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The Threat to Direct Marketing in Germany

Legislative Challenges to the Use of Consumer Data Has Firms on Notice

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Gunnar Brune Gunnar Brune

The value of brands is built on trust. It's only when consumers trust a brand's proposition that the value chain of a business model generates a profitable impact. And then there are value chains that are based on consumer data. Many online business models rely on the trust under which consumers render their data to them. Industries that lean on direct marketing depend on that trust.

This valuable trust has taken severe blows in Germany. As a result a great part of the direct marketing business faces annihilation. What happened?

A number of scandals involving the misuse of data have drawn the attention of the public and politicians. Phone calls were recorded and private data was spied out or sold illegally in giant numbers only made possible by our information age. Blue-chip German companies were involved. And, only a short time after the emergence of Web 2.0's online mass exhibition, the backlash is in full effect. The German equivalent of Facebook, StudiVZ, tried to extend the use of private data last year. Just like Facebook tried this year. Both cases failed, because of public opposition.

All this is bad for the brands involved. But, even worse, it has also fired up another great ad-ban battlefield. Triggered by public outrage, politicians have filed legislation to ban a great deal of non-opt-in direct mail. If this legislation passes, list-brokers and many direct-marketing service and communication agencies may have to close doors right away. A whole part of the industry sees their opposition against the bill ineffective against an undifferentiated public opinion and expect the worst.

You might call this just a passing German paranoia. Or you call it a prototypical angst that will infect the rest of the digital world. The evolution of the mobile internet with location-based features and services relies heavily on trust and responsible marketing strategies. Google, recently estimated the world's most valuable brand, launched of the G1 in Germany last month. It led the biggest German weekly newspaper to produce a report about the extensive use of private data by Google, called "Google, der Spion, den wir lieben"or "The spy we love."

This is where trust has a double effect on value. It is massively affecting brand value of Google, Facebook, T-Mobile and the like. It also impacts the evolution of the digital mobile channel which we all wait for desperately so we can activate valuable consumer touchpoints. But when we do we need to do so with responsibility.

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