The government's consumer empowerment strategy, announced last week, includes a flagship initiative intended to encourage companies and regulators to release personal data back to individuals in an open, reusable (electronic) form.
The government has recruited an impressive line-up of companies to form working groups to make it happen. They include Barclaycard, MasterCard, HSBC, RBS Group, Lloyds TSB, John Lewis Partnership, Groupe Aeroplan (Nectar), Home Retail Group, Centrica, Southern and Scottish Energy, Everything Everywhere (T-Mobile/Orange) and Google.
How big a deal is this? Individuals already have the right to see what data organisations hold about them under the Data Protection Act. So making the data available in an 'open, reusable form' may simply make requests for data slightly more common, which could be a big 'so what?'
But for the government, if not the brands, the underlying intentions look radical.
This, for example, is what employment and consumer minister Ed Davey said in a speech previewing the announcement: 'We are getting behind a radical shift of power. For years, skilled businesses have realised the value of good consumer management. We're trying to shift to a world of what you might call vendor management, where consumers have control over their own data, over their own choices. They are the ones setting the agenda for businesses.'
Taking charge of relationships
The key phrase here is 'vendor management, where consumers have control over their own data'. This is a reference to vendor relationship management (or VRM), which is a mirror image of customer relationship management, or CRM. Under CRM, organisations equip themselves with the tools to manage their relationships with their customers. The organisation is the relationship manager - the one in control.
Under VRM, individuals are equipped with the tools to take charge of their relationships with their suppliers. VRM turns the individual into the relationship manager, choosing which relationships to cultivate, and specifying how these relationships should be managed.
So, how could the customer as relationship manager manifest itself? You could say that being able to opt in or out of electronic marketing communications (as required by current law) is one incipient form of relationship management. But it could extend all the way to individuals storing their own data, deciding what information should be shared with which organisation, for what purposes, and under what terms and conditions.
Personal data release signals a step in this direction. The idea behind it is that individuals should not only be able to see the data companies hold about them, but that they should also be able to use this data for their own purposes.
Some potential examples for consumers include:
- Taking data about household energy consumption to independent consultants for advice on how to reduce energy bills and become greener.
- Taking data about actual mobile phone use to price-comparison services that cut through tariff complexity and confusion to find the best deal for the individual.
- Combining data about purchases to create a genuine single customer view. For example, while Amazon knows the books I buy from its site, it doesn't know the titles I buy from other booksellers. If I combine data from all my booksellers, I create a much more accurate, rounded picture of my buying habits than any current silo-based view, which is far more valuable for that reason. I could then share this data with chosen suppliers or advisers for next-best purchase recommendations.
- Combining data from several individual financial-service suppliers to create a complete picture of finances and using specialist tools and services to analyse spending patterns and trends and make better moneymanagement decisions.
There is a hint of something really big here: a fresh category of personal information management services (PIMS) that help individuals acquire and use the information they need to manage their lives better. This could turn managing personal data for, and on behalf of, the individual - empowering the individual - into an industry in its own right.*
Seen from this perspective, the strategic implications of the government's initiative could be profound. They unfold at three levels: fixing the current flaws in CRM; moving toward a new information-sharing relationship with individuals; and seizing the innovation and growth opportunities of becoming a PIMS provider.
CRM's flawed model
CRM as we know it suffers from four inherent structural flaws. First, it captures data about individuals at particular snapshots in time, which means the value and accuracy of this data decays quickly. Because the process is driven by data-harvesting from interactions and transactions rather than deliberate data-sharing, it's hard to keep the data up-to-date, resulting in high datamanagement and cleansing costs for relatively low-quality data.
Second, because CRM is an organisation-centric process revolving around the customer's interactions with one particular organisation, it never sees a genuine single customer view, as outlined in the book-buying example above.
Third, thanks to the above two reasons, the data CRM uses to drive marketing and other activities is partial and inaccurate. This creates waste on the side of the organisation and irritating irrelevance on the side of the customer.
Lastly, organisations' attempts to fill the holes in their data suck them into data-gathering activities that many individuals regard as intrusive, and therefore undermine trust.
For these reasons, the current model of CRM can never deliver its original grand relationship-building dreams. Counter-intuitively, however, by releasing data back to individuals, marketers can begin to address all these flaws.
At the first and simplest administrative level, customers can use the process to check whether their details are up-to-date and correct. Second, the process of handing data back to the individual in electronic form requires fresh data-sharing rules, standards and, possibly, infrastructure. The likely result is that individuals will also be able to share their data with organisations. 'My library' as opposed to 'my book purchases from you' is a case in point. Looking to the future, VPI - volunteered personal information - of this sort may become the most important source of customer data.
Closely connected to this is trust. The way in which organisations treat personal data is fast becoming a proxy for trust-worthiness. Open, above-board, mutually beneficial data-sharing gets organisations back on to the 'trust' high road and off the 'surveillance and stalking' low road.
Increased information-sharing with customers creates a big opportunity for brands to build on their existing relationships to become PIMS themselves: if anybody is going to help individuals manage and use their data better, why not the brand?
Many marketers' knee-jerk reaction to the government's proposals will be: 'Over my dead body... we've spent millions of pounds gathering and managing this data, it's critical to our competitive advantage. The last thing we're going to do is just give it away.'
On closer inspection, however, more thoughtful marketers will recognise the government is opening a door to companies to rebuild their relationships with customers and reinvent CRM.
Working out how to do it - so that precious data doesn't end up in the wrong hands, for example - will require a lot of thought. Nonetheless, the opportunity to place customer relationships on a different footing is just too good to miss.
*See the report 'PIMS: a market poised to disrupt'
Alan Mitchell is a respected author and a founder of Ctrl-Shift and Mydex.