How can data transform customer experience
Growing digitalization will create opportunities for companies to use consumer data to propel innovation and improve customer experiences.
Around 2.5 quintillion bytes of data are created every single day.¹ One of the most significant sources of this data is consumers, whose online browsing, past purchases and payments leave huge trails of information. For many consumer enterprises, having a ‘stake’ in this data flow, and creating value from it, will be the keystone around which their business model is built.
There will be significant opportunities for companies to leverage consumer data: either by using it to improve services and personalize marketing messages or by offering services to reassure consumers about the security and privacy of their information online. At the same time, growing consumer activism and regulatory reforms reflect society’s increasing data privacy and transparency concerns.
Consumer data flow and value capture is one of four themes that we believe will be central to the digitization of the consumer industries over the next decade. The other themes we examine are experience economy, omni-channel retail and digital operating model.
Data as an asset
In consumer industries, the successful capture of value from data is just taking off. For Internet giants such as Amazon, using consumer data to drive revenues is at the core of their business model.
Leveraging big data and analytics capabilities to drive insights from consumer data will help propel innovation. An exciting variety of possibilities then come into play, from manufacturers producing hyper-personalized products to retailers optimizing their inventory management.
Despite privacy concerns, consumers are generally ready to hand over their data if they benefit in return. There are, however, some barriers to effectively collecting, analyzing and monetizing data, including a reluctance to change mindset, talent shortage and lack of supply chain agility. Additional efforts are also required to keep up with regulatory developments surrounding data privacy.²
ITC, a large Indian conglomerate with around $8.5 billion in revenues, runs the e-Choupal program, linking farmers directly to the company via the Internet. The system has 6,500 centers across 40,000 villages in 10 states, helping around 4 million farmers (as of 2011) get the best rates for their produce and reducing ITC’s procurement costs.³
Data privacy and transparency
Major breaches of data security and privacy happen with worrying frequency in today’s digital world.⁴ Consumer industries, with the vast amount of data they collect, are a major target for criminals looking to access personal information and payment details. Data breaches also bring punishing financial fallout for companies, with IBM estimating the average cost of security-related incidents to be more than $40 million.
Aside from the cost of clearing up the damage, firms that have been hacked can lose business, with 59% of consumers stating that they would be less likely to buy from a company that had suffered a data breach.⁵
For many companies in consumer industries, this focus on data privacy is likely to require higher spending on data security, and cybersecurity applications and processes, especially as data-driven business models become prevalent. Businesses that earn consumers’ trust will also gain a competitive advantage (see Figure 1).
Beyond privacy concerns, data transparency will also be driven by consumers’ growing concern about the social impact of their purchasing decisions. Access to data and information throughout the supply chain will continue to promote transparency in relation to products and the source of raw materials.
John West, a UK-based canned fish company, has introduced a service for consumers to identify the source of the fish that they have just bought.⁶ Consumers can enter a unique code on the John West website, which then provides them with information about the provenance of the fish, including the ocean it came from and the fishing boat that caught it.
With data privacy as a growing area of consumer concern given the rise in number of data breaches across industries, we expect a place for trust as a value proposition and differentiator in the market. Capturing a share of data privacy-conscious consumers should provide a value opportunity of around $330 billion for industry over the next 10 years. Data transparency refers to brands driving differentiation in the market by becoming more transparent about their products and supply chains in combination with improving their ecological footprint and societal impact. At around 0.5% of total retail market by 2025, this should drive around $40 billion in value migration toward businesses that adopt greater transparency from those that do not.
Data privacy and transparency, in combination, have the potential to generate more than $400 billion in cumulative industry value through to 2025, underscoring the importance of these initiatives in driving competitive differentiation in the future.
Data to improve experience
Consumers appreciate the appeal of services that are designed with the user in mind and make life easier. Consumer data can be leveraged to provide a ‘do-it-for-me’ experience, as demonstrated by the many companies that provide consumers with recommendations, bundled offers and in some cases, even virtual reality-based user experiences.
Companies such as Fits.me allow retailers to benefit from concepts such as virtual stores by providing the necessary expertise without the need for large upfront investments. Thomas Pink, a leading luxury shirt brand, was one of the first UK retailers to use the concept of a virtual fitting room, powered in this case by Fits.me. The shirt maker reports that customers who enter the virtual fitting room are more likely to buy a product than those who don’t (with a conversion rate that is 29.6% higher).⁷
Using consumer data to improve customer experiences makes services more convenient for users, but it could also lead to enterprises potentially making purchase decisions on behalf of customers – and the ethical issues that this would raise. Data-driven businesses that improve experiences and quality of life for consumers could also have other social benefits, such as creating new employment opportunities, especially related to last-mile delivery and data analytics.
1. IBM, “What is Big Data?”
2. The Guardian, EU states agree framework for pan-European data privacy rules, 2015
3. ITCportal.com, ““ITC : e-Choupal : Let’s put India first”“
4. informationisbeautiful.net, World’s Biggest Data Breaches
5. Conroy, P. et al., “Building consumer trust: Protecting personal data in the consumer product industry”, Deloitte, 2014.
7. Fits.me, Boosting Conversions and Improving the Shopping Experience with a Fits.me Virtual Fitting Room
The consumer industries are one of six sectors (along with automotive, electricity, healthcare, logistics and media) that have been the focus of the World Economic Forum’s Digital Transformation of Industries (DTI) 2016 project. An overview of the DTI program can be found here.
Our in-depth findings about the digital transformation of the consumer industries are available in a white paper, which can be downloaded here.
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