In the ever-changing landscape of digital life today, marketing research is showing that personalization and behavioral targeting are increasingly emerging as some of the most significant factors in business success.
In a fast-paced culture of convenience such as ours, we no longer just love it when our digital experiences are tailored to our particular interests and needs, but increasingly, we feel a bit frustrated when they aren’t.
Personalization is now shifting, as all new technologies inevitably must, from a “wow factor” to a default expectation.
At the same time, the significance of safeguarding online privacy is also becoming clear, with various privacy controversies and data leaks frequently in the news. The eerie recognition among the general public that aspects of their digital lives they had considered private are actually being collected and used for advertising, most notably conversations around their phones’ microphone, makes the topic of online privacy impossible to ignore.
In such an environment, how should a business optimally use behavioral targeting to provide excellent customer experiences, without overstepping the boundaries of privacy people feel?
People's Conflicting Preferences
Paradoxically, having a product you merely mentioned in a conversation presented to you in the next moment, while eerie, is also undeniably convenient. It’s almost as if the whole of the internet is a robotic servant, carefully listening to your every whim, and then offering them up to you on a platter (with a price tag, of course).
We want to have our cake and eat it too.
That is, we want our digital experiences highly relevant and tailored to us, but also want to feel we have some semblance of control over exactly what information is collected, and how it is used. This is known as the privacy paradox, which we’ll discuss more extensively below.
In this article, we will examine this difficult question in detail, and address how to make informed and evidence-based decisions about personalization and behavioral targeting, as online marketers.
The Power of Personalization and Behavioral Targeting
For some privacy-conscious marketers, it might be tempting to simply forego personalization, so as not to spook their customers.
However, the folly of this conservative approach becomes clear the moment we delve into its undeniable effectiveness, and transformative impact on user experiences and business success.
In this regard, the numbers tell an eloquent story. Various marketing research studies and case studies have consistently showcased a significant uptick in conversion rates as well as user satisfaction when behavioral targeting is brought into play.
If we want to make evidence-based decisions as marketers, the evidence for personalization is undeniable. Even if it make us a little uneasy.
It’s not difficult to see why, either. The less time and energy we have to cut out of our busy lives to look for the specific products and services we want, the better our experience will be, and probably the more products/services we will end up purchasing.
The Relevance Factor
The heart of personalization is relevance, and the primary way to know what’s relevant is behavioral data. It's the secret ingredient that ensures you have the right knowledge about users to help them find what they seek effortlessly.
Every click, hover, and linger on a website leaves a trail of data, painting a unique portrait of each individual user. Website personalization utilizes this portrait to present users with content that resonates deeply.
These virtual nods, when done artfully, tell users, “We understand you,” creating a sense of trust and familiarity with your brand.
I trust you don’t need much more convincing that personalization and behavioral targeting have a significance for business success that is clear now, and only increasing over time. As we journey deeper into the realm of personalization, the next milestone on our path is the profound connection between personalization and the delicate domain of online privacy.
Data Collection for Personalization
Understanding the intricacies of data collection for personalization is also critical background for an optimal approach. It involves gathering an array of data types, each playing a unique role in shaping personalized experiences.
These may include any of the following:
- Behavioral Data (First-Party): Information gathered directly from user interactions with your website or application, including pages viewed, products purchased, and the time spent on each.
- Behavioral Data (Third-Party): Data sourced from external providers that offers insights into user actions across the broader internet, helping to identify interests and behaviors.
- Geographic Data: Location-based information, which can include a user's country, state, city, or even precise coordinates. This data is useful for tailoring content based on regional preferences.
- Demographic Data: Data such as age, gender, marital status, and household size, which can be crucial for personalizing content related to products and services.
- Professional Data: Details about a user's profession, including industry, company, role, and work history. This type of data can be valuable for B2B personalization.
- Psychographic Data: Information related to user attitudes, values, interests, and lifestyle choices. It helps in understanding what motivates users.
- Historical Data: Records of past user interactions and behaviors on your website, which can be used to predict future preferences.
- Purchase History: Data about a user's previous purchases, which can guide recommendations and offers.
- Device Information: Details about the user's device, such as type, model, operating system, and screen size. This helps in optimizing the user experience for specific devices.
