How Data Shapes Our World and Wallets

Solutions Review’s Contributed Content Series is a collection of contributed articles written by thought leaders in enterprise tech. In this feature, Verisk Marketing Solutions’ Head of Data Governance Christine Frohlich offers commentary on how data shapes our world and wallets.

The marketing industry is undergoing a significant transformation, driven by changing consumer expectations and the increasing scrutiny of data privacy practices. We’ve entered an era where consumers are more sophisticated than ever, with a heightened consciousness surrounding the use of their personal data and a willingness to share it in exchange for meaningful value. While there are certainly challenges ahead amidst this shifting landscape, there is also a great opportunity for marketers to build stronger relationships with consumers and create more meaningful experiences.

Consider this: every year, consumers enjoy over $32,000 worth of free online content thanks to advertisers who bid on those users’ attention. Additionally, advertising activities sustain nearly 20 percent of all jobs in the United States. Yet, in the eyes of both the general public and lawmakers, the broader implications of our data-driven economy often go unnoticed. It’s high time to challenge this narrative and recognize that this industry offers tangible benefits to both consumers and the nation’s economy as a whole.

Beyond its role in creating elevated user experiences and improving ROI on ad spend, data shapes product development, pricing strategies, and distribution decisions. Moreover, it’s a catalyst for fair access to products and services and a driving force behind competition. Follow along as we shed light on the impact of data beyond traditional applications while exploring the delicate balance between consumer data and privacy.

Data & Consumer Privacy: A Balancing Act

Consumer privacy has been heavy on the minds of legislators throughout 2023. With new laws in effect throughout Connecticut, Colorado, Utah, Virginia, and other states passing privacy legislation, businesses across all industries are taking heed and refining their data governance strategies and programs. Navigating the ever-changing patchwork of state laws remains a challenge, especially when today’s consumers are more self-aware than ever.

While consumers are increasingly vigilant in protecting their data, they expect businesses to act responsibly as guardians of their personal information (PI). Consumers also seek personalized offers from the brands they engage with, however, they often hesitate to share the information necessary for this personalization, creating a challenging paradox for marketers. Considering the amount of high-profile data breaches we’ve seen over the past 5 years or so, it comes as no surprise that both users and businesses are increasingly motivated to safeguard their information and systems in response to growing consumer apprehension.

This dynamic shows that consumers are acutely aware of why businesses collect data for their own internal use. However, the broader conversation often leans toward a negative perception, overshadowing the various benefits for consumers. In fact, we’ve even seen calls for the use of consumer’s personal information to be eliminated or highly restricted. While this may initially seem attractive to consumers, the reality is that the marketing industry offers consumers much more value than meets the eye.

The Internet as a Double-Edged Sword

It goes without saying that widespread internet access has fundamentally reshaped our lifestyles, the way we acquire knowledge, and our modes of communicating with one another. Users have access to a virtually boundless repository of information, making them more informed and forward-thinking than ever before. Consumers can find immediate answers to nearly any question, stay current with the latest developments in breaking news, and effortlessly connect with distant family and friends. Efforts to quantify the worth of these services have produced varied findings, but a consistent theme holds true: consumers attach substantial significance to these offerings.

One largely cited study estimated the annual value placed by the median consumer on various digital services in 2017. According to their findings, search engine services were valued at approximately $17,530 per year, while email services held an estimated worth of $8,414 per year. Digital maps were deemed valuable at around $3,648 annually. Additionally, content services such as video, social media, and music were collectively valued at $1,663 for the median consumer. When considering e-commerce ($842) and messaging ($155), the overall estimated value reached $32,252.

Alongside the countless benefits that the internet offers, there exists a trade-off that users must navigate. While sharing personal data with the corporations and advertisers you interact with can seem intimidating, it’s in exchange for a wealth of services and conveniences that have undoubtedly revolutionized our lives. Many of today’s highly sophisticated users willingly embrace this trade-off, recognizing that the benefits of the internet far outweigh the costs. Others continue to hold reservations about data monetization, viewing it through a more critical lens.

