UK less trusting of consumer-facing businesses than 3 years ago

19 September 2018

As consumers and businesses become more reliant on technology, they are also feeling more exposed to risk. According to a new report, UK consumer attitudes indicate levels of trust relating to the use data collection and data use by consumer-facing businesses is now lower than it was three years earlier.

A revolution in digital technology has helped businesses to connect more directly with potential customers than ever before, via a cornucopia of new platforms for engaging with them, or alternatively by creating new channels through which to market and sell items. At the same time, the digital transformation of modern consumerism has simultaneously created new avenues through which customers can to shop for and engage with brands. The changes wrought by digital transformation have both allowed agile new start-ups to compete with established market incumbents, who in response have also developed new business models to cater to this changing consumer behaviour.

According to a new research paper by Deloitte, titled 'Risky business: Keeping up with the changing consumer', while digital transformation can improve the efficiency of operations and ultimately reduce costs, however, it comes with a new and unique set of quandaries which society, and capitalism, are both struggling to adapt to. The report from the Big Four firm, which analyses the opinions of more than 2,000 UK adults, contends that adopting new technologies often requires changing both the way that people work and the culture of an organisation, without which a number of risks, including cyberthreats and the misuse of personal data can emerge, while many businesses are left pondering how to identify, evaluate and mitigate such risks.

Relationship between the rate of technology adoption among individuals and businesses

Perhaps the most alarming revelation of Deloitte’s study is that analysts believe technology is evolving at a faster rate than businesses and governments can manage. While the rate of change in technology has always led change on the individual, corporate, or government fronts, the digital era has seen this gap accelerate dramatically. In the business sense, this has resulted in shortening product lifecycles and challenging investment cycles and IT ‘roadmaps’, while with regards to individuals, many are left unaware of just how technology might be leveraging their data and information for interests entirely unbeknown to the customer. At the same time, public policy has struggled to remain abreast of the latest technological changes to regulate this potential use or misuse, leading to regulations which struggle to keep pace with the corporate use of technology broadly leaving consumers under-protected.

An example symptomatic of this is the recent news that Facebook would face a mere £500,000 fine by UK authorities for its part in the Cambridge Analytica scandal. Britain’s Information Commissioner Office (ICO) announced the global firm would be hit by the maximum amount possible according to the UK’s Data Protection Act, which first came into force in 1998. The social media behemoth, which raked in revenue of £500,000 every five and a half minutes in Q1 2018, could have faced a much more severe punishment had the debacle come to light months later. In that case, the ICO would have likely been able to call on the European General Data Protection (GDPR) to issue a far more severe blow, with the GDPR famously capping fines at the higher level of £17 million (€20 million) or 4% of global turnover – depending on which is largest. In Facebook’s case, 4% of global turnover amounts to a colossal £1.4 billion ($1.9 billion), demonstrating just how costly the sluggish adaptation of public policy has been in regard to holding coporate interests accountable for their use of digital technology.

Lack of trust

As a result, in the three years since Deloitte last explored the misuse of data, levels of consumer anxiety regarding organisations either holding or having access to their personal data has risen significantly. Following a number of high profile incidents which have been widely reported in the media, this comes as little surprise, particularly in regard to concern about social media companies and individual political parties, which could hold and access to the data of consumers, targeting them with tailored messages in an indirect and often unaccountable manner. Since 2015, the number of consumers who know how to control the level of data or information available about them online has slumped below half. After a 3% fall, now just 48% are confident of this matter.

Consumers’ attitudes to data security and cybercrime

At the same time, a number of expectations have risen dramatically with respect to the security measures employed by firms when holding the data of customers. On this front, nine in every 10 consumers now believe that companies should be taking more drastic action when handling their data. 90% expect companies which collect or process personal details or financial transactions online to refrain from sharing this data with third parties unless they request my permission to do otherwise, while 91% expect such firms to keep this data secure from criminals. Above all, 92% suggested that companies have to be held responsible for ensuring the security of user data and personal information online – suggesting a rising inclination that, to this point, they have not been, or could have done more to be responsible.

What may come as a surprise, and potentially gives a beleaguered sector further cause for concern in 2018, is that for consumer businesses, there is a major level of mistrust shown towards retailers and brands. Two-thirds of consumers are now concerned about online retailers having access to their data, in stark contrast to just 54% in 2015. At the same time, 67% noted growing concern at brands having access to their data, a 21% boom on the 46% in 2015. On top of this, three-fifths of consumers told Deloitte they are concerned about supermarkets holding or having access to their data compared to just 41% in 2015. This could have key ramifications for the likes of AR experiences in stores, which some fear could be used to monitor shoppers, while consumers are also growing increasingly concerned about travel agents, hotels and airlines having access to their data.

The survey will present the retail and consumer goods sector with a major headache going forward, as the market attempts to reinvent itself, following a sluggish 2018 in which multiple long-standing brands in the UK have faced administration or issuing profit warnings. Digitalisation is often thought of in the sector as a kind of silver bullet for its problems, with firms emulating e-commerce players in a bid to turn around poor sales figures. With the levels of distrust aimed at digital retail, however, this transformation could be compromised, and its true potential never realised, should companies fail to remedy their perceived image problem.   

Consumer concerns with sharing data with different types of organisation

According to Deloitte’s study, while the data suggests that consumers have lost trust in businesses, their new found awareness of the value of their data and how it is used, should be viewed as an opportunity by many consumer businesses. Indeed, in light of GDPR, many organisations have already begun to overhaul the methods they use to communicate with consumers about the use of their data, with the resulting transparency over data collection and usage likely to have started mending damaged relationships with the public. Meanwhile, new companies with strong ethical credentials are likely to receive a boost to business, using this appetite for transparency to fuel a rise to prominence, helping to change perceptions of business in the digital age as a whole.

The report concluded, “Rebuilding trust with consumers will become a key priority for the majority of businesses. Those businesses that embrace this challenge and show their consumers that they have their best interests at heart have the opportunity to build longer term loyalty. In addition to the changes in terms of marketing communications and culture, the issues we have highlighted over privacy could also drive innovation. With consumers more aware of the value of their data, we believe this will stimulate competition between consumer businesses to produce innovative goods and services that make the best possible use of personal data.”


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Four ways digitalisation is transforming car brands and dealers

16 April 2019

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”