- Social Media Activity: Insights from a user's social media accounts, which can inform personalization efforts and help to identify trends or affiliations.
- Search History: Details on what users search for on your website or even in search engines, which can be used to refine content recommendations.
- Customer Feedback: Information derived from surveys, reviews, and feedback forms, which can assist in refining content and services based on user preferences and concerns.
- Engagement Metrics: Data on how users engage with your site, such as click-through rates, bounce rates, and time spent on pages.
- Communication Preferences: User preferences for how they want to be contacted, whether via email, notifications, or other channels.
- Language and Localization: Language preferences and other localization settings, which are vital for providing content in a user's preferred language.
- E-commerce Behavior: Data related to online shopping habits, such as cart abandonment, product views, and purchase intent.
- Customer Segment Data: Data about which customer segment a user belongs to (e.g., new visitor, returning customer, VIP customer), which can drive personalized promotions.
- Content Engagement: Details about the type of content users engage with, whether it's articles, videos, or specific topics, aiding in content recommendations.
- Device and Browser History: Information on a user's browsing history, including the websites they visit, which can guide content recommendations.
- Privacy Preferences: User-specific privacy settings, indicating the level of data they're comfortable sharing and the degree of personalization they desire.
Among these data types, behavioral data is of primary importance, offering a window into how users navigate the digital landscape. This includes tracking their clicks, time spent on various pages, and other specific actions they take, providing valuable insights into individual preferences and tendencies.
Of course, various other types of data are also useful, depending on the company, website, business model, and strategy.
Geographic data, for instance, can be referenced against publicly available weather data at their location, for retailers to show seasonally relevant product recommendations or promotions. The industry of the visitor can be used on a B2B site, to ensure that homepage messaging is relevant and not generic, for a company who services many verticals.
The ideal strategy is to have as much data of various types as possible on your users, within the bounds of privacy expectations.
First-party vs. Third-party Data
All data has to come from somewhere. As you look over the list of data types above, you may notice: these data points come from a variety of sources, ranging from what the user has explicitly told you in a form, or from their activity elsewhere on the web, or perhaps even their Google searches.
However, the two main categories of where this data is collected are first-party and third-party data. If you view it through the lens of a website looking at any given user browsing, there is the data about them that can be “seen” or tracked directly from their session activity on that website (first-party), and data that comes from elsewhere and has to be matched to them (third-party).
Third-party Data: Where the “Creepy Factor” Lurks
The latter of these two is much more controversial, and recent regulations are actually making it difficult to use third-party data in some parts of the world, for that reason. There is even talk of a coming “cookieless world.” This is because it crosses a perceived boundary in the minds of users, and makes them feel watched across their entire online activity.
It also makes it obvious that their personal data (what they’ve been doing online, which can sometimes feel quite private) is being passed around, bought and sold. Until recently this was done entirely without users’ consent on most websites, which is why now practically every site has a cookie/tracker opt-in form upon arrival.
First-party Data: Business as Usual
First party data, on the other hand, is more or less expected by most users. There is an understanding in most users’ minds that when they are on a site, that site will watch and use what they do there, to try to give them what they want.
First-party data personalization is a bit like having a salesperson in a store, making suggestions based on what you’ve shown an interest in while shopping there. Third-party data personalization, if done poorly, can be like having a salesperson know what you were talking about to your spouse in the bathroom three days ago, and suggesting a product (say, a laxative) based on that. Quite a different experience, to say the least.
For this reason, our concerns about online privacy in relation to personalization and behavioral targeting are much more pertinent to third-party data usage than to first-party, although both must of course be considered.
The Personalization Privacy Paradox
The “privacy paradox” is what was referred to at the beginning of this article, and it encapsulates the fascinating duality of human behavior in the digital sphere.
The fact that we value our online privacy and data security is really just an extension of our broader sense of personal privacy and ownership. We live in homes with walls and locks on the door, and in many places, we have a legal right to lethal action if that home is violated by a stranger. We are certainly far from bees living in a hive.
The concept of privacy is therefore deeply felt as a fundamental right, and a default expectation of public life by most people, at least in Western cultures.
Just as the thoughts in our mind need not be known unless we intentionally reveal them through communication, there is a strong ethical sense that access to what is ours should only be granted by us, it’s just that the concept of “data” as personal information with a market value is only newly dawning in the minds of most people.
