Collection No 1
In a frog study on personal data, Chinese consumers stood out by placing low value on their own personal data, especially when compared to consumers in Germany and other countries where personal data is more highly valued.
Chinese Consumers Don’t Value Personal Data
Many firms in China and around the world offer products and services that leverage personal data from their users, either to enhance the product experience for users, or to monetize that data in order to cover the cost of products offered free to users. For example, Sesame Credit is an offering from Alipay that provides credit to people who have not had credit before. It assesses risk by looking at a person’s internet shopping history, online bill payment records, phone usage history, and online behavior and compares this with the 300 million registered users and 37 million businesses who transact on Alibaba, China’s leading e-commerce company.
Sesame Credit and products like it are made possible by the trails of digital exhaust we leave behind us as we lead our modern lives – a data stream generated primarily by our smartphones, but also from our cars, connected products in our homes, health and wellness devices, social media, communication tools and so on. These tools make our lives better in many ways, in this instance by offering financial services to people who have not had them before. But the data we generate and share is also more personal than ever before, giving firms and organizations that have access to this data a comprehensive picture of our lives.
In order to understand how consumers feel about their personal data, and to construct a model for a fair exchange of this data, frog conducted a five-country study of attitudes to personal data in 2014. In the study, China stood out by being at the low end of the value that consumers place on their own personal data, especially when compared to Germany and other countries that place a higher value on personal data. Just three types of personal data were considered sensitive by the majority of Chinese consumers: their digital communications history, their government ID information, and their credit card/financial information. All of the other digital exhaust that Chinese consumers create each day through their use of mobile phones and computers—from their physical location to health history to web surfing history—were not highly valued. This is in stark contrast to counties such as Germany, where people placed almost 20x more value on their digital communication history, and also placed higher value on data types such as health history and medical information, which Chinese consumers do not value at all.
It’s not that Chinese users are less aware of the personal data trails and digital exhaust they leave behind them than their global counterparts. Globally, 21% of survey respondents had a detailed understanding of how data is collected when they use online services and smart connected products. Interestingly, awareness has barely changed since 2011, even as the scale and sophistication of tracking has vastly increased. Awareness by Chinese users was slightly below the global average, at 17%, but comparable to German users at 16%. Moreover, Chinese respondents are worried about the same potential harm from the abuse of their personal data as the rest of the world – they worry that that someone might steal their identity (74%); that someone might steal money from them (62%), and they want to maintain their privacy (62%). So while Chinese participants showed a comparable level of awareness and similar concerns about the potential abuse of their personal data, they differ from their global peers in the value that they place on certain types of personal data.
China Can Lead the Market
Whatever the cultural reasons for this difference in how Chinese consumers value their personal data, the implication is very positive for Chinese organizations and businesses that are designing products and services using personal data. In our original analysis published in May 2015 we provided a framework for firms to use when evaluating the value they need to provide users, compared to the data type they are collecting and how they are making use of that data. Product makers and service designers can build their China market offerings with confidence that consumers are willing to share information with them. And the amount of value that product and service designers have to offer in return for that personal data can be lower, compared to markets such as Germany. It allows firms to launch “minimum viable products” that are more minimal. Put another way, product and service designers can take more risks with new and unproven value propositions when designing with data for the China market, and expect to gain some market acceptance.
We see this playing out with frog’s work in Shanghai. We recently worked with a global household white goods maker to design a smart refrigerator that makes health recommendations to its users. Smart connected refrigerators are something of an industry insider joke in the design consulting world, as an example of a technology capability in search of a use case – we have been hearing about “the fridge that self-orders milk” since the first days of the internet. But this project was different. The concept is that the refrigerator gathers and records vital signs of the fridge users, including heart rate and blood oxygenation, and makes a general health evaluation of the user. Over time, it learns about the different individuals who use it, and provides health recommendations including possible changes in diet and recommendations about hydration and so on.
Product makers and service designers can build their China market offerings with confidence that consumers are willing to share information with them.
In countries where health data is highly valued, such as Germany and Britain, we would expect initial interest in a “health coach refrigerator” to be lower, unless the value provided in exchange is exceptionally high. But in China, where there is less sensitivity to sharing health and medical data, firms can launch products like the health coach refrigerator and learn and iterate based on customer reaction. Even if the first value proposition brought to market turns out to be suboptimal, Chinese makers are ahead of the global competition by learning and course-correcting sooner.
