Let’s face it – retailers know an awful lot about their shoppers, mostly achieved by mining the shopping histories tracked via their loyalty clubs and other data collection methods.

 

The promise to shoppers who sign up for these programs is that in return for agreeing to allow the retailer to use the data for its own benefit, it will also be used to provide them with personalized offers, helping them save money on their monthly grocery bills. Sounds like a win-win, right?

In most cases, this is a good example of a case in which both parties receive benefit, with very little down side to either party. But as society becomes more and more sensitive to the implications of data privacy, will we see a change in willingness on the part of shoppers to allow this to continue?

The answer seems to be that most shoppers understand what they are signing up for and are perfectly willing to continue allowing retailers to use their shopping history data as they see fit, so long as they continue to receive perceived benefit. And so long as the retailer does not breach that trust. Two interesting studies support this proposition:

Firstly, Ipsos reports in their Global Trends Survey that supermarkets are the most trusted organizations globally, ranking higher than brands, telecoms, banks, governments etc. Ipsos also notes a higher propensity for younger shoppers to be willing to give up some of their privacy in return for personalized services – 51% versus the average of 43% across all age groups.

Secondly, a recent Gartner study indicates that millennials are more than willing to share their data with retailers, on the basis that they’ll receive a more personalized experience (including personalized discounts) in return. There are multiple other studies that support these findings.

But even younger shoppers are becoming more concerned about how the data is being used, causing retailers to carefully plan their personalization strategies so as not to alienate shoppers who may feel that the marketing efforts are crossing the line and becoming creepy.

Some retailers have indeed crossed the line and paid the penalty. One of the most high-profile examples is a case dating back to 2012 in which marketers at US retail chain Target were using sophisticated models to predict pregnancy amongst its female shoppers, and time targeted offers for newborn related products, based on the predicted delivery date. Following unfavorable media coverage, Target quickly realized their mistake and took action to ensure that their marketing team would be more sensitive to such issues.

Given these concerns, retailers need to ensure that their loyalty marketing tactics and related personalization infrastructure (which is in some cases highly automated), are set up to prevent similar occurrences. Creating constraints related to which categories should not be mined and used for personalization is a good start and includes avoiding targeting around categories and products that infer information about a shopper’s health and personal lifestyle.

What about retailers selling / trading shopper data with 3rd parties? Based on the assumption that supermarket loyalty data is so rich that it can be used to personalize marketing offers for products typically not sold in a supermarket, should retailers monetize their data by selling it to non-competing marketers? This takes place frequently within coalition loyalty clubs where non-competing retailers share data with one another – Nectar in the UK is a good example, where Sainsbury’s, a supermarket chain, shares data with ARGOS who sells electronics, and EasyJet who sells low cost airfares. The issue becomes less clear cut when retailers are tempted to sell the data to non-related parties for monetary or other gain.

Our take on this is simple – retailers need to be absolutely transparent on what, if any shopper data is being shared, and with whom. Just as important, a defined moral compass needs to be ingrained within the organization by which all marketing activities are measured. If there is any question as to whether using the data might create even the slightest perceived breach of trust in the eyes of the customer, then the activity should not be allowed to occur. After all, loyalty is tough to earn, but easy to lose, right?

Happy trading

Chen Katz