The Balancing Act Every Digital Marketer Must Perform
However, this becomes a paradox when juxtaposed with the desire for personalized content, which is to say, for convenient online experiences. Thanks to personalization advancements by large brands, we have grown accustomed to tailored recommendations, curated feeds, and a digital experience that seems to intuitively understand our preferences. Walking the tightrope of this paradox poses a serious challenge for companies today.
Navigating the privacy paradox involves addressing the very real concerns regarding data collection and user tracking.
The specter of data breaches and misuse controversies looms large in the collective consciousness, driving the demand for stringent data protection regulations.
Users want to know their information is handled responsibly and ethically. They're concerned about the extent of tracking, its implications on their personal lives, and the security measures in place to safeguard their data. All of this is completely understandable, too, however inconvenient it may be for brands eager to optimize their marketing efforts with user data.
Striking this balance between customization and privacy calls for a transparent and user-centric approach to data collection. This represents a new paradigm where personalization thrives within the bounds of responsible data practices. These boundaries can ensure that the online behavior of each user remains respected and protected. But what are they?
Privacy Regulations and Compliance
The clearest and most necessary boundaries involve the emergence of robust and evolving privacy regulations, which continually shape the landscape as this new category of laws are written or changed in various countries.
Key regulations like GDPR (General Data Protection Regulation), CCPA (California Consumer Privacy Act), and LGPD (Lei Geral de Proteção de Dados) have set a new standard for data protection and privacy practices. Though they are each unique, they all necessitate a shift towards a user-centric approach, where individuals gain greater control over their data.
While the importance of consent is broadly recognized in other areas of life, in the domain of digital privacy, it has taken a little while to catch on, and be legally protected.
One of the fundamental shifts brought by these regulations is the importance of obtaining user consent; if you want to know things about users in order to market to them more effectively, especially if you want to sell that information to third parties, you need their consent to do so.
Consent Can Be a Matter of Perception
However, consent can also be tricky. It’s more often implied than explicitly given, and there are many situations online in which we give explicit consent by agreeing to a user agreement we have never actually read. This leads to the stipulation that consent must also be informed.
Written into most regulations is the requirement for transparency, that users must be informed about the data collected, how it's going to be used, and have the right to grant or deny their permission.
This means that even if there is a long user agreement written in legalese that no one will ever read, there needs to be some simpler summary with all of the most relevant aspects of the agreement, which users can read, understand, and deny or agree to.
This represents a paradigm shift that, while requiring some effort to adjust to for online businesses, creates clear and feasible boundaries within which user data can be utilized for behavioral targeting and personalization.
Opt-in mechanisms are a vital component of user empowerment, and these days, almost every website we visit has the familiar “I agree” or “Reject all cookies” options. While mostly prompted by data privacy regulations such as GDPR, this same mechanism can also be used for personalization and behavioral targeting.
Users can be asked whether they want their information to be used for a more tailored experience with the brand, and if not, can experience the generic version of the website.
In the interest of user empowerment and maximizing opt-ins, its recommended that this be asked separately from other third-party cookie opt-ins, so that the user understands that this is solely for the improvement of their experience on that specific website. In this context, most users will opt in.
Privacy Settings: Handing Users the Reins
In addition to opt-in forms, users can also take active control of their online privacy by engaging with the privacy settings and preferences offered by websites and online platforms. Privacy settings, typically accessible through user account settings, provide individuals with the ability to set their data-sharing preferences. This means users can specify what type of data they are comfortable sharing and to what extent.
By delving into privacy settings and adjusting them to their preference, users can navigate the fine line between personalization and privacy according to their own unique comfort levels; essentially, this is personalized privacy.
Privacy settings can also be informative. It can also be very helpful to provide a reminder to users who have never accessed their privacy settings, that they exist, which may prompt some users to investigate and be more aware of how their data is or is not being shared.
Privacy-centric Personalization Practices
So far, we have dealt mostly with the firm boundaries set by data regulations and user permissions. However, even within those boundaries, there is a more delicate art of enhancing user experiences while respecting data privacy.
Among these practices, anonymization and pseudonymization stand out as essential tools.
