence, and don't skimp on rewards.
By making your customers equal partners in data collection and usage, you'll strengthen your shopper relationships, improve your customer insight, and keep the regulators at bay. That's the future of responsible data usage. Practice it now, and you'll reap the benefits in the form of profitable relationships, increased revenue, and long-term stakeholder value. Don't wait for regulators to do it for you.
Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group