WAY OFF: Insidious business practices

[Paul Mather]

On Fri, 6 Apr 2001, Matthew Braun wrote:

=> I don't mind the store knowing what I buy for purposes of inventory
=> management.  Thing is, discount card information usually isn't.  It's for
=> targeting marketing campaigns, and determining the demographics of purchases.

That might be true, but I would personally put more stock in that
statement if the stores around here made even a basic attempt to
validate the information they collect on the application.  (An easy way
to validate the address would be for them to mail you the card, along
with some coupons, say.)  I hope they are targeting their marketing
campaigns.  I'd much rather receive targeted offers than something that
has no relevance to my interests.

=> The information is sold to product manufacturers, or other firms
=> so they can target me with junk mail, telemarketing, etc.  That's
=> what I'm not wild about.

If they manage to sell such low quality data, good luck to them!  I
would be surprised if they put stock in much more than sex and age group
on the application forms.  Most people I know baulk at providing the
usual demographic info (job title, income, etc.), and leave that blank.
Nobody I know has been "made" to fill in that info having left it blank,
or been denied a card for not having filled out everything on the form.
Maybe they're tougher on the customers up in Illinois.  Heck, if you
forget your card at Food Lion and have bought a card item, they'll
usually just scan the store card they keep by the register!

=> If the guy down at Murphy's knows what I drink, or the guy at the magazine
=> rack knows what I read to better serve me, hey, that's fine.  But I do mind
=> if someone I've never heard of knows exactly what I buy.  I dunno--maybe
=> it's just me, but IMHO it's none of their business...literally. :-)

Hmm... When the "little guy" does it, it's considered "good service" or
"personal attention,"  but when the "big guy" does it, it's a "sinister
invasion of privacy." :-)  You may not feel this information is
pertinent to their business, but it is actually useful to them from an
inventory standpoint.  You may not want to help them out in this regard,
in which case you can opt out.  I wish the same were true of WWW sites,
which are not so flexible.

=> The cash registers are all tied into the same system.  At the end of the
=> day they know how many pounds of tomatoes, and how many boxes of Kraft
=> Dinner they have sold without scanning a single card.  What they sell isn't
=> what they want to find out--exactly who buys what items is.

Yes, that's exactly true, but what an individual buys is not interesting
per se.  It can help identify trends across groups of individuals,
though.  The cash registers tell them how much kitty burnin' gasoline,
say, they're selling each day, but don't tell them what percentage of
their customer base is buying it, or whether that percentage is buying
it regularly.  The cards let them know more about how a product is
selling, not simply how it is doing on average.  That is information
useful to a large business.

Suppose you were selling a new brand of kitty burnin' gasoline, but the
kitty attracting pheromones are highly perisable (pardon the pun), and
so you don't know whether to keep it stocked because it's marginally
unprofitable.  With register data, you just know how much is being sold,
which doesn't help you much.  With card data you can determine (via
random sampling) whether it is being bought by a good percentage of your
customer base, or whether a small niche is buying it.  It can also
suggest, by looking at purchases of it over time, whether it is bought
sporadically, or whether it is something that is bought regularly.  If
it was bought sporadically by a minority of your customers, you might
feel more justified in ditching it.  However, if you also found that
that minority bought it regularly, and also tended to buy high-margin
items, you might want to keep it around, even though it might be
unprofitable, because it could be a good "loss leader" for that niche to
keep them coming to your store.

If you were mad enough to trust your demographic data, and found there
was a strong correlation between regular buying of kitty burnin'
gasoline and the demographic group identified as "crackpot billionaire,"
then you'd definitely want to keep it on the shelves. :-)

=> I don't begrudge them making a buck.  They've picked this system to profile
=> their customers to the point of finding out who buys what.

Yes, it is useful to them to know what card #75623541 buys, but it is
more actionable (to use the data mining jargon) to identify clusters
across different card usage, and from them useful association rules,
say.  I would imagine they would actually prefer only a random sample of
their customers use the cards, because they can estimate population
behaviour from that yet only pay the rewards (card savings) to a small
subset of their total customer base, saving them money. :-)

I'm sure a lot of outfits make more of an emphasis on collecting and
exploiting demographic information, but I also think they probably put
more effort into validating that information.  WWW sites are good at
this, because they collect billing/credit card information, so at least
they have a half-decent address to which to send the junk mail.  (Plus
they can more closely monitor what you do.)

=>   It's not a big deal.

That's what THEY would have us believe! :-)

(Okay, so I'm grouchy... I'm doing my taxes.)

Cheers,

Paul.

e-mail: paul at gromit.dlib.vt.edu

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