Monday 25 April 2011

Apple tracks your location - who cares?


Last week the world was rocked by the discovery that Apple iPhone users were being tracked. Apparently a users co-ordinates were being stored along with a date/time stamp on both the users phone and their desktop when synced. Even worse, it was then reported that this information was being sent back to Apple. Like something from a Bond novel, Apple was tracking the activities of millions of people, just waiting for when it could... well therein lies the question.

What exactly was Apple doing with this data and why were they collecting it? In fact, why do we care so much when we're all giving away our data every day. Was this just a slow news day or is there really an issue here?

Data privacy is a strange beast. On the one hand people are getting all worked up about Apple collecting location data (despite indicating this within it's terms and conditions) and on the other people are using the very same devices to check into Facebook Places, Foursquare or Color providing a wealth of location information (and photos) for all the world to see.

It seems that people don't have a problem with the data itself being collected or shared, its the fact that they didn't seem to know about it that is at issue and that they don't know why.

Google had the same issue when it was mapping it's Street View product. As well as collecting images of the streets it was mapping, it was also collecting WiFi information on the networks it came across. This has caused outrage at a national level with governments (and the EU) clamouring for an explanation, yet as F-Securereported, Skyhook has been doing this for years and nobody bats an eyelid. Indeed, it was recently reported that Google has stopped collecting WiFi data from Street View as it can now do this via the handsets (just like Apple)

BT also fell foul of this public feeling when its "service" Phorm started tracking users web visits (initially secretly) to provide better targeted advertising. There was an online privacy backlash which resulted in a European commission investigation and the service being pulled. At almost the same time however, Nectar was announcing a new service which seemed to do a similar thing, targeting advertising to people based on their behaviour. Called Consumer Connect, it serves up online adverts through Yahoo to opted in customers based on their offline shopping habits with Nectar. There was however no consumer backlash and it was reported positively in the media.

It seems then that our reaction to data privacy is based on the context of how the data is obtained and used, not just the data itself:-

  • Value Exchange - Do we understand why the data is being collected and what we get from it. Skyhook collect data to provide location based services which work in tandem with other technologies to map your location - thats useful. Both Google and Apple may have had the same intention but this isn't obvious. Increasingly consumers understand the value of their information and are willing to "trade" it in order to receive other benefits.
  • Clear Boundaries - With BT Phorm all web usage would be tracked to serve up better ads. This feels a little too broad and unecessarily intrusive. With Nectar Consumer Connect, users are clear about what data is being utilised, it's their shopping details, something most people realise is already being used for offline targeting of offers already.
  • Permission - Consumers like to do things on their terms. I can choose to share that dodgy photo on Facebook (although I may regret it later), I can choose to share my location when I check-in and increasingly I can choose to share this through services like Facebook Connect. However, when this information is simply taken without permission we feel aggrieved.

With data increasingly being monetised across many organisations, whether it is credit card transactions, loyalty programme transactions, web visits or phone calls, all of this information says something about us and has real-world value to many others.

This also means that increasingly companies may be collecting or using information in a way which consumers didn't expect. It doesn't matter if this usage is buried in your terms and conditions (Apple clearly stated they were collecting GPS information) - if it's not obvious to your customers then you risk a backlash from them when they find out.

This isn't hard though; just take a look at the Tesco Clubcard Customer Charter and Privacy Policy. This isn't pages of small print. Instead it's a plain English explanation of what Tesco will do with your data, how this benefits you and what to do if you don't want it.

If we want the benefits that come from increased usage of customer data we need to remember that ultimately it's the customer's data. Always ask permission as begging forgiveness rarely works.

Sunday 17 April 2011

Forget your competitors - focus on your customers

Breaktherules"Today, you're no longer trying to keep up with the competition... you're trying to keep up with your customers!"

This was a recent tweet by Mari Smith (@marismith) on a comment by Bryan Eisenberg (@thegrok).

It might only be a tweet, but it's a very interesting insight.

Our marketing efforts have traditionally been about the competition. We've got a better widget, better pricing or more outlets. We clean whiter, have greater coverage or reach parts others don't - probably.

The message is clear. It's better, faster, more - always about beating the competition.

There are very few unique products. Companies like Apple who create a brand new market with a brand new product like the iPad are rare. Typically you're selling a different version of something that already exists and trying to set it apart from the competition.

Loyalty marketing is no different. It's focused on building relationships that make doing business easier and more rewarding - the aim is to keep customers and by definition keep them away from competitors.

But if it's now less about the competition and more about keeping up with your customers, should this change our approach?

