Most consumers expect a level of personalized service that requires data collection and sharing — and they know that. How you handle their data is what matters.
According to Zendesk, 76% of consumers today expect personalized experiences, which could include (but is not limited to) engagement over their preferred contact method, account type or status, and product recommendations based on purchase and search history. Additionally, 71% of customers expect companies to collaborate internally so they don’t have to repeat themselves.
But although consumers like it when advertising is geared towards them, there are still privacy concerns related to targeted advertising and customer behavior tracking. As a result, the advantages of personalized advertising should be balanced with its liabilities.
Here are some of the concerns and benefits of targeted advertising.
The benefits of targeted advertising
The benefits of targeted advertising revolve around the fact that it’s a better fit for consumers since it’s tailored to their preferences. As a result, it’s more likely to resonate with them and therefore yield a better return on its investment. Below are a few key advantages.
1. Targeted ads work because they don’t feel like such a hard sell
Generally, ads can be annoying because of their invasiveness. But targeted ads have proven resilient: Businesses are more likely to attract customers with targeted, personalized advertising.
Targeted advertising can speak more fluently to pain points and problems that individual customers face. On top of that, because they’re based on the user’s specific interests, this type of advertising lacks off-putting “in your face” abrasiveness.
2. Personalized advertising truly connects with audiences
One of the advantages of personalized ads is that they boost engagement. People have the tendency to click through an ad if it’s customized to their preferences, even if it’s coming from an unknown brand.
When a brand or product understands customers’ wants and needs, it genuinely resonates with those customers. In fact, Twitter revealed that in Q4 of 2019 that the company experienced a 29% boost in advertising engagement because of improvements they made in ad relevance.
The concerns around targeted advertising
Targeted advertising is a double-edged sword. The personalization that makes it great comes at the expense of consumer privacy. While most consumers understand the trade-offs necessary for targeted advertising, there’s a groundswell of concern that some practices might be crossing the line.
1. Targeted ads can creep out customers
While your customers might like personalization, that shouldn’t permit you to overstep bounds and take it too far. In essence, you don’t want personalization that makes people feel uneasy.
Customers are astute enough to understand that digital advertising works by gathering data to enhance personalized ads. However, they especially dislike it when companies give customer data to third parties.
What’s more, customers are concerned with how advertisers get their personal data and what they do with it. According to Harvard Business Review, customers aren’t very concerned when businesses use the information they have voluntarily disclosed. On the other hand, they get angry when companies use “online surveillance” to obtain information inferred through their scrolling or browsing activity.
An infamous example cited by HBR was the case of Target. The company inflamed public outrage by sending maternity-related coupons to shoppers who it deduced were pregnant due to their online activities. In the process, the company inadvertently tipped off a father that his teenage daughter was pregnant.
Hence, targeted ads are fraught with the possibility of privacy violations. As a result, companies using personal advertising should be transparent with consumers about their methods.
2. Targeted ads and digital marketing spark privacy concerns
Targeted advertising is built on collecting massive amounts of our personal data. But consumers are no longer naive about the potential for abuse that is prevalent in targeted advertising. This shines a spotlight on the question of how targeted ads will fare in the presence of increased consumer awareness.
For instance, one study in the Journal of Retailing uncovered the “Personalization Paradox:” In 2003, when a law requiring websites to start informing visitors of covert tracking was enforced in the Netherlands, businesses experienced a sharp drop in click-through rates.
And while customers do have a preference for personalized ads, research indicates they generally want fewer of them—especially when customers are asked about the data collection practices that empower personalized ads.
As early as 2019, only 17% of internet users believe it’s ethical to track online activity, even for the purpose of personalized ads the majority of consumers seem to prefer. And a backlash against targeted ads grows when consumers believe the perception of privacy risks outweighs the perception of its benefits.
As a result of these consumer sentiments, advertisers have to be judicious in the use of personalization.
3. Targeted ads can be harmful
Targeted advertising is everywhere because it’s now the engine of our digital economy. Many of the “freemium” services we have come to rely on daily, like social media, email, and search engines, are financed through advertising paid for with consumers’ personal data.
As we’ve seen in political advertising, radicalization can easily occur, especially on social media platforms. This is because targeted ads are prone to isolate people into self-reinforcing bubbles, with algorithms sinking them into deeper rabbit holes of conspiracy theories.
The echo chambers this creates limit the diversity of thought that’s crucial for a vibrant society. Consumers become isolated by virtue of the fact that the information they’re exposed to is being limited by personalization.
This is called “epistemic fragmentation,” and it amplifies the effect of harmful advertising. One of the solutions is for advertisers to be more mindful of maintaining the balance between personalization and privacy.
The symbiotic effect of personalized advertising
Digital targeted ads make advertising more meaningful. For businesses, personalized advertising is an invaluable means of meeting consumers at the point of their needs and giving them what they want. But there is light at the end of the tunnel for advertisers.
Most consumers are demanding more transparency from the brands they frequent, but they’re open to developing brand trust. As many as 40% of consumers today would willingly share personal information — if they knew how it’d be used (KPMG).
-Lytics
