Media

Are We too Targeted? Consumers Increasingly resist swapping personal information for increased value, online and offline

As you enter the site, you're greeted by name with offers based on your purchase history. Placing something in your shopping cart brings the inevitable offers for package deals on items that "people like you" just love. Your every movement and entire shopping trip will be logged in computer servers indefinitely for future analysis of how best to induce you to spend more in the future — or should the authorities ever come calling with a search warrant.

It may sound like a visit to Amazon.com, which is exactly what it's like. But it's also a realistic vision of what shopping could be like a few years from now in thousands of supermarkets and drugstores. Smart shopping carts with video screens and wireless links to in-store servers with gigabytes of data about shoppers' purchase history are transforming such visions from pie-in-the-sky rants by tech-company sales reps to pilots that could lead to larger rollouts.

The smart tart is one of dozens of new marketing and market—research applications online and off driven by a common currency— consumer data—and the rapidly growing ability of information technology to store, manage, analyze and act upon it faster and cheaper.

"It’s bringing the world of Amazon down to the shopping cart," says Michael Alexandor, a former Unilever executive who's now the top marketer at Canada’s title-free tech startup Springboard Retail Networks. Springboard will bring its Concierge touch-screen shopping cart to pilot stores in Canada in June and began marketing its technology in the U.S.

"What consumers don't want are TV commercials on their shopping carts," says Mr. Alexandor who says focus groups have been clear on that. What they do want is something more like an Internet experience, complete with store navigation aids, touch-screen deli ordering and recipes.

"It's not invasive because it's creating value," Mr. Alexandor says, adding that consumer data transmitted wirelessly and stored in potentially thousands of retail locations is protected by "military style encryption." Besides, consumers can forgo data collection entirely by not using a smart cart.

It's a tradeoff proposition as old as online marketing: wonderful new utilities in exchange for your personal data. But while it might seem the transition of the online model offline would be seamless, it turns out the online model is facing growing resistance of its own. Amid broad media coverage about spyware, identity theft and breaches of supposedly secure consumer databases, millions of people are tossing their cookies.

Jupiter Research shocked online marketers in March with a report that 58% of Internet users say they've deleted cookies, the small files placed on hard drives by Web sites from their computers at some point.  As many as 39% do so—or at least think they do — monthly. Subsequent research from Insight Express and others showed similar numbers, though indicating people follow through on their cookie-cidal intentions only about half the time.

The news probably shouldn't have been a surprise, as it mirrors in a way what’s been happening offline for more than a decade. Despite being offered tangible rewards like discounts, about a third of shoppers don’t use supermarket frequent-shopper cards, says Larry Aronson, principal of Cartwheel, a firm that specializes in analyzing and building marketing programs around supermarkets' frequent-shopper programs. Much of the return retailers get the first year of a loyalty program comes from not giving a third of their shoppers the discounts they used to get without cards.

To get returns beyond that initial bump more retailers are turning to rewarding profitable customers or making offers based on what they'd bought previously. CVS, for example, recently offered women who use red hair colorants coupons for Kao Brands' John Frieda Radiant Red shampoo. NCR, in what it calls "executable consumer relationship management," has begun selling electronic-shelf-tag systems, expected to be piloted in California later this year, that can change price based on who's at the shelf, either on reading a barcode or, potentially, shopper cards equipped with individually encoded radio- frequency-identification (RFID) chips. 
It doesn't even take such next-generation technology, or even long-term storage of data, to individually reward—or spook—consumers. Catalina Marketing raised a few eyebrows in the mid 1990s when it let Eli Lilly use its Checkout Coupon system to give moms (or dads, or anyone else) who bought diapers or formula for newborns an invitation to ask their doctors about Prozac.

Whether such “relevant" ads will entice more consumers than they repel remains to be seen.  Kim Feil, VP-senior marketing officer of the North Atlantic personal-care business of Kimberly-Clark Corp., which markets such sensitive items as diapers, feminine care and adult-incontinence products, doubts consumers really want offers personalized based on what they buy.

"On whole I don't think consumers want to be so targeted that they feel vulnerable, "Ms. Feil says. “I’m more an advocate of targeted cluster marketing, where you're much more finite in the definition of the consumer group you want to connect with, and then you really build a meaningful community and relationship around that.”

But not everyone in the package-goods industry is so sensitive to privacy concerns. The CEO of one company rolling out systems for analyzing shopper data said recently "The only people who care about that are the ones who have something to hide." 
Apparently many do. Surveys taken more than three years apart by researchers with very different motivations have shown more than 60% of consumers harbor concerns about the privacy implications of putting trackable radio-frequency identification chips on consumer-product packages [see related story]. After backlash against tests of RFID tagging and shelf monitoring by Gillette Co., Procter & Gamble Co. and Wal-Mart Stores in 2003, all three backed off, at least publicly, to focus on supply-chain applications of the technology.

How many people are concerned enough to take action either online or offline about purchase tracking remains an open question. But the rapidly growing body of cookie-rejection research indicates mounting resistance.  Jupiter’s report found 28% of Internet users are selectively rejecting third-party cookies such as those placed by online ad networks. This indicates they're doing more than just automatically selecting all the options offered by anti-spyware programs now used by 70% of those online.