When compared with the rest of the world, Chinese consumers were particularly open-minded when it comes to sharing health data for the greater good. In our study, we asked participants if they would be willing to share their medical history with doctors and researchers if they would directly benefit from sharing by receiving medical tips, information, and new discoveries that might help them. (See chart below) 76% of Chinese respondents were willing to do this, and a surprising 63% were willing to share even if they did not benefit directly, simply to drive medical advances. This compares to a global average of 56% who are willing to share their medical records for direct personal benefit, and 46% who will share for the greater good, even if they derive no personal benefit. This data ties in with our learnings on local healthcare projects. We observe that the Chinese are very open about personal health issues. This may stem from the fact that Traditional Chinese Medicine was and is more embedded in day-to-day routines and people’s diets than healthcare trends tend to be in other markets. But whatever the cause, we are not surprised to see businesses such as genomic data and analytics pioneer BGI thrive in China. Likewise, fields of research and development that require population level studies are likely to have greater success in China.
The Role of Trust
Our research showed that, aside from the sensitivity towards certain types of data, another important dimension is the extent to which consumers trust a firm with their personal data. As reported in our original article, credit card and new finance companies enjoy the highest level of consumer trust, while banks, technology companies, retailers and phone companies fall in the middle, and social networks have the lowest level of trust. China is no different to this pattern. New finance firm Alipay tops the list of consumer trust, followed by banking and finance giants China Union Pay, China Merchant Bank, and Visa. The internet giants are in the middle, together with carriers and consumer electronics firms, and entertainment and social media fall to the bottom. What is different about China, however, is that firms at the higher end of the trust spectrum are more widely trusted. More than 90% of the consumers we interviewed trusted financial services firms to use their data in appropriate ways. This is 10-15 percentage points higher than the trust American and British consumers have for comparable financial services firms in their countries.
This is important, because companies with a high degree of trust will be better able to compete in the market with products and services that use personal data. New products and services in areas such as connected healthcare, home security, personal safety, and smart home all have a potential to be very profitable businesses. But even in China, where consumers place a relatively low value on their personal data, companies that can earn and maintain the trust of their customers will be better able to succeed in these markets, because customers will more willingly share their information with companies they trust. Conversely, those who abuse their customer data—or who lose data in security breaches—are likely to be punished by consumers. Chinese customers are fickle and, on average, technologically savvy. This means they are difficult to win and easy to loose. And while trust in a company’s ability to handle personal data is rather specific and hard to measure, we believe that over time it will become a big part of how a brand is perceived and trusted.
This is important, because companies with a high degree of trust will be better able to compete in the market with products and services that use personal data.
Many Chinese product and service firms designing products with data aspire to build on their success in domestic markets to enter global markets. It is a natural move to make, particularly if a firm has honed products and moved ahead of the global competition. However, moving from China, with its customer base that places a relatively low value on personal data, into markets where consumers are more sensitive may be challenging. Firms building products and services that leverage data types that European and American consumers find more sensitive—such as location data, health history, and digital communication—history will have to offer more value in exchange for their personal data than they do for the China market.
This may involve re-thinking how the data in the product is used. For example, it is more acceptable to consumers to use their personal data to enhance the product experience than it is to use that data for marketing purposes. Firms that offer services that are monetized using targeted advertising may have to re-think their monetization model.
For example, in 2012, a team in frog Shanghai created a smart connected mask, the Airwaves concept, in response to China’s air pollution problem. It uses a PM 2.5 sensor built into a face mask to make location specific assessments of air quality and to recommend replacing the filter medium in time to remain effective. While the concept emerged in China as a response to the severe air quality issues the country is facing, the idea continues to resonate with companies, media and people worldwide, as air quality is becoming a bigger problem in many cities outside China. Our findings imply that in order to make the concept work in countries like Germany we will have to re-evaluate our use of location specific data and how it is shared, and we would have to make an extra effort to reassure customers that their health specific data (e.g., whether they replace their filter regularly enough) is safe with us and will only be used in their favor.
Competing on Trust
Product makers in China face the same fundamentals as the rest of the world when it comes to designing with data. They need to offer relevant value to their customers in the form of enhanced product and service experiences. But they have an advantage compared to their peers in Europe and North America because they enjoy a higher degree or trust with their consumers’ data, and those consumers place value on fewer types of personal data. This combination allows firms servicing the China market to experiment more freely with products and services that leverage personal data. It may give them an additional advantage as they tackle markets outside of China, because they will be further along the learning path compared to their global competitors.
This article was also published in the January 2016 issue of Harvard Business Review China.
Tim leads a global team of business and product strategists who work alongside frog designers and technologists to bring game changing innovations to market. He has worked in Silicon Valley for 15 years in a variety of product, strategy and marketing roles.
As Vice President, Creative, Rainer leads a multi-disciplinary team of creatives in the Asia Pacific region from frog's studio in Shanghai, where he has been based since 2009. He partners with frog’s local and global clients to help them embrace change and transform their businesses to drive growth.