Ethical Choices of Retail Data Mining

Articles
June 07, 2010

Ethical Choices of Retail Data Mining

How far should retailers go to offer individualized discounts to shoppers based on their purchase histories? At what point would such efforts cross the line and become unacceptable intrusions? Where would this end if the public continues to roll over for savings and let merchants mine data about them?

How far should retailers go to offer individualized discounts to shoppers based on their purchase histories? At what point would such efforts cross the line and become unacceptable intrusions? Where would this end if the public continues to roll over for savings and let merchants mine data about them?

Would stores look to draw conclusions from the TV shows we watch, the movies we attend, the restaurants we frequent, or knowledge of our health conditions, travel, personal interests, and more? Chains such as Kroger and CVS rely largely on purchase histories in their stores to guide their issuance of relevant coupons to individual shoppers.

But what if information from FICO, the credit scorer, were used to provide greater insight? How would people react then? It might matter if the data shared included credit-worthiness or specific items bought from any store, or both; we don’t know from a New York Times account how deep the relationship is between FICO and Walmart’s Sam’s Club division.

But as word spreads about this sharing that helps the wholesale clubs offer customized savings and build incremental sales, shopper reaction will indicate if a boundary has been crossed. The Lempert Report sees this as an aggressive example of an unwarranted, insidious privacy encroachment creep – one that is masked as a customer-friendly initiative but simply harbors too much information about people and takes advantage of today’s widespread desire to save money.

Sam’s Club customers who pay $100 per year to become Plus members and derive other benefits too (vs. the typical $40 annual fee) get the eValue coupons. Between 20% and 30% of Plus customers redeem the targeted eValues coupons, Linda Vytlacil, vp-member insights and innovation at Sam’s Club, told the Times. That they may work isn’t our dispute.

We mind the seeking of credit-card information for these marketing purposes. We think the price in privacy loss is too steep for consumers to pay. Therefore, The Lempert Report urges the establishment of ethical standards for retail data mining. We call for collaboration between members of the Grocery Manufacturers Association, the National Grocers Association, and the Food Marketing Institute to bring a reasoned approach to this discipline that helps customers without hurting them too.