The cost of losing a customers trust
Preserving consumer trust gets a lot of lip service. But a new report from the World Economic Forum actually attempts to translate its value into dollars and cents.
In a study on personal data released this week with the Boston Consulting Group, the report said that while online retail in the Group of 20 countries could reach $2 trillion by 2016, consumers’ perception of trust plays a significant role in enhancing or eroding that value. With more trust, online retail could grow to $2.5 trillion by 2016; with less, it could reach just $1.5 trillion by the same time, they said.
“Given that this $1 trillion range is from just one small part of the broader personal data ecosystem, it provides an indication of the magnitude of the potential economic impact when other sectors (health, financial services, etc.) are considered – potentially in the tens of trillions of dollars,” the report says. That ecosystem includes individuals, as well as data collectors, marketers, data brokers, publishers and other organizations with an interest in using personal information.
As our volume of digital “exhaust” grows (currently, 10 billion text messages and 1 billion blog and social network posts, according to the report), so does consumer concern around privacy. Just this week, (now public) Facebook was hit with a lawsuit over privacy and, over the past few years, regulatory investigations over privacy violations have climbed.
In this report – and a highly cited report on the topic last year – the World Economic Forum calls personal data “an emerging asset class.” But to really extract its value, the organization argues, public and private institutions need to rethink how they do business so that consumers get more protection, rights and opportunities to hold organizations accountable when it comes to their data.
For a data industry making billions of dollars from personal information ($2 billion from third-party consumer data alone, according to Forrester Research) that’s a tall order. But a handful of companies, from startups like Personal and Azigo to industry giants like Experian, are testing new business models that give consumers more ways to control – and, in some cases, receive compensation for – their data.
As Personal’s Shane Green told my colleague Ryan Kim earlier this month, “A new model is emerging for personal data. You’ll want a simple, clear answer about what data companies are capturing about you, how they’re using it and what’s in it for me.”