Every time we download a new app, or sign up at a Web portal, we’re informed about terms and conditions of use, the seller’s privacy policies, cookie policies, and more. All pledge appropriate use of our personal data.
Do we read these policies? I suspect many haven’t time—and assume they’re all similar. And although companies may know what percentage of site visitors actually click to view these policies—and which ones stay long enough to have read them, they cannot take visitors’ privacy for granted. Neither can they risk abusing their users’ trust.
What exactly is appropriate use of consumers’ data? Is it acceptable, for example, for a health insurance provider to collect data from its customers’ smart watches, and adjust its premiums as a result? What about a pay-per-view movie provider that charges higher rates to customers who live in wealthier zip codes?
Data has become the lifeblood of growing businesses, but is it improving the customer experience—or being used purely for commercial interests? It’s an important balance to strike.
For Cognizant’s recent research report, “The Business Value of Trust,” we asked consumers in Asia-Pacific and the Middle East about the importance of having trust in doing business with companies in the digital world.
Key findings? 57% of Asia-Pacific consumers say they would stop doing business with companies they believe have used their personal data irresponsibly. More than a third (37%) say they would take legal action against a company that did so. Almost two-thirds (63%) say that they will stop sharing personal data in response to unethical business practices or a perceived lack of transparency. or corporations wishing to be competitive in a data-saturated world, the appropriate use of customers’ personal data is a key factor.
Why trust is paramount: Brand loyalty
Broken trust doesn’t only have monetary consequences; it can undermine brand value and damage employee morale. In these unforgiving times, getting data ethics wrong has greater consequences than ever before. Consider:
- Consumers trust banks and utilities relatively more than other companies. The 2008 financial crash caused many consumers to lose trust in weakened financial institutions. But 32% say they are still likely to switch their bank if trust is compromised. And 31% will switch their utility providers
- Only half of respondents trust government institutions. Phone-tapping, e-mail snooping, and a perceived increase in governments’ demands that technology companies disclose consumer data has forced many people to rethink how they engage with local, state, and federal agencies.
- Consumers report the lowest level of trust in automotive companies and retailers. In fact, 41% told us they would no longer shop at retailers that mismanaged their personal information.
- Digital startups are gaining trust at the expense of traditional businesses. A majority of consumers 52% said they are willing to consider new products and services from non-traditional channels or digital startups. Traditional businesses must focus as much on building trust with digitally empowered consumers as on competing with the innovation digital startups are known for.
Businesses have always had to consider ethical factors when they made strategic decisions, but now more than ever before, a failure of ethical judgment can prove catastrophic to a business’s public image and long-term success. In a digital world in which a hasty remark can go viral in the blink of an eye, making the wrong ethical judgments can land an individual or an organization in very hot water.
Transparency: a new brand currency
As companies embark on their journey toward digital transformation, they face questions about how to protect individuals’ privacy, conduct business ethically, and build and maintain trust.
Many companies believe that all they have to do is publish their data privacy and security policies: Thus the pop-up windows on Web sites. Some do read them; more than half of consumers we surveyed told us that making sense of these policies is nearly impossible.
Communication is a two-way street. Stating a policy and then hiding behind the law does not create a sustainable level of trust. Our study indicates that transparency is the top factor in determining a company’s trustworthiness; 45% of consumers were willing to share their personal data if a company asked them for it upfront and clearly stated how the data would be used.
The trust revolution: It’s an opportunity
Why is sensitivity to trust critical? One thing we cannot do is walk privacy backwards. Brand loyalty cultivated over many years can be destroyed in a day. A Forbes Insights report reveals that 46 percent of organizations had suffered damage to their reputations as a result of a data breach. Companies that knowingly misinform or mislead consumers risk self-extinction. So do those that are simply careless about safeguarding personal data.
The lack of confidence surrounding privacy, security, and trust represents a tremendous opportunity for companies that are transparent about their use of data. Trust is not an issue of compliance, privacy, security or technology (as many companies presume it to be) but a brand-level risk/opportunity that belongs in the C-suite. For companies that manage data ethics, privacy and security issues well, a positive opinion can certainly result.
In a future post, I’ll look at actions organizations can take to succeed in the trust economy, offering examples. In the meantime, please share your perspective with us. I’d like to learn about your point of view.