DPDPA promotes the principle of data minimization, which requires companies to collect only the data that is necessary for a specific purpose. For marketing companies, this will mean a significant reduction in the volume of data collected. Data should only be collected for specific, explicit, and legitimate purposes.
The Digital Personal Data Protection Act, 2023 (DPDPA), passed in August 2023, by the Indian Government marks a significant shift in how companies approach the collection, processing, and utilization of personal data of individuals within the country.
With the rules to be framed under the DPDPA on the horizon, it is imperative that companies initiate their efforts to comply with the provisions of the DPDPA which is a time-consuming and resource intensive exercise and has the potential to significantly impact the existing business operations.
This legislation, which aims to protect the privacy and personal data of individuals, has far-reaching implications particularly for the marketing industry and the marketing activities of businesses. The enactment of the DPDPA requires companies to rethink their marketing strategies fundamentally as the impact of this law on marketing activities will be significant, requiring a complete overhaul of existing marketing practices.
For the marketing industry, this law necessitates a comprehensive overhaul of traditional marketing practices, emphasizing the need for explicit consent from individuals and reliance on first-party data.
This article delves into the profound impacts of the DPDPA on marketing activities, the imperative changes companies must implement, and the consequences of non-compliance.
The End of Third-Party Data Reliance
One of the most significant changes that will be brought about by the DPDPA is the stringent requirement for explicit consent from individuals before their data can be used for marketing purposes, i.e., before a company can send a marketing e-mail or SMS or reach out telephonically.
The new law will effectively dismantle the longstanding reliance on third-party data. Marketers will no longer be able to depend on data purchased from brokers or gathered from various sources without direct consent from the individuals concerned.
Companies must now ensure that consent is obtained through clear, affirmative action, and individuals must be fully informed about how their personal data will be used. This shift will make it more challenging for companies to build and maintain their marketing databases. The process of obtaining explicit consent is more time-consuming and often results in lower opt-in rates, shrinking the pool of potential customers for marketing campaigns.
Reliance on third-party data to target potential customers effectively which was the cornerstone of marketing efforts will be rendered non-compliant as companies can no longer purchase or use third-party data without ensuring that proper consent has been obtained.
As a result, companies are compelled to shift their focus to first-party data, i.e., information collected directly from individuals who have given explicit consent. This transition is costly and time-intensive, requiring businesses to develop new strategies for engaging with customers and gathering data.
The shift to first-party data for marketing purposes will not only enhance transparency but also foster a more trustworthy relationship between businesses and consumers. However, it poses a considerable challenge for marketers who must now invest in building and maintaining robust data collection mechanisms.
Explicit Consent of Consumers for Marketing
Under the DPDPA, obtaining consent from individuals before processing their personal data for marketing purposes is paramount. This consent must be freely given, specific, informed, unconditional and unambiguous. For marketers, this means a significant change in strategy. No longer can companies rely on pre-checked boxes or implied consent or databases purchased from third parties.
Instead, they must ensure that individuals actively agree to receive marketing communications, i.e., prior to sending any promotional email, SMS or tele-marketing call, a company must ensure that it has the explicit consent of the individual to receive such communication. Failure to obtain proper consent can lead to severe consequences, including hefty fines and reputational damage.
Marketing companies have to develop new consent mechanisms, ensuring that users are provided with clear information about data collection purposes. Consent forms now need to be concise, transparent, and easily understandable. Additionally, companies must allow users to give separate consent for different processing activities, such as email marketing and data sharing with third parties.
Organizations must also keep detailed records of when and how such consent was obtained, maintaining logs that can be used to demonstrate compliance in case of investigations and audits.
DPDPA promotes the principle of data minimization, which requires companies to collect only the data that is necessary for a specific purpose. For marketing companies, this will mean a significant reduction in the volume of data collected. Data should only be collected for specific, explicit, and legitimate purposes.
Marketing companies must clearly define why they need certain data points and ensure that they do not collect more data than is necessary. Companies must also establish and adhere to data retention policies, ensuring that personal data is not kept longer than necessary.
The law also requires that individuals should be able to withdraw their consent as easily as they provided it in the first place, with companies ensuring that consent withdrawal is processed promptly and that data processing, i.e., marketing activities cease accordingly. Furthermore, in case an individual withdraws consent then the company would be required to delete the data of the individual from its database as well as the database of any third party with whom the personal data of the individual had been shared.
Deletion of Existing Marketing Databases
Under DPDPA, companies are required to audit their existing marketing databases and delete any personal data of an individual that was obtained without consent. This mandate would significantly impact email marketing, SMS campaigns, and telemarketing activities. Businesses must now ensure that their contact lists comprised solely of individuals who have actively opted in to receive marketing communications.
The new law requires purging of extensive marketing databases built over a period of time without the consent of individuals, necessitating a fresh start for many companies. The immediate effect is a reduction in the volume of marketing messages sent, but the long-term benefit lies in targeting a more engaged and consenting audience.
Companies must review their current lists of email subscribers, SMS recipients, and telemarketing contacts to ensure that all individuals have provided consent for marketing purposes. This process is not only time-consuming but also potentially costly, as it may involve significant loss of valuable marketing contacts.
For many companies, these databases represent years of effort and substantial financial investment. Deleting them not only means losing a valuable asset but also starting from scratch in building compliant marketing lists.
The Necessity for a Major Marketing Overhaul
The introduction of DPDPA has necessitated a major overhaul in how companies carry out their marketing activities. Traditional practices that relied on indiscriminate data collection and third-party sources are no longer viable or permissible. Businesses must now prioritize transparency, consent, and data security in their marketing strategies. This overhaul includes:
- Implementing Clear Consent Mechanisms: Companies must design and implement clear and straightforward processes for obtaining explicit consent from individuals as well as provide a mechanism to the individuals to withdraw their consent with such similar ease with which consent was taken in the first place.
- Building First-Party Data Collection: Investing in tools and strategies to collect data directly from customers through engagement and value-driven interactions.
- Regular Data Audits: Conducting regular audits of marketing databases to ensure compliance with DPDPA and maintaining records of consent.
- Enhanced Data Security Measures: Implementing robust data protection measures to safeguard personal data and prevent breaches.
Conclusion
The introduction of the personal data protection law will have a substantial impact on the marketing industry, necessitating a complete overhaul of traditional practices. While the changes required under the law present significant challenges, they also offer an opportunity for businesses to build stronger, more transparent relationships with their customers.
In this new era, success in marketing will depend on a company's ability to adapt to the stringent personal data protection law while finding innovative ways to engage with their audience. The companies that navigate these changes effectively will not only comply with the law but also gain a competitive edge by earning the trust and loyalty of their customers.
The road ahead is undoubtedly difficult, but those who navigate it successfully will be well-positioned to thrive in a new era of data privacy.
Originally published by ETGovernment, Aug 25, 2024.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.