Pretend that youre living in the future and that America has evolved into a high-tech consumer utopia. After decades of unchecked capitalism, the retail market is now dominated by a handful of superstores that offer everything from artisan bread to windshield wipers and designer clothes. In order to stay competitive, these stores tailor their advertisements to fit with each customers tastes, values and needs. Advanced monitoring devices embedded in their products allow them to track every single purchase you make.
By analyzing the data, theyre able to learn everything about you your age, gender, the number of kids you have, how you spend your free time. Companies can even predict a pregnant woman’s due date and the gender of her baby, all by studying her buying patterns.
If that sounds like the premise of an upcoming science fiction novel, weve got some bad news for you. This is all real, and its happening at the department stores in your town as we speak. Right now, your favorite retailers and online merchants are collecting a flood of information about you and your behaviors, and theyre using it to create customized ads that encourage you to give them more of your money more often. They know you better than your own family does, and if you think thats scary, this is only the beginning.
From Surveys to Data Mining
Using market research to influence sales isnt anything new to big business. With so many competitors struggling to maximize their share of a finite market, it only makes sense that a company would try to focus the majority of its promotions on their best-selling products. In his 1921 book Marketing Methods and Salesmanship, Ralph Starr Butler describes the process as the thing that primarily determines the success or failure of every salesman and of every advertisement on it depends the choice of one trade channel or of another and the decision to use established methods of reaching the market or to hew out some new road between distributor and consumer.
Marketing has always been a career that relies upon tedious research and relentless statistical analysis. Since the 1920’s, businesses have employed marketing agencies to study sales reports, run focus groups and distribute surveys in order to learn what people were buying and why they were buying it. They could then use this data to help increase their sales. For instance, if a grocery store learned that everyone who bought lemons on Thursday also bought flour, they could arrange those two items to be closer together in the store, making sure to charge full price for both.
However, traditional research like this can only take a company so far. For decades, market analysis was bottle-necked by the limited technology available to research agencies. While advertisers had all sorts of new mediums available to them, the only thing the analysts had to show for themselves after 50 years of advancement was the telephone survey. Statisticians had taken their algorithms as far as science would allow. If businesses wanted to create more efficient advertising campaigns, they would need to figure out a way to monitor the behaviors and purchasing patterns of every single one of their customers which everyone knew was impossible. And then the Internet was invented.
The rise of the personal computer in the 1990’s ended up being a complete revolution for market analysis. Suddenly businesses and research agencies were able to interface multiple computers with a database to collect all kinds of data on every one of their customers. Want turned to wealth, and suddenly researchers found themselves with so much information that they needed a computers help just to analyze it all. This process of extracting useful knowledge from large volumes of data became known as data mining, and its responsible for all of the eerie, invasive marketing techniques companies are using today.
Privacy is Dead
When Facebook founder Mark Zuckerberg infamously stated that the age of privacy is over in a 2010 interview, he couldnt have been more correct. These days, everyone uses a social network that puts all of their personal information in the public domain. They carry around cell phones that are constantly connected to the Internet. And they all shop at stores that have figured out incredibly advanced ways to record, store and analyze this information.
In the latest privacy-violating gaffe to make headlines, a Target store in Minnesota was called out by a father who demanded to know why the retailer was sending his teenage daughter coupons for maternity clothing and furniture. He was convinced the store was encouraging high school girls to get pregnant in order to raise profits. As it turned out, Target knew something that the girls father didnt. Thanks to advanced data mining techniques, the stores marketing computer was able to study the girls purchases and determine that there was an 87% percent chance that she was in her second trimester of pregnancy.
According to Andrew Pole, the statistician behind Targets pregnancy detecting algorithms, the store records as much information as it can about every customer. 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 weve sent you or visit our Web site, well record it and link it to your Guest ID, he told the New York Times. Creating a marketing strategy for pregnant women golden geese for department stores is simply a matter of figuring out what moms-to-be tend to buy during each trimester. The research conducted by Target revealed that the second trimester was the biggest purchasing period during any pregnancy, a time when expectant mothers went wild buying things like vitamins, unscented lotion and maternity clothes. Target now looks for these patterns and sends out pregnancy coupon mailers to women who are likely to be in their second trimester.
In his interview with Computer World, Olds expressed concern over the dangers of allowing all of your personal information to be harvested indiscriminately. “They say that if you’re playing poker with strangers and you can’t spot the rube at the table, then you’re the rube,” he says. “There’s a corollary for online services. If you’re not paying for a product or service, then you are the product.”