Data’s Expanding Horizon

Marketers, advertisers, and data brokers alike are constantly working to dispel the myth that data monetization is “bad”. What many consumers and legislators may not recognize is that data drives more than just advertising, and the benefit of advertising goes far beyond simply selling goods and services.

Fostering Competition

Competition is a fundamental driver of the US economy. According to the FTC, competition in America is about price, selection, and service. It benefits consumers by keeping prices low and the quality and choices of goods and services high.

It’s often overlooked how much consumer data helps small businesses and advertisers compete with larger brands. In fact, research across a variety of platforms has proved time and time again that the smaller players benefit most from user data, such as browsing activity and online purchases. In a large-scale experiment with more than 70,000 advertisers on Facebook and Instagram, researchers found that removing the ability to use offsite data would result in a 35 percent increase in customer acquisition costs—disproportionately hurting smaller advertisers.

This is true globally, as seen under the EU’s General Data Protection Regulation (GDPR). Large e-commerce websites saw an 8 percent reduction in revenue due to GDPR restrictions, while their smaller counterparts experienced even greater losses, with a 16 percent decline in revenue.

Ensuring Fair Pricing

Data-driven personalization is incredibly powerful from a competitive standpoint, but also a pricing standpoint. Personalized pricing, the idea of offering different prices to customers based on location, purchase history, and browsing behavior, is widely criticized. Some worry that personalized pricing may not fairly represent what products are worth to consumers and could potentially lead to discriminatory pricing based on factors like race or gender. However, with the proper legislation in place to safeguard from this type of discrimination, personalized prices can actually improve outcomes for both consumers and brands alike.

Personalized pricing operates on a similar principle as the progressive tax system in the United States. While a one-size-fits-all pricing model may seem fair in theory, the reality is that it’s inherently exclusionary. By personalizing prices, we increase access to features and benefits for those who would otherwise be excluded. During a panel discussion at Verisk Marketing Solution’s VIA Consumer Insights & Experience Summit, Jean-Pierre Dubé, Marketing  Professor at Chicago Booth School of Business, referenced a study revealing that supermarket chains adopting more granular pricing would lead to poor neighborhoods paying 9 percent lower prices on average. This not only enhances the shopping experience for customers but also expands the horizons for brands, enabling them to reach previously untapped markets.

Maximizing Product Performance

In the realm of product development, data-driven insights allow companies to identify trends, consumer preferences, and areas for improvement, driving innovation across all industries. By analyzing customer behavior, feedback, and market demand, businesses can create products and services that are more aligned with the needs of their target audience, resulting in greater customer satisfaction and loyalty. Not only are customers more satisfied, but the product development cycle is more efficient. When brands truly understand their audience, they unlock the potential to streamline development timelines, mitigate risks, and foster innovation. Designers can use data to catch issues early and make changes, avoiding costly rework, and product recalls.

Similarly, customer insights shape distribution strategies. Companies can make informed decisions about inventory management, shipping logistics, and distribution channels. This approach reduces unnecessary overheads and waste while ensuring that products are available when and where consumers demand them.

Bottom Line

The impact of data reaches far beyond the realm of advertising, affecting vital facets of both the corporate world and broader society. Smaller businesses and advertisers, often unsung heroes of the market, reap immense benefits from consumer data. Removing their access to this data leads to skyrocketing costs, disproportionately burdening these underdogs. While legislators are well-intentioned with privacy regulations geared towards protecting individuals, many simply don’t understand how costly some of these regulations can be.

Consumers are rightfully wary of how their information is being used, but it’s important to look at the bigger picture and recognize just how much our day-to-day lives are impacted by data-driven decisions. Understanding the multifaceted role of data in fostering a healthy economy is pivotal to the future of marketing and commerce. Data isn’t just a piece of the puzzle; it’s the cornerstone of our digital world.