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Rethinking value exchange: Consumers trust us with their data - how do we repay them?by
18th Nov 2011
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Ian Stockley explains the theory behind the new 'value exchange' - and how this means moving from a commercial exchange to an emotional exchange.
A ‘value exchange’ between consumer and brand is one of the fundamentals of modern marketing; the basic transaction of swapping rich data for better experiences, as a means of facilitating commercial transactions and improving connection and engagement. In fact, there are three stages that work together to create a ‘value exchange’ between the brand and the customer.
- The trading of money for goods or services.
- The consumer sharing information in return for a reward.
- The promise and delivery of a better consumer experience.
Whereas the latter has often been thought of as a ‘nice to have’, it is now the goal of modern marketing. It’s the stage that allows brands to build deeper relationships and develop lasting customer engagement. This better experience is realised when brands use customer intelligence to forge an emotional connection with the consumer. However, this isn’t necessarily easy to create – let alone sustain. To succeed, consumers need to shift their historic perceptions of how brands use their data, and start to trust that the information they are sharing is being used in a way that benefits them.
The theory behind the new value exchange
When it comes to direct, the rise of the internet and social media has created new and exciting ways to collect and convey consumer information – information that can then be used to enrich brand interactions.
On paper, it’s a simple process. We take this ever-increasing wealth of information and use it to gather valuable customer insight. Customer intelligence then allows us to connect with each customer at a deeper and more intimate level. And it’s this understanding that enhances the customer experience at each interaction, and every touch point.
Sir Terry Leahy, former CEO of Tesco, summed up this process beautifully: “Always look around, at customers, people, their lives, their problems, fears and hopes. Out of that empathy, the truth emerges. If you go on listening, they will give you your strategy. I never had to look for growth. I just listened to customers talk about how their lives were changing and the direction they were going in. Follow and stay close – then be the first to respond when a need emerges.”
When we start to see the consumer as an individual with their own needs and requirements, then brands can start to evolve the relationship they have with their customers. It takes the brand-consumer interaction from being a solely monetary exchange, and transforms it into an emotional one.
But what does this mean for marketers in practice? As Sir Terry implies, Tesco are successfully creating the framework for an effective value exchange, using data generated by their loyalty schemes as the prime driver to offer value to their customers. However, this shows that even data-literate supermarkets are still grounded in a purely commercial model when it comes to the brand-consumer exchange. They still primarily see the interaction as a commercial exchange, as opposed to an emotional one.
Brands now need to recognise that a leap to an emotionally driven exchange has the potential to fundamentally change and enrich this dynamic, whilst still supporting the need for commerciality.
Bringing the consumer into the equation
We commissioned a piece of research (carried out on behalf of Indicia by OnePoll, October 2011) as a way of investigating consumer attitudes towards how brands are using their data.
Our findings told us:
- 55% would trust their regular supermarket to deliver their usual weekly shop, based on the items they typically buy.
- 47% would trust their partner to do the same.
This shows that consumers are not only aware of the information major supermarkets collect on their shopping habits, but that they now trust these retailers to use this information in a positive way to make their lives easier.
Trust is the critical word here. Consumers are now beginning to trust brands to use their data in a way that will enrich and improve their shopping experience. The challenge for marketers then, is how will we use this trust?
Interestingly, Waitrose has announced it is to launch its own loyalty card. What’s fascinating about this is the rationale Waitrose has given for the move; that they want to ‘say thank you’ to customers, while ‘understanding more about the food they love’. Giving something back is of course entrenched in the ‘standard’ loyalty model. But the language in the second statement suggests an ambition to tap into the emotional drivers that motivate customers’ purchasing decisions. The potential here is huge – especially if the scheme extends to stable mate John Lewis. The powerful combination of data on an individual’s activities with both these retailers, and the already passionate and trusting relationship consumers have with the John Lewis Partnership, could easily translate into the delivery of a value exchange based on and enriched by customer experience.
An exchange based on values, not just value
Our research also looked at clothing retailers:
- 33% would trust clothing brands to deliver clothes in their size, based on previous interactions.
- 45% would trust their partner to do the same.
Clothing retailers lag behind supermarkets simply because of the gap between our experience in-store (where our size details are not recorded) and online (where this information is easily presented to the brand). However, this research shows us that consumers understand that the data they hand over – in this case clothes size – is used by brands to offer a better customer experience. And this is hugely important.
For other businesses, the gap remains much wider. Take the banking and the financial services sector – privy to some of the most sensitive information on consumers. Across all the brands, the customer experiences a real disparity between the branch, call centre and online banking portals. This is paired with an inability to use customer intelligence to gather, process and apply insight to offer an emotionally driven and consistent brand experience. The good news however is that thought leaders in the financial services industry are actively tackling the issues, dedicated to building an enriching and valuable brand experience for their customers.
What is most interesting in the study is how consumers are starting to welcome the way brands recognise them as individuals, specifically if their information is used to deliver a better experience:
- 53% of respondents believed that 1 in 4 of their favourite brands used their data to provide a better experience.
- 59% would like to see more of their favourite brands doing the same.
What the research confirms is that consumers have a growing appreciation and understanding of the role they need to play in unlocking a better experience from the brands they trust.
Moving from a commercial to an emotional exchange
As we treat consumers with humanity, brand communication has the potential to become more personal. More relevant. More welcomed. More trusted. It becomes less obviously the catalyst for a commercial outcome. This is the new value exchange, where the ‘experience’ the consumer is presented with is an emotional one, instead of being obviously commercial – or even intrusive.
If we continue down the aisle of our supermarket example, let’s ask what Waitrose could do to change the game. As they tap into a new fountain of insight, will their objective be to deliver a better experience, or just a money-off voucher? At this stage, they can do everything and anything.
What constitutes a better experience is different for every individual. So the quest for marketers today is to use customer intelligence to drive emotional communications. Once we have this conduit into the minds and hearts of the people who want to connect with us as brands, a brave new world awaits.
The experience value exchange and the role of the ‘interface’
The concept of an emotionally charged exchange between consumer and brand is a powerful one. As we move towards creating an enhanced customer experience, we need to consider the ‘interface’.
The interface is the space where the creative idea exists between the brand and the customer. Realistically, it can be the most intimate and impactful part of the brand that the consumer experiences. So however smart and sophisticated our data, technology and planning is, the consumer’s attention and concern remains at the interface.
Ian Stockley is managing director at Indicia.
In the next in this series of articles, Mike Fisher, chief futurist at Indicia, examines whether a price can be put on data, and discusses the risks associated with placing a value on information in the eyes of the consumer.