Reference no: EM131040286

Closing Case Target Provides a Surprise

The Problem When you shop, you provide details about your buying habits and about yourself to retailers. The retailers analyze those details to determine what you like, what you need, and how to provide you with incentives so you will buy more of their products. Consider what happened at Target (HYPERLINK "https://www.target.com"www.target.com), for example.
Target sells everything from milk to stuffed animals to lawn furniture to electronics, so the company wants to convince customers that Target is the only store that they really need to visit. Unfortunately, this message is a "tough sell" because once customers form shopping habits, it is extremely diffi cult to change them.

There are, however, periods of time in a person's life when old routines change, including buying habits. The most important of these periods is the birth of a child. Parents are exhausted and overwhelmed, and their shopping patterns and brand loyalties are up for grabs.
In these cases, timing is everything. Because birth records are usually public, the moment a couple have a new baby, they almost instantaneously receive offers, incentives, and advertisements from all sorts of companies. To be successful, then, a retailer needs to reach them before its competitors are even aware that a baby is soon to arrive. Specifi cally, Target's marketing managers want to send "targeted" (no pun intended) ads to women in their second trimester, which is when most expectant mothers begin buying all sorts of new items, such as prenatal vitamins and maternity clothing.

The Solution Target has long collected huge amounts of data on every person who regularly frequents its stores. Target assigns each shopper a unique Guest ID number that collects and maintains data on everything the shopper buys. If you use a credit card or a coupon, fi ll out a survey, mail in a refund, call the customer help line, open an e-mail message Target has sent you, or visit Target's Web site, then the company records the transaction and links it to your Guest ID.

Target also links demographic information to your Guest ID, such as your age, whether you are married and have children, which part of town you live in, how long it takes you to drive to the store, your estimated salary, whether you have moved recently, which credit cards you carry, and what other Web sites you visit. Further, Target can buy data about your ethnicity, job history, the magazines you read, whether you have declared bankruptcy or been divorced, the year you bought (or lost) your house, where you went to college, what kinds of topics you talk about online, which brand of coffee you prefer, your political leanings, charitable giving, and the number and types of cars you own.

All of that information is meaningless, however, unless someone analyzes and makes sense of it. Using analytics techniques (discussed in Chapter 12), Target analysts discovered about 25 products that, when analyzed together, allowed the retailer to assign a "pregnancy prediction" score to each female customer. In fact, Target could estimate a woman's due date to within a small window, which enabled the store to send coupons timed to very specific stages of her pregnancy. As a result, Target began sending coupons to customers according to their pregnancy scores.

An Unexpected Result One day, an angry man entered a Target store and demanded to speak with a manager. He claimed that his daughter had received Target coupons for baby clothes and cribs, even though she was still in high school. He bluntly asked the Target store manager, "Are you trying to encourage her to get pregnant?" The store manager had no idea what the man was talking about. He looked at the mailer and found it was indeed addressed to the man's daughter. Moreover, it contained advertisements for maternity clothing and nursery furniture, as the father had charged. The manager apologized and then called the man a few days later to apologize again. During this conversation, however, the father indicated that he had had a talk with his daughter. He told the manager, "It turns out there's been some activities in my house I haven't been completely aware of. She's due in August. I owe you an apology." Target discovered that people felt uncomfortable when the retailer knew about their pregnancies in advance. Target emphasizes that the company is very conservative about compliance with all privacy laws. The firm notes, however, that even if they follow the law, their policies can still make people feel uncomfortable

Target responded to this problem by modifying its marketing policies. Specifically, it began to mix in ads for items the company knew pregnant women would never buy. The purpose was to make these ads appear random. For example, Target would place an ad for a lawn mower next to one for diapers, or a coupon for wineglasses next to one for infant clothes. This strategy created the impression that the company had chosen the advertised products purely by chance. Target discovered that as long as a pregnant woman does not believe she has been spied on, she will use the coupons. She typically assumes that everyone else on her block received the same mailer for diapers and cribs.

Questions

1. Are Target's data collection and analysis legal? Why or why not? Support your answer.

2. Are Target's data collection and analysis ethical? Why or why not? Support your answer.

3. Apply the general framework for ethical decision making to Target's data collection and analysis.

4. Do you feel that Target's data collection and analysis invade your privacy? If so, how? If you feel that your privacy is being compromised, what can you do about this problem?