Well this is something that the book Blue Ocean Strategy discusses when it says:-

The only way to beat the competition is to stop trying to beat the competition. In red oceans, the industry boundaries are defined and accepted, and the competitive rules of the game are known. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Instead of focusing on beating the competition, they focus on making the competition irrelevant by creating a leap in value for [customers].

Blue Ocean Strategy talks of shifting your strategic focus from competitors to alternatives and from customers to non-customers. Focusing on alternatives - on how a customer may achieve the same overall outcome without using you or your industry forces you to think about what customers actually want and how well they are being serviced today. When you focus on customers you're free to break the rules and free to create them.

Apple broke the rules. They created something new that did the old things better. Browsing the web, reading books, playing games. The iPhone, iPod and iPad don't compete, they create new rules.

Groupon broke the rules. They focused on the little guy - the under-served small retailer to get deep and local discounts while everyone else was hawking the same coupons and discounts from the big boys.

Interestingly though you don't have to be Apple or a new start-up to do something different. A recent blog on netbanker shows how easily credit card companies could add value by just thinking differently about the competition - in this example the competition isn't another issuing bank, it's another way to reach customers spend decisions - namely Groupon!

Don't focus on the competition, make them irrelevant. Go break the rules.

Monday 4 April 2011

O2 free Wireless - is it for keeps?


Back at the end of January it was reported that mobile network operator O2 is planning to launch free, premium wifi hotspots across the UK for all - not just for their own customers.

It occurred to me at the time that this was an interesting, if slightly crazy proposition. Sure, I can see the reasoning for this for existing O2 customers. It provides a great retention offering and also frees up capacity on their network for data traffic - something which is growing exponentially. However, opening it up to the general public seems a large cost with little gain.

It begged the question as to whether this was sustainable?

More and more is becoming "free". The content we consume - from BBC News to Spotify - it's all available for free. Now, with O2 providing the access itself for free, it raises the question of who ultimately wins. In the words of Jerry Maguire :-

"Show me the money!"

Even Google who constantly innovate by providing increasingly complex consumer services for free have to make money; and they do. Information is power and more importantly information is money. By controlling the source of this information - over 84% market share - Google are able to sell access to consumers through targetted advertising.

So there we go, problem solved. O2 will make money through advertising and will build volume be making it free. All nicely packaged up - and that was how this blog was going to flow until I read a really interesting blog by Bill Gurley entitled "Android may be the greatest legal destruction of wealth in history" - go read it, it's a fascinating viewpoint.

In this blog Bill argues that Google provides products like Android simply to protect its core product - it's search engine - and the revenues associated with this. Describing the core product as an "economic castle" he argues that products like Android are simply "un-breachable moats" which are created to take out any potential threats to it's "castle", which in this case is anything which gets between them and their consumer. Bill goes on to say:-

In essence, they are not just building a moat; Google is also scorching the earth for 250 miles around the outside of the castle to ensure no one can approach it. And best I can tell, they are doing a damn good job of it.

Companies entering adjacent businesses simply to put pressure on competitors who were looking to enter their core market is nothing new. While working at IBM many years ago I was told a (possibly apocryphal) story about how they only entered the photo-copier market at the time to put pressure on a competitor who was looking to enter their core mainframe market.

However, Google's strategy could easily eclipse that. Offer your product for free (or as good as) to build a market which essentially you control so that revenues continue to flow into your highly profitable core product offering.

Could O2 potentially be doing the same thing?

Is free wi-fi less about making revenues from advertising and instead more about creating an "un-breachable moat" to protect their core mobile offering.

Making sure they own the connection with their customer's handsets (both current and potential), however they connect means they are less likely to be displaced or intermediated. In addition it provides a great way to displace competitors with the potential offered by the data - allowing them to possibly see the devices used, locations visited, sites visited - all of which can be used to help target both online marketing as well as their own.

Although both free wi-fi across the UK and a new mobile phone platform are not small projects, the principle of creating ways of protecting the core business is nothing new - this is ultimately what many loyalty programmes are trying to achieve.

The loyalty programme is trying to protect the core revenue - the economic castle - by creating an un-breachable moat around it. The points currency does this in part by ensuring customers have a vested interest in making their next transaction with you rather than your competitor. However the real power, the bit that makes it potentially un-breachable is the "context" you develop with the customer based on their data.

If this information is utilised to reduce ongoing "friction" in the relationship by providing better service and more relevant product offerings then competitors will struggle to breach the walls to capture your customers. If on the other hand the data stays locked up and unused, then this is tout-amount to leaving the drawbridge down and the doors open.