Interpreting regulations as Europe seeks harmony

European Union proposals on data protection may impact customer loyalty programmes which should ensure consumers get “fair value” in exchange for information, writes Peter Wray


The proposed European Union Data Protection Regulation was introduced in January 2012 and put forward reforms that represent the most significant overhaul of Europe’s data protection and privacy laws since 1995.

The current directives are implemented at national level in each nation’s own terms which led to differences in data protection within Europe. Regulations, however, must be enforced precisely as specified by the Council of the European Union. The purpose of the latest regulation is thus to harmonise data protection enforcement across Europe. EU plans are to make the regulation effective in January 2013.

The current reality across the EU is that the proposed regulation has widely different interpretations. The US Federal Trade Commission (FTC) has also added to the political debate with an Informal Note, provided to the European Commission in December 2011, describing the proposals as a backward step that would have an adverse effect on the global interoperability of privacy regimes, due to it increasing differences rather than promoting convergence. Application of data privacy regulation differs widely globally.

Loyalty memberships will need to perceive greater value flows back towards consumers

In early-October this year, EU data protection commissioners said they believed Google was in breach of privacy laws due to its pooling of data. The concerns were instigated by changes in the way in which Google tied together the previously separate data collected under services including its search engine, YouTube and Google+. While creating a unified privacy policy across all the services, it also in effect amassed the data into a single location. Google is already under scrutiny by the EU which claims some elements of its advertising are anti-competitive.

The concept of data privacy is complex. The UK Direct Marketing Association (DMA) commissioned a recent study on how consumer attitudes to their privacy are being impacted by search engines, mobile apps and a huge growth in services dependent upon a concept of a “fair exchange of data”.  Two-thirds of consumers surveyed by the study agreed that their definition of privacy was changing due to the internet and social media.

Google, Amazon, LinkedIn and so on have a business model built around the ability to collect and interpret customer data more accurately. Consumer loyalty programmes are also rapidly developing their expertise in this area. The reality is that data privacy has many differing perspectives and individual consumers are inconsistent in their attitudes to privacy depending on the context of the issue in which it is raised.

Consumers are increasingly the gatekeepers of their own data and conditioned to expect more relevant, more individualised and better offers or service as “fair value” for exchanging their data. As the era of big data grows commercially, loyalty memberships will need to perceive greater value also flows back towards consumers for fair value in this voluntary exchange to remain in balance. The evidence from some sectors in the loyalty market suggests a relative decline in value.

The future success of this data sharing relationship will depend on the level of trust between the consumer and brand. Trust is a very fragile state. Break that trust and the result could be terminal for your brand.