Reference no: EM133298936

Case Study: In the age of online shopping and digital information, it's easy to get paranoid about how much vendors know about us. You want to get creeped out? Start paying attention to the recommendations that Amazon makes to you based on what you've previously looked at and purchased. But taking all your shopping to a brick-and-mortar department store won't help preserve your privacy. Exhibit number one? Target figured out that a high school girl was pregnant and started sending her direct-mail coupons for maternity products before her father knew anything was going on.75

How did Target know the young woman was pregnant? It seems that pregnant women have very predictable buying patterns. Sometime during the second trimester, four to six months into the pregnancy, pregnant women start buying things such as prenatal vitamins and maternity clothing. Once a woman starts buying these products, she's likely to be giving birth in three to six months.

According to Charles Duhigg, author of the book The Power of Habit: Why We Do What We Do in Life and Business, Target tracks every consumer who comes to its stores with a unique number tied to his or her credit or debit card. Using this number, Target knows what pattern of products every consumer buys. This information is then paired with data about the consumer that are purchased by the store, says Target statistician Andrew Pole. Before long, the store knows a lot of information about a customer, including preferred purchases, address, income, race, and even estimated earnings.76

So our high school student was buying the right combination of cocoa butter lotions, soaps, and mineral supplements that told Target there was an 86 percent likelihood she was pregnant. So Target started sending her coupons for the products people expecting babies are likely to buy.

When these coupons showed up in the mail, the young woman's father got upset and went to his local Target to complain to the manager. "My daughter got this in the mail!" the father told the manager. "She's still in high school, and you're sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?"

The manager apologized repeatedly to the father. Then the father had an interesting discussion with his daughter. A few days later, when the manager called to apologize again, it was the father who had to apologize. His daughter was pregnant, but she hadn't told him.

Obviously, Pole's system of evaluating the young woman's purchases worked as intended. But how were he and his employer going to deal with the backlash from consumers who just figured out how much the company knew about them?

"If we send someone a catalog and say, 'Congratulations on your first child!' and they've never told us they're pregnant, that's going to make some people uncomfortable," Pole told Duhigg. This led Target to work on figuring out how to get its ads delivered to pregnant women without the women knowing they were being targeted. As Duhigg puts it, "How do you take advantage of someone's habits without letting them know you're studying their lives?"

The solution ended up being fairly simple. Target mails out coupon books to consumers based on their purchasing history all the time. Usually, those coupons don't upset people. So the secret, according to a Target executive, was to mix the pregnancy product coupons in with a collection of other innocuous coupons that hid the fact that Target knew the woman was pregnant.

"We found out that as long as a pregnant woman thinks she hasn't been spied on, she'll use the coupons," the executive said. "As long as we don't spook her, it works."

Question: First, what is the issue with Target using consumer buying habits to tailor advertising messages and why might some consider this an invasion of privacy? And second, have you ever felt targeted by an advertiser such as Target or Amazon, and did you find it helpful or creepy? Explain.