As data is a key tool for personalization and improved brand-customer communication, the 2023 report highlights a “Catch 22” or disconnect when brands use data to enhance customer interactions.
Sam Richardson, Customer Engagement Consultant at Twilio, stated: “With the oversaturation of brands competing for consumer attention, data-driven personalization is non-negotiable for organizations looking to stand out, and it’s something consumers increasingly expect.
However, brands must ensure they use first-party data collected on a consensual basis to build trust with consumers. This data can be transformed into relevant communications and fuel timely, personalized engagements that respect customer boundaries.”
The VIP Effect
The report revealed that consumers will take decisive actions—both positive and negative—based on the success of personalized experiences. Over half (51%) of European consumers say they will become repeat buyers after a positive personalized experience, while 49% will recommend the brand to a friend or family member, and one-third (33%) will join the brand’s loyalty program for offers and rewards. However, an impersonal experience can deter many.
In fact, European consumers are less likely to make a purchase (36%), may stop purchasing from the brand entirely (19%), or even buy from a competitor (18%), emphasizing the importance of effective personalization and the risks associated with getting it wrong.
Data Distrust
Despite the benefits of sharing data for consumers, there is skepticism about how brands use their data. According to Twilio’s report, over one-fifth (22%) of European consumers feel less comfortable with the use of their personal data for personalization purposes compared to last year.
This year-over-year decline in trust underscores the importance of brands being transparent about when, how, and why they collect data and being clearer about how customers can benefit from sharing it.
There’s also a pressing need for brands to disclose how they manage, store, and protect customer data, as less than half of European consumers (49%) trust brands to keep their personal data safe and use it responsibly. A strong, accessible data privacy and protection strategy can help offset any negative perceptions consumers may have regarding their data.
The Shift to First-Party Data
Over one-third (36%) of European consumers feel that personalization has become less targeted in the past 12 months, failing to deliver the desired VIP effect. With general or irrelevant advertising on the rise, likely due to the gradual phasing out of third-party cookies, brands need to consider first-party data as an alternative.
Not only is first-party data consensually provided to businesses by customers or generated through their interactions with them—helping to mitigate consumer distrust and skepticism—but it also offers the most up-to-date and valuable insights for creating personalized experiences. It’s a win-win for both brands and consumers.
Richardson commented: “This disconnect between data sharing and personalization creates a real dilemma for brands to navigate—you can’t effectively personalize communications without leveraging customer data. It’s a dependent relationship. However, consumers have their reservations about sharing data. There’s a lot of work brands need to do to dispel myths, reassure customers, and communicate the mutual benefits of data sharing—including a rewarding shopping experience for consumers. While brands must recognize the value that personalization strategies can offer, they must prioritize building that trust and being transparent about how they plan to use it. The shift to first-party data collection is a logical approach to achieving this.”
Overcoming Barriers
Reassuring customers is about transparency and giving them autonomy; they like to know they’re in control. Businesses can rebuild consumer trust in data sharing by following these steps:
- Emphasize the value exchange – Data collection benefits businesses, but there are real advantages for consumers as well. Communicate the benefits of personalization and CX, and highlight the interdependent relationship between data and personalization as a means to this.
- Be transparent – Part of communicating this value is being honest about how data will be used and disclosed when collecting it. This way, consumers won’t feel deceived.
- Prioritize data privacy, protection, and ethics – Having strong strategies, procedures, and credentials for securely managing and storing customer data is essential. Ensure these are front and center for consumer access.
- Give consumers autonomy and honor customer preferences – Make opting out of data-sharing practices an easily accessible option to give customers the much-desired control over their information.
- Don’t overdo it – Collect only the data you truly need. Gathering excessive data not only creates unnecessary volumes to process and interpret but also means there’s more data for businesses to protect.
By adhering to these principles, brands can better navigate the complexities of personalization in a data-sensitive world, fostering stronger, trust-based relationships with their customers.