Anonymization involves removing personally identifiable information (PII) from user data, ensuring that the data is no longer tied to specific individuals.
Pseudonymization, on the other hand, replaces PII with artificial identifiers. This method helps in creating customized experiences based on user behavior patterns, even while associating it with individual users, without directly associating their anonymous user profile with any PII.
Accomplishing this can be as simple as excluding any potential PII collection for users until they have reached a certain level of consent to such collection.
Much of what personalization and behavioral targeting software uses to optimize user experiences need not be tied to PII, but can be performed anonymously.
For instance, you can know what “user169384” clicked and when, what ad campaign referred them, how many times they have visited the site and what pages they spent time on, what city they are visiting from, and many other things, without knowing anything that would personally identify them.
At the Intersection of Personalization and Privacy
Businesses also have at their disposal a range of additional personalization tools designed to merge personalization with privacy, such as consent management platforms (CMPs). These tools allow users to manage their consent settings, enabling them to choose the extent to which their data is utilized for personalization. These ensure that users have the final say, putting them in the driver's seat when it comes to their data.
Making user consent explicit is also in the interests of the business, since there is more of a legal argument to be made that every effort was made to help users make informed decisions about their privacy, should any disputes arise.
By employing these techniques, businesses can provide tailored content while maintaining a strong commitment to user privacy, balancing personalization and data protection.
On the other hand, in many contexts, it is less likely that users will be concerned about PII. This is especially true when your website has any kind of login or form that users have filled. Once users have explicitly given you their personal information through account creation or otherwise filling out a form, they generally understand that you will have and use their personal information.
In this case, they will probably be happy to have you display their first name in your homepage content, for instance. The key here is that they have explicitly consented to this level of familiarity with your brand, by creating an account or filling some kind of form.
The key to understanding how this balance can be best struck for each individual user is to understand the level of consent, explicit or implied, that they have individually given.
You can think of these like concentric circles overlapping between your brand and the customer. At the outer range or layer is the anonymous visitor who may opt in for personalization that does not involve PII, but then at the deeper layer or inner circle are customers who have explicitly given you their personal information, and therefore probably don’t mind your using it to tailor their experience of your brand in highly personal ways.
The Future of Privacy in Personalization and Behavioral Targeting
The future promises a fascinating interplay between personalization and privacy, where businesses must adapt and stay ahead of the curve to cater to users' needs while respecting their data concerns.
As the integration of user data and experiences across the whole digital domain becomes more and more common and advanced, it’s possible that users may have global privacy preferences which are referenced by any digital entity they come into contact with.
Google accounts which currently allow convenient sign-in on practically every app and website are likely the beginning of such global profiles, which may grow more complex in terms of the data and/or preferences that are shared, beyond the simple convenience they currently provide.
Ongoing developments in data ethics and regulations will also continue to shape the landscape. Many experts believe that users have the right to benefit from whatever value companies extract from their data, which, again, would be aided by a global profile of some kind. It’s possible that the trading of data between companies may become more explicit to users, and users may be entitled by law to some percentage of whatever profits are paid.
Evolving Expectations and Removing the “Middle Man?”
A more direct exchange between the user and data brokers is also possible, so that users give brokers permission to track their behavior and sell it to companies, on the condition that the user gets some share of what is the profit. On the other hand, greater centralization and even potential nationalization of internet access or social media in some countries may also lead to a more centralized and less market-driven approach to data exchange.
Finally, while technologies advance, so do user preferences and expectations.
As individuals grow more and more familiar with their preferences being communicated automatically when they sign in to a new network, they’ll likely also feel less of a need to give each and every website their specific preferences. Rather, they will expect that their preferences are already understood.
In closing, throughout our discussion of personalization and privacy, from the individual to the large-scale, the balance between technological advancements and individual rights and expectations is the key theme.
In this broader sense, the question of how to conduct behavioral targeting while respecting user privacy is really just a particular iteration or case of the larger question of how rapidly evolving technological possibilities will fit with and perhaps change our existing values.
In any area where the particularities change so rapidly, it is critical to maintain an understanding of the more fundamental principles, such as the basic ethical principles underlying concepts of privacy. This will allow those who use rapidly evolving marketing technologies to do so in such a way that both convenience and respect for user privacy are maximized, and neither comes too much at the cost of the other.