One company interviewed by the Jupiter researchers found the proportion of visitors blocking third-party cookies at one site grew from only 3% in January 2003 to 14% in January 2005. Jupiter suggested using mandatory registration or Macromedia Flash’s “local shared objects" capability to bypass the cookie blocking. It’s rapidly evolving into a game of technological tit for tat that’s not exactly turning out the way pundits expected back during the infancy of Internet marketing.

Seth Godin coined the term "permission marketing" with his book of the same name in 1999, which argued that the Internet was rendering unwanted "interruption marketing" obsolete and would require future communications based on express consent of the targeted.

Things haven't quite happened as he imagined. "A few enlightened marketers get the idea of marketing with permission," Mr. Godin said in a recent e-mail. "Most of them are sneaking around and taking advantage of the sloth of the populace. Consumers hate marketers with a passion never before seen [and] have raised the art of ignoring marketing to the highest level in history."

Hence the title of Mr. Godin's latest book, "All Marketers Are Liars," published in May, which he says has resonated well with people on Amazon. Judgmental as it may sound, the premise is that marketing is by nature built around fibs, which are OK so long as your act is authentic and you don't kill or seriously damage anyone in the process.

John Hagel, in 1999 a McKinsey & Co. consultant, was another visionary of how the consumer—marketer compact would evolve. He coined the term "infomediary" in his book “Net Worth” to describe the brokers who would get the best deals for technology-empowered consumers in return for their consent to be marketed to. 
Mr. Hagel, now an independent tech consultant, didn't respond to an e-mail inquiring whether things had turned out as he expected. He doesn't list a phone number, though an infomediary he didn't necessarily envision years ago, Intelius, offers searchers his unlisted number.

Both online and offline privacy worries, such as RFID "are cascading into an understandably converging paranoia about the extent to which we're being monitored," said Pete Blackshaw, a long-time consumer advocate and former P&G executive who’s now chief marketing officer of Intelliseek, which tracks consumer opinions expressed online via blogs, message boards and other public forums.

Google, in particular, has become a growing target of bloggers tracked by Intelliseek's Blogpulse tracking tool, since last year's beta launch of Gmail, which delivers ads automatically based on e-mail content. The online chatter has gotten more negative as Google has rolled out services to help users search their own hard drives, let them access their old Google searches forever or accelerate Web-page loads—all with the tradeoff of letting Google have, store and use for ad serving in perpetuity all personally identifiable data collected.

"One of the unintended tradeoffs of the accountability debate is that marketers are becoming targeted to the point of controversy," Mr. Blackshaw says. "We probably over-romanticized the potential for targeted marketing, and we may need to figure out models that aren't quite as alarming to consumers.....Before, we crossed the line with spam and intrusive ad models like pop-ups. Now, maybe we're becoming just too good at targeting, to the point we need to take a step back and ask if we need all this?"

Nearly two years after abandoning testing of radio-frequency-identification chips on products amid negative publicity about videotaping people at store shelves and industry plans to "pacify" opposition, Gillette Co. executives still can't stop talking about putting RFID on razor packages. But consumers still aren't sold, and it's not clear they ever will be.

Wal-Mart Stores ended a Boston-area test of Gillette's Smart Shelf in August 2003, the same week Katherine Albrecht, organizer of Consumers Against Supermarket Privacy Invasion and Numbering uncovered files stored on a Web site on an industry-backed group behind the technology. They showed research conducted in 2002 by Procter & Gamble Co. that said 789 of consumers were concerned aboutthe privacy implications. Documents also showed plans to depict RFID chips as no more than 'an improved barcode' and garnered acceptance by getting the Department of Homeland Security friendly journalists and advocates for the disabled.

Wal-Mart withdrew from item-level tests to concentrate on tracking cases and pallets in the supply chain, it said.  But retailer and P&G got a black eye a few months later when a disgruntled ex-P&G worker leaked news of another test using a Webcam at a cosmetics display in an Oklahoma store to the Chicago Sun-Times. Since then, both public discussion and store-level testing of item—level REID appear to have ended.

But Gillette still can't help touting its Smart Shelf. In a private presentation for investors at its Retail Innovation Lab in March, Dick Cantwell, the Gillette VP in charged of RFID, touted, among other things, the ability to capture video footage and alerting store security when someone takes three or more packs of razors off the shelf.

 “It's pie in the sky,” said a Gillette spokesman of the item-level discussion, a transcript of which was disclosed in a filing with the Securities and Exchange Commission, It would be economical to use RFID that way for “at least a decade,” he said.

But market-research firms Big Research and Artafact with an 8,500-member panel to track attitudes, found that while RFI D awareness rose from 25% to 41% between September and March, acceptance didn’t budge. The firms found 65% of men and 70% of women very or somewhat concerned about privacy implications. 
People don't care much about privacy in applications like ski-lift tickets or tollbooths because they see benefits and know when they're getting tagged, said Linda Stegeman, president of Artafact "Where their privacy concerns surface is when they can't see a benefit for themselves, which is primarily the retail applications.”