Today, data is like gold in our digital world because it plays a significant role in business choices and marketing plans. Have you considered where businesses find all the information, they use to reach us so accurately? That’s where data brokers come in—these are the hidden figures in the marketing scene.
Data brokerage is a field that gathers, sorts and sells information about people and companies. Marketers, advertisers, and other organizations use this information to improve their tactics and tailor their messages. Although this may seem beneficial for businesses and consumers, the industry faces several problems, such as accuracy, ethics, and various risks.
In this blog, we’ll break down:
- What data brokerage is?
- How data is collected and the challenges of ensuring its accuracy.
- Risks businesses face when relying on brokered data.
- Key takeaways for marketers aiming to leverage data responsibly.
Let’s dive in.
What Is Data Brokerage?
Data brokerage is about gathering, processing, and selling information about people and businesses. Data brokers serve as middlemen; they collect data from different sources, organize it, and sell it to clients who need it for things like marketing, evaluating risks, and making decisions.
What Types of Data Do Brokers Gather?
Data brokers gather all sorts of information, including:
– Demographics: Details like age, gender, income, and education.
– Behavioral Data: Information on online browsing, purchase history, and app usage.
– Location Data: Current or past location details from mobile devices.
– Social Media Activity: Public posts, likes, and shares.
They often merge these data points to create in-depth profiles that can help predict how consumers behave or what they prefer.
Who Benefits from Data Brokers?
Many industries use data brokerage services, such as:
– Marketing and Advertising: To reach audiences with tailored campaigns.
– Financial Services: To evaluate credit risk and prevent fraud.
– Healthcare: For outreach to patients and planning resources.
– Retail: To gain insights into customer preferences and trends.
Though the industry has advantages, how data is collected and used often leads to privacy and accuracy concerns.
Collecting Data and Its Accuracy Issues
Data brokers gather information from different places, which can be grouped into a few key types:
- Publicly Accessible Data
Sources: Government records, social media profiles, and online directories.
Challenges: This information can be old or missing essential details. For example, a person’s income level in public records might need to be corrected.
- Online Tracking and Cookies
Sources: Your browsing history, online shopping behavior, and ad interactions.
Challenges: With stricter rules on third-party cookies, data brokers seek new ways to collect online activity data. This change can lead to gaps in the data and raises questions about whether users have consented.
- Business Partnerships
Sources: Loyalty programs, surveys, and customer databases.
Challenges: Sometimes businesses provide data that needs to be more accurate and complete, especially if customers entered the wrong information when they signed up.
- Buying from Other Brokers
Sources: Data brokers often purchase information from one another to improve their profiles.
Challenges: Mistakes can build up when information is passed around too much, making identifying inaccuracies challenging.
Challenges with Data Accuracy
Even with their advanced methods, data brokers struggle to keep their information accurate:
Incomplete Data: Customers sometimes provide different amounts of detail, resulting in uneven profiles.
Old Information: Data is sometimes updated, which can make it less relevant.
Misinterpretation: Algorithms can wrongly guess interests or behaviors, resulting in targeting that misses the mark.
The Risks of Using Brokered Data in Business
Turning to brokered data can be a gamble. It can help with targeting and understanding customers, but there are some real risks to consider:
- Privacy Concerns
One major worry is how data is used. Companies might buy data gathered without proper consent, which can breach laws like GDPR or CCPA. Such breaches can lead to heavy fines and damage a company’s reputation.
- Data Security Threats
More data can mean more trouble. As a company collects more information, it becomes more appealing to hackers. If brokered data holds sensitive customer details, a security breach could result in lawsuits and a loss of customer trust.
- Mistakes in Targeting
Inaccurate, brokered data can cause marketing mistakes. For instance, targeting luxury goods to low-income consumers can harm a brand’s image.
- Dependence on Data Brokers
Relying solely on brokered data while using first-party data can help a company connect genuinely with customers. Businesses must create ways to gather data to avoid becoming overly dependent on brokers, which can be expensive over time.
- Legal Risks
Data privacy laws are changing, and not all data brokers know how they operate. Companies that use brokered data must ensure it meets current legal standards; ignorance won’t protect them.
Important Points for Marketers
Marketers must balance data usefulness and critical ethical considerations if they want to use data brokers efficiently and responsibly. Here’s the approach:
- Focus on First-Party Data
First-party data, gathered directly from customers through their interactions with your brand, is usually more trustworthy and aligns better with privacy laws. While using brokered data can add to your strategy, having a solid first-party data system is the way to go for a lasting method.
- Check Your Data Sources
Not every broker is transparent or high-quality. Before you buy data, make sure to:
- Look into the broker’s brokers.
- Ask how they collected the data.
- Ensure the data meets regulations like GDPR and CCPA.
- Put Money into Data Verification
Use tools to tidy up and confirm the accuracy of brokered data before bringing it into your systems. This helps prevent any incorrect or old information from messing up your campaigns.
- Be Careful with Personalization
While data can help you market more effectively, going too far can make customers uncomfortable. For instance, if you seem to know too much about someone, someone feels intrusive rather than appreciated.
- Keep an Eye on Legal Trends
Stay updated on shifts in data privacy laws. By being proactive, you can avoid compliance issues and maintain customers’ set ethical guidelines.
Draft internal policies about how your company handles data. This means deciding which data points to use and ensuring that all marketing efforts respect privacy.
- Teach Your Team
Marketers need to understand the ins and outs of data brokerage, including the risks involved and the best ways to handle them. A well-informed team is less likely to make mistakes that could damage your brand.
Finding a Good Balance
To make the most of data brokers, you must balance what you get from outside sources with what you collect internally. Here are a few tips for businesses to achieve that balance:
Combine Your Data
Brokered data gives you a comprehensive view while your data goes deeper. Use both to better understand your audience. For instance, mix the demographic data you get from brokers with the behavioral information from your website to improve your targeting efforts.
Use AI to Help
Artificial intelligence can help when it comes to examining brokered data. It can find patterns and details that you might miss on your own. Plus, AI can spot inaccuracies, which helps you avoid errors.
Be Honest with Customers
It’s important to be precise. It’s how you use data. People value honesty, and it builds trust. Being straightforward can also ease any concerns about targeted marketing efforts.
Check Your Data Regularly
Make it a habit to review your data sources and the brokers you partner with to ensure you’re complying with regulations and maintaining good data quality.
Conclusion
Data brokers are important in today’s marketing and advertising world, as they offer useful information that can help businesses grow. But the way they gather data, along with issues like accuracy and ethical questions, means companies need to be careful.
For marketers, the trick is to find a balance between the advantages of using data from brokers and the risks involved. Focusing on data they collect themselves, checking the accuracy of brokered data, and following ethical guidelines can enable businesses to use data brokers wisely while gaining trust from their audiences.
As data privacy rules keep changing, businesses need to stay flexible and proactive. This way, they can make sure their marketing efforts are effective and follow the rules. By doing this, they can take advantage of data while protecting their reputation and relationships with customers.