In a previous post I described a new technological approach to track consumer behavior, utilizing data from security surveillance cameras and outlined some of the ethical issues that arise from the use and abuse of this technology. A recent NYT article (How Companies Learn Your Secrets by Charles Duhigg) adds valuable insight to the issue. Duhigg outlines the conversations he had with Andrew Pole, one of the leading statisticians of Target, the second largest retailer in the United States, focusing on Target’s interest in identifying pregnant female costumers to be able to specifically target them with advertisements. Though I recommend reading the article in full, it can be summarized as follows:
Part one of the article describes why new parents are “the holy grail of retailers“:
[…] once consumers’ shopping habits are ingrained, it’s incredibly difficult to change them. There are, however, some brief periods in a person’s life when old routines fall apart and buying habits are suddenly in flux. One of those moments — the moment, really — is right around the birth of a child, when parents are exhausted and overwhelmed and their shopping patterns and brand loyalties are up for grabs
Related to the desire to collect information on customers Duhigg outlines what he got out of the conversation with Pole:
Whenever possible, Target assigns each shopper a unique code — known internally as the Guest ID number — that keeps tabs on everything they buy. “If you use a credit card or a coupon, or fill out a survey, or mail in a refund, or call the customer help line, or open an e-mail we’ve sent you or visit our Web site, we’ll record it and link it to your Guest ID,” Pole said. “We want to know everything we can.”
Also linked to your Guest ID is demographic information like your age, whether you are married and have kids, which part of town you live in, how long it takes you to drive to the store, your estimated salary, whether you’ve moved recently, what credit cards you carry in your wallet and what Web sites you visit. Target can buy data about your ethnicity, job history, the magazines you read, if you’ve ever declared bankruptcy or got divorced, the year you bought (or lost) your house, where you went to college, what kinds of topics you talk about online, whether you prefer certain brands of coffee, paper towels, cereal or applesauce, your political leanings, reading habits, charitable giving and the number of cars you own. (In a statement, Target declined to identify what demographic information it collects or purchases.) All that information is meaningless, however, without someone to analyze and make sense of it. That’s where Andrew Pole and the dozens of other members of Target’s Guest Marketing Analytics department come in.
In the second part of the article, Duhigg explains the scientific background on human habit patterns, or in other words, the reason why tracking consumer behavior is so valuable for corporations.
The process within our brains that creates habits is a three-step loop. First, there is a cue, a trigger that tells your brain to go into automatic mode and which habit to use. Then there is the routine, which can be physical or mental or emotional. Finally, there is a reward, which helps your brain figure out if this particular loop is worth remembering for the future. Over time, this loop — cue, routine, reward; cue, routine, reward — becomes more and more automatic. The cue and reward become neurologically intertwined until a sense of craving emerges.
[…]
Habits aren’t destiny — they can be ignored, changed or replaced. But it’s also true that once the loop is established and a habit emerges, your brain stops fully participating in decision-making. So unless you deliberately fight a habit — unless you find new cues and rewards — the old pattern will unfold automatically.
[…]
In the 1980s, a team of researchers led by a U.C.L.A. professor named Alan Andreasen undertook a study of peoples’ most mundane purchases, like soap, toothpaste, trash bags and toilet paper. They learned that most shoppers paid almost no attention to how they bought these products, that the purchases occurred habitually, without any complex decision-making. Which meant it was hard for marketers, despite their displays and coupons and product promotions, to persuade shoppers to change.
But when some customers were going through a major life event, like graduating from college or getting a new job or moving to a new town, their shopping habits became flexible in ways that were both predictable and potential gold mines for retailers. The study found that when someone marries, he or she is more likely to start buying a new type of coffee. When a couple move into a new house, they’re more apt to purchase a different kind of cereal. When they divorce, there’s an increased chance they’ll start buying different brands of beer.
Consumers going through major life events often don’t notice, or care, that their shopping habits have shifted, but retailers notice, and they care quite a bit. At those unique moments, Andreasen wrote, customers are “vulnerable to intervention by marketers.” In other words, a precisely timed advertisement, sent to a recent divorcee or new homebuyer, can change someone’s shopping patterns for years.
And among life events, none are more important than the arrival of a baby. At that moment, new parents’ habits are more flexible than at almost any other time in their adult lives. If companies can identify pregnant shoppers, they can earn millions.
Duhigg also describes the level of precaution and slyness a retailer like Target needs to successfully use this information without triggering the target costumer’s sense of privacy protection.
[…] someone asked an important question: How are women going to react when they figure out how much Target knows?
“If we send someone a catalog and say, ‘Congratulations on your first child!’ and they’ve never told us they’re pregnant, that’s going to make some people uncomfortable,” Pole told me. “We are very conservative about compliance with all privacy laws. But even if you’re following the law, you can do things where people get queasy.”
About a year after Pole created his pregnancy-prediction model, a man walked into a Target outside Minneapolis and demanded to see the manager. He was clutching coupons that had been sent to his daughter, and he was angry, according to an employee who participated in the conversation.
“My daughter got this in the mail!” he said. “She’s still in high school, and you’re sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?”
The manager didn’t have any idea what the man was talking about. He looked at the mailer. Sure enough, it was addressed to the man’s daughter and contained advertisements for maternity clothing, nursery furniture and pictures of smiling infants. The manager apologized and then called a few days later to apologize again.
On the phone, though, the father was somewhat abashed. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”
[…]
Using data to predict a woman’s pregnancy, Target realized soon after Pole perfected his model, could be a public-relations disaster. So the question became: how could they get their advertisements into expectant mothers’ hands without making it appear they were spying on them? How do you take advantage of someone’s habits without letting them know you’re studying their lives?
“We have the capacity to send every customer an ad booklet, specifically designed for them, that says, ‘Here’s everything you bought last week and a coupon for it,’ ” one Target executive told me. “We do that for grocery products all the time.” But for pregnant women, Target’s goal was selling them baby items they didn’t even know they needed yet.
“With the pregnancy products, though, we learned that some women react badly,” the executive said. “Then we started mixing in all these ads for things we knew pregnant women would never buy, so the baby ads looked random. We’d put an ad for a lawn mower next to diapers. We’d put a coupon for wineglasses next to infant clothes. That way, it looked like all the products were chosen by chance.
“And we found out that as long as a pregnant woman thinks she hasn’t been spied on, she’ll use the coupons. She just assumes that everyone else on her block got the same mailer for diapers and cribs. As long as we don’t spook her, it works.”
Duhigg ends his article by quoting a powerful yet disturbing statement by Pole:
“Just wait. We’ll be sending you coupons for things you want before you even know you want them.”
As mentioned above, Duhigg’s article adds urgency to the privacy protection issues raised by the new surveillance technology. If what is quoted above is possible even without this new technology, one can only imagine the possibilities with it. Paired with the information one can buy from Facebook or Google, the fully transparent consumer is easily created.
Consider the example of the father getting to know about his daughter’s pregnancy through Target’s individualized advertisements. In context, this means Target had superior knowledge about something an individual wanted to keep private even before that person’s closest friends or relatives. Every person has the need and right for privacy, which should be enforced and protected by government regulations. If you care about your privacy you should be informed about How Companies Learn Your Secrets and take a stand against it.
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