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HIGHLIGHTS


Co​nsumer trust—a digitally disrupted dynamic

How CPGs are managing personal data to build consumer trust in a digital age.


Nowhere to hide
Digital innovation has provided society with unprecedented access to review, rate and scrutinize the activities of enterprises, placing increased power in the hands of individuals to act independently and on their own terms. The fact that sites such as TripAdvisor are so successful (claiming to be the world’s largest review site with 375 million unique monthly visits1) is reflective of the paradigm shift where a new world of trust is emerging; transferring trust from the power of the institution to the hands of the individual2.

Whilst this level of unregulated exposure can be daunting for Consumer Goods enterprises, research suggests that these review platforms have the potential to generate significant revenue benefits for business; 92 percent of individuals trust their peers’ reviews of companies, whilst only 20 percent of individuals believe a company’s claims about themselves3.

From farmer to store
Losing consumer trust has big implications for businesses; not least from the financial impacts of boycotting4. Accenture analysis suggests that in the global Consumer Goods market, $85 billion is at risk per year through consumer boycotting. This has been catalyzed by digital transformation, which has brought a new class of engaged and informed consumers. These connected consumers have better visibility into supply chains and can rapidly share evidence of malpractice through social media and sharing platforms on a global scale (e.g. the horse meat scandal in 2013).

In response to this, Consumer Goods companies are increasingly using remote sensors and RFID technology to track their end-to-end supply chain, enabling more transparent practices and enhancing product quality and safety. Examples include Unilever, who are using technology to help trace 58 percent of their international supply of palm oil to 1,860 known sources.

Inclusive innovation
In terms of building trust, transparency is clearly key. Yet another consideration is engagement. Not only should companies be clear to consumers about what they are doing, but they must actively seek to involve consumers while doing it.

When Porsche wanted new innovation for a design of its 911 Carrera, they reached out to their network of 5 million Facebook followers and created a model which was based on the input of 54,000 individuals. Both Porsche’s online profile and volume of brand engagement increased as a result of this move; with consumers noting that they felt more loyal and trustful of a company they could engage with on such a meaningful level.

The freemium economy
As digital transformation accelerates, the collection of personal data is intensifying. A recent Accenture survey of nearly 600 business executives from around the world found that 80 percent of companies collect personal data directly from individuals, with a third of them using connected devices to collect this data. Facebook’s user base (1.5 billion people worldwide) current value (around $245 billion) and revenue growth (41 percent last quarter) are powerful evidence of the importance of the personal data economy.

At the same time, consumers are becoming increasingly aware of their limited ownership over personal data; as enterprises use complex EULAs (End User License Agreements) to share and even generate revenue from consumer information without inclusion of the individual.

“When you have models like Google and Facebook, which provide free services by relying almost exclusively on advertising for their revenue, they depend on knowing us as intimately as they can in order to add profit to their businesses. From a trust perspective, there is a problem with the structure of this free economy.”
ANDREW KEEN
Author of The Internet is Not the Answer5

Algorithmic governance
Consumer Goods companies are now more effective than ever at creating targeted advertising; using online activity to build complex profiles of consumer preferences and buying patterns. Across the board, this strategy has driven up sales and increased consumer engagement. Yet there is a difficult challenge here around just how influential online content should be. To encourage us to buy Marks & Spencer’s red roses because we googled ‘flowers’ and its nearly Valentine’s Day is perhaps understandable, but other examples push this online relationship of trust to its limits.

In 2012 Facebook conducted an experiment on 700,000 users which involved using an algorithm to attempt to manipulate individuals' emotions based on the content they viewed. Not only did Facebook prove that this could be successful, but also that this sort of experience is currently perfectly legal6. Without legislation it is difficult to fully understand the boundaries of this relationship, as Richard Dent (University of Cambridge) notes, “if Facebook can influence the emotions of its users, it could feasibly use its algorithm to influence people towards specific political perspectives or worldviews.”7

Way forward
The transformation of trust between individuals and organizations has been catalyzed by the explosion of digital into the landscape of consumption. Yet the rate and extent of digital change is presenting difficult trust-based questions for Consumer Goods businesses which, if left unanswered, may place any existing consumer relationships in jeopardy, and inhibit future progress. CEOs must address this challenge immediately, and must do so by employing three key mechanisms; awareness, transparency and engagement.

Footnotes:

1 Trip Advisor 2015. https://www.tripadvisor.co.uk/PressCenter-c4-Fact_Sheet.html

2 The Changing Rules of Trust in the Digital Age. Rachel Botsman 2015. Harvard Business Review. https://hbr.org/2015/10/the-changing-rules-of-trust-in-the-digital-age

3 Consumer trust in traditional advertising declines in UK, while a recommendation from friends remains most credible. Nielsen 2015. http://www.nielsen.com/uk/en/press-room/2015/consumer-trust-in-traditional-advertising-declines-in-uk-while-a-recommendation-from-friends-remains-most-credible.html

4Accenture analysis

5 Interview with Andrew Keen conducted on behalf of the World Economic Forum, 28.10.2015.

6 Everything We Know About Facebook's Secret Mood Manipulation Experiment – The Atlantic. Robinson Meyer 2014. http://www.theatlantic.com/technology/archive/2014/06/everything-we-know-about-facebooks-secret-mood-manipulation-experiment/373648/

7 ‘A tyranny of algorithms': R(w)SM guest blogger Richard Dent responds to Joss Hands' talk. University of Cambridge, 2015, http://www.smhr.sociology.cam.ac.uk/blog/RwSMHandsDent