Part 2 – The commercial uses of data
Today most companies have an online presence. If you are selling something you usually have a website that this is done through. Social media has also become increasingly important. This is an evolution of marketing, where companies create an online presence that is carefully calibrated to communicate the right values and ideas in order to appeal to the right kind of customers. It’s also a way to be accessible to them as the communication goes both ways.
Some companies design apps. The app can be the whole business model or just a tool to be used in combination with the service itself. Whatever the function, you can be sure that everything you as a customer do when you interact with the different digital platforms of any company will be registered, stored and analyzed.
Studying the data being generated helps companies to understand their business better. Which products are being sold at the moment? Which are not? Are there any correlations between these patterns and the current marketing campaigns? Are there any other patterns to be seen?
With enough data you can study the people that buy what you are selling. Are there any common denominators? Marketing has always been about psychology. The more you know about people, the more you can manipulate them.
The marketplace is developing with the times, and companies are forced to adapt to it in order to maintain a competitive edge. Most companies, therefore, work with collecting, storing and analyzing data in different ways.
Some business models are completely based on collecting and analyzing data. Some with the goal of creating marketing campaigns and ads, some to sell data to third parties
There are four main types of data that are interesting here.
Personal data. This type of data typically consists of personal information such as social security numbers, gender, IP addresses and so forth.
Engagement data. This is information about how the customer interacts with the service’s web page, apps, social media accounts, ads and customer service.
Behavioural data. Here you find information about transactions, purchase histories and information about how services and goods are used.
Attitude data. This information is about how satisfied the customers are, how desirable the products/services are, how the customers interact with customer service and so on.
How is this data being collected?
Data can be collected in many ways. Everything a customer does on a digital platform is generally registered. This could be when you click around on the website, what ads you check out or what kind of products you are browsing. When you talk to the company’s customer service the calls are usually recorded for later reference. In that context, the company looks at what the customer had to say, how it was said, how the service rep handled it and how the customer reacted.
Some companies conduct customer surveys, and some services require you to answer a number of more or less personal questions when you register. Sometimes the companies buy large chunks of data from data brokers. These are companies whose sole purpose is to collect and sell customer data.
How is this data being used?
As you probably understand by now, the amounts of data quickly reach enormous proportions. Enough so that it would be impossible to analyze it with the help of human beings. Today, the analysis of the data is done with the help of machine learning algorithms and other forms of AI. These programs sift through the data, analyze it and summarize it based on certain given parameters.
You could for example choose a certain product and then ask the program to define all other parameters that also are true.
In this completely theoretical example; you own a company that sells different nutrition supplements. Among these products there is a bestseller, which is your brand of whey protein. When running all your data through the program, the program tells you that the people buying this specific product have a tendency to be male, between 20 and 30 years, who are vegans and frequent a certain blog.
In your role as chief of marketing you draw conclusions from this collusion of data. You could adapt your marketing to contain certain values and symbols that have been proven to be attractive to this particular group of people. You could also buy ad space on the blog that you know is popular with them. Another possibility is to identify other kinds of products and services that might be attractive to the same people, and market them in the same way.
Looking at the commercial uses of data, you quickly come to identify certain categories.
It can be about optimizing the customer’s experience of the service you provide. In that case you generally try to identify the needs of your customers, in order to satisfy them in the best way possible. This could be done by analyzing customer reviews and other forms of feedback.
In today’s world, the key to a successful business is personalization. This is, in my personal view, a natural development of capitalism. In earlier years the customer has always been dependent on the companies. There has been a given amount of providers for whatever it is you want to buy, and as a customer you have been forced to adapt to them. The companies set the prices and conditions, and you have been happy just to get what you want.
Today, there are a million different providers for whatever it is you need. You as a consumer have more money than ever, and the internet has made it so that you are well informed and that you have access to everything from everywhere all the time.
This has led to a development where the business itself is more and more about finding a way to lure the customers to you instead of the competitors. It’s no longer about the product itself, but the associations and values that the product itself carries with it.
It’s not enough to have a great whiskey to sell, because there will always be thousands of other brands that all have the same qualities for the same price. Instead, the business today is about branding. What values does the product carry with it, and who does it appeal to?
Let’s paint a picture. You want to sell your whiskey. This whiskey needs a certain kind of profile to be marketable. So you decide that it’s going to be a viking whiskey. Odin’s brand! You, as the chief of marketing, quickly realize that you need data on people that like vikings and whiskey.
So you buy a big chunk of data from the best data broker you can find. The parameters given are people who like whiskey, who are of an eligible age and who like vikings. When you analyze the purchased data you soon come to identify other factors that are common for these people. What values they hold in high esteem. What places they frequent in the physical world. Where you can reach them online. What other behaviours can be said to be common for them.
When these questions have been answered, you will be able to shape and direct the marketing of your whiskey in a successful way.
To identify a certain group of people in order to direct your marketing in a successful way requires data.
Another use for data is simply converting it to money. This is done by data brokers. Companies whose sole purpose is collecting and compiling data on vast amounts of individuals.This data is then sold to third parties. They satisfy the demands that the modern marketplace puts on businesses.
Yet another use for customer data is security.
For example, some banks use the data you generate when using their services in order to protect themselves from fraud. When you talk to their customer services your voice is recorded and analyzed. If someone else calls them and impersonates you in order to defraud them, they have software running that will cross reference the voice with previous interactions. If the person speaking isn’t you, red flags quickly appear in the system.
Another example puts you on vacation in Spain, where you are visiting an internet cafe. You are trying to access your gmail account. Google knows which devices you usually use to do this, and also which places you tend to do this from. It’s generally not Spain, nor the computer you’ve just rented. The system then asks you to confirm that it is actually you trying to log in to your account. This is done with the help of a code that is sent either to the phone number you have registered or an alternative email address.
It can be difficult to know what kind of data is being collected, who is collecting it and what it is being used for.
Ten years ago, this market was largely unregulated. Thankfully, this kind of activity has come to be regulated by legislature that we will go through in a later chapter. Regardless, there will always be people that make their living in the gray areas of life.
Last year, in a much written about case, the public was notified about customer data being sold to various different american authorities.
Among these were the FBI (Federal Bureau of Investigations), DEA (Drug Enforcement Agency), IRS (Internal Revenue Service), DHS (Department of Homeland Security) and the CBP (Customs and Border Security).
The first two are law enforcement agencies, the third is the american tax service, and the fourth is a law enforcement agency created to combat terrorism. The CBP is a government agency whose responsibility is surveilling the border and tracking illegal immigrants.
The data sold was collected through an app that had nothing to do with these agencies. The company responsible realized that the location data that they collected on their customers through the app was a possible alternative revenue stream, and so they started selling it to whoever was buying.
The CBP used the location data to track illegal immigrants in the country. The law enforcement agencies to track criminals.
Government agencies need a special court order in order to get this kind of information legally. In order for a judge to sign such an order, there would have to be different criteria that the agencies and their suspects had to meet. In order to bypass this whole procedure they started buying the information straight from companies that had no government oversight.