Talking about data can be confusing and complicated, especially when discussing collection, use, and consent. Thanks to GDPR and similar suggested legislation in the US along with Facebook’s continued data issues, customers are more cautious than ever about how much and what kind of data a company uses.
Every company, whether on- or offline, collects and uses data about their customers. However, the sheer amount of data available online today is enormous. New companies need a strong data strategy to understand what they will collect, how they will store it, and how it can be used. Even companies that are using data the same way they have been for years may need to consider their strategy moving forward as data becomes even more of a tension point with consumers.
Types of Data:
It all starts with knowing what the different types of data are and how they are collected. There are currently three:
- First party – data directly collected from consumers by a company that owns, uses, and stores it
- Second party – data directly collected from consumers by one company and given or sold to another
- Third party – data collected from multiple sources by a company with no connection to the consumer, usually purchased from individual companies and then consolidated to be resold
Remember, many companies collect their data online, but brick-and-mortar stores and services often track data as well through accounts and loyalty programs. All of this data is often aggregated into third-party use.
What Is Data Used For?
Companies use data in a variety of ways, which include ensuring the best experience for their customers, reaching a targeted audience that is more likely to purchase their items, and building a broader audience.
Example: A homebuilder is working on a new housing development, and they need to sell units. They pull the data from their own site as well as previous homebuyers in their records to determine what information potential customers are most likely to search for. By looking over page traffic and upgrades that most interested their current customer base, they can create targeted ads that will resonate and generate more interest. (first-party data)
The homebuilder then contacts a local real estate company to request teaming up with them for advertising. They make a deal to allow the homebuilder to use their data to target homebuyers looking within a specific price range with ads that they buy on the real estate company’s site. This allows them to get the best chance of reaching local homebuyers that will be interested in their homes. (second-party data)
In addition, the homebuilder then goes to an exchange and purchases a data set. They use this data set to find other sites that potential homebuyers may be using, such as home improvement stores, furniture stores, and mortgage companies. They use this information to get their targeted ads in front of a larger audience. (third-party data)
Why Are Consumers Worried?
It all comes down to consent. Facebook got in trouble because they were allowing apps to share or sell data without getting consent from the consumers for their data to be shared this way. In the US, a disclaimer on a website that says using that site is considered consent to share information is still extremely common. However, companies are slowly moving away from assumed consent to active consent.
Active consent means that companies not only notify the consumer of what data they collect but also give them the option to say yes or no. Saying no could mean that there are certain limitations on using the site but should not immediately render the site unusable. Note that a pop-up that informs a consumer about data sharing but does not give them an opt-out is still assumed consent. Active consent requires a choice.
Transparency about what data is collected, how it will be stored, when it will be used, and if it will be sold can help a customer overcome concerns about using a particular service or company. Whether a company chooses assumed or active consent, being clear with customers will likely benefit them in the long run.
Can A Company Just Avoid Data Altogether?
Probably not. If a company is using any programmatic ad exchange, any SEO strategy, or any fraud prevention software, they are using some form of data. Every loyalty program, account creation, and even mailing list requires data. While first-party data is often considered to be the safest and the least invasive for consumers, third-party data can also sometimes be essential for marketing and security.
Every company needs to have a clear policy that addresses both how and why they will use data. This should be made clear to consumers and be easily accessible. Protecting that data will also be incredibly important moving forward.