December 12, 2013 by meliorgroup
By Reshma Bennur
It is easy to believe in this world of impersonal online transactions that companies you buy from don’t really know who you are – they don’t recognize you by face or voice. The truth is companies have never known their customers better. Companies might reduce customers to account numbers, lumped in a database with several thousand other account numbers – but with one click, they can access or buy all sorts of information about a customer – purchase history, personal information, financial credibility.
Business sense dictates that companies that have the wherewithal to gather all this “private” information, use the data to further their financial gains – use it to predict future purchases, identify cross sell opportunities and inform marketing initiatives. While gathering customer data is effective when used for marketing, it only works well when customers don’t know this strategy is being employed.
Take the recent example of Target – the big box store swamped select customers with discounts and coupons on baby products. These were not customers who had babies or baby registries, but customers whose purchase behavior indicated that they could perhaps be pregnant. Target conducted extensive data mining and predictive analysis to identify who these customers might be. Not surprisingly, customers reacted negatively – it disturbed people to think that Target somehow thought they were pregnant. Customers felt manipulated, spied on, and angry.
When Target became more subtle in its marketing efforts, continuing to promote baby items to select customers, but this time intentionally mixing up the ads for baby items with ads for unrelated items (like ads for a lawn mower next to coupons for a crib), customers no longer felt spooked. And they happily used the coupons.
Customers want to believe that the discounts, coupons and privileges they are being offered are a reward for their loyalty, not a result of calculated purchase predictions. In Melior’s research on the invisible customer, we learned that only 9% of customers value receiving customized recommendations of products/services of interest, while 50% of customers value receiving discounts and coupons on products and services. Why? Customized recommendations are considered akin to “selling” – making customers wary by highlighting the fact that their behavior was tracked, analyzed and used for possible financial gain. The same recommendations repackaged as discounts and coupons are seen as a benefit – as a special opportunity to buy.
So in the enthusiasm to implement marketing strategies based on data mining and predictive analytics, keep in mind that customers want to feel valued for their loyalty not openly targeted for promotions based on their behavior without feeling that the reward came with a price – no longer being “invisible” to a marketer.