This industry-wide trend of data mining and subsequent analysis is disturbing on two fronts. First, the techniques retailers use to monitor and record information about us is becoming increasingly invasive. Every single tidbit of information you provide a store or social network or, now, Google is recorded and stored away forever. The only way to shop off the grid is to pay for everything in cash while simultaneously refusing to sign anything or use any coupon that can be used to reveal your information. And sometimes, even that doesn’t guarantee you arent being watched. Last year, Wal-Mart began placing RFID chips on all of its clothes. The chips are designed to help workers keep the inventory in order, but privacy advocates have pointed out that since the radio transmissions cant be turned off even after theyre removed, they could theoretically be used to record a customers identity and shopping habits. There are two things you really don’t want to tag, clothing and identity documents, and ironically that’s where we are seeing adoption,” said Katherine Albrecht, founder of a group called Consumers Against Supermarket Privacy Invasion and Numbering. “The inventory guys may be in the dark about this, but there are a lot of corporate marketers who are interested in tracking people as they walk sales floors.
Albrechts concerns are a bit unfounded, but not because the potential isnt there. The reason why Wal-Mart wont track you with RFID chips is because your smart phone is already doing that work for them. Every time you use Wal-Marts or Targets, or Amazons, or Barnes and Nobles cell phone app to redeem a coupon or browse products, your phone transmits a full log of your activity to the company database. This data is then used in conjunction with your purchase patterns to help analyze your behavior. However, RFID chips have been useful recording devices for another popular product credit cards. At the moment, EMV credit cards, as well as phone-based mobile wallets, are capable of recording your entire purchase history. So even if you dont have a phone, you still arent safe.
The second major concern that the Big Brother mentality raises is what exactly these retailers intend to do with the bounty of data that they mine. Advances in neuroscience have enabled scientists to study exactly what influences our decision-making (by studying brain activity in rats, for example), and what theyve discovered is that were creatures dominated by habit. Once we figure out a successful routine, brain activity drops and it becomes much, much harder to steer us away from our original decision. As a result, companies are no longer trying to market a product so much as they’re trying to condition a habit. Theyre studying your behavior in order to build a promotional campaign specifically designed to condition you to shop at their store every single time you make a purchase. Its called operant conditioning, and it’s working on you right now.
Why Should I Care?
Many retail company representatives like to use the So what? defense when confronted about their industrys increasingly invasive marketing techniques. Its a fair case to make. If Target, Wal-Mart and Visa are doing nothing more than recording your purchases so that they can send you coupons that youll actually use (instead of leaving them hanging on the refrigerator door for months), why throw a fit? After all, nobodys forcing America to shop at one of these superstores. If you dont like it, why not just go somewhere else?
But dig a little deeper and you’ll see that things arent so simple. Through the conquest of their respective markets, Target, Wal-Mart, McDonalds and other major franchises have created a culture of dependency. When one of these stores sets up shop in a new town, they kill off market competition like a plague. This especially hurts the poorer demographics. The franchise becomes the only option consumers can afford within a reasonable driving distance. There are dozens of scholarly articles on the cultural impact these retailers have had, and all of them suggest that Wal-Marts power is absolute in poorer areas.
Lets be clear here this article isnt about dismantling monopolies. No one wants to philosophize about the inherent evils of capitalism and the necessity of such evils in a free society. If your own company rose to power because it did smart business in a free market, that’s great. But is it too much to ask for the retailers that dominate the industry to acknowledge their power, at the very least? At what point does social responsibility come into play? Telling someone to buy their milk elsewhere when youve murdered every cow in town but your own is ludicrous, to be honest. And offering your services on the condition that consumers give up their privacy is even worse.
An Easy Fix
It wouldnt be hard to make everyone involved in the data mining debate happy. A compromise could be achieved in two steps. First, retailers would agree to let their customers opt out of any personalized campaigns enabled by personal data collection, such as information about their behaviors and preferences. It would be unconstitutional to prohibit stores from monitoring the buying habits of their customers and crunching some numbers, but as Americans we should at least be made aware that were receiving customized advertisements, and we should be given the opportunity to say no. As Pole says, Even if youre following the law, you can do things where people get queasy. For the record, this is exactly how Google responded to privacy protests. Google gave users the option to decline personalized results, but still, those users had to consent to data collection.
Second, the government would have to appoint a committee to ensure that retailers are actually honoring their word and not attempting to unduly influence their customers. Logically, this would fall within the jurisdiction of the Consumer Financial Protection Bureau. The committee would be allowed to field consumer complaints and would be responsible for investigating company databases to make sure the information they gather is used lawfully.
Now, even this small fix might seem unnecessary to some readers, but its important to remember that the steps were taking are preventative. Our era is already one of unprecedented access to private information, and corporations and businesses hold all the keys. Besides Target, no company has explicitly stated what they plan to do with the information they gather. That sort of blank check can be dangerous. By setting a precedent for what constitutes fair use of private information in marketing, we can make sure that advertisers give everyone the ability to say no. After all, isnt psychological freedom just as important as literal freedom? It should be.