Trading Privacy for Competitive Advantage

Some of the information provided in the article, “What Wal-mart Knows About Customers’ Habits,” by Constance L. Hays, was very shocking to me. The fact that Wal-mart has gathered and stored twice as much information about their customers as is available on the Internet is unbelievable. Obviously this is very powerful information, and the executives at Wal-mart have used it very well to have efficient processes and forecast customers’ needs on a daily or weekly basis.

Now that I’m aware of the extreme amounts of personal information that Wal-mart has on record about both me and my purchases, I’m surprised that I’ve never seen any marketing or promotions tailored towards me. Wal-mart has always been successful when using checkout data to analyze trends, budget the number of cashiers needed per hour, and forecast which items are going to be the most profitable on shelves. However, they have never used this data to make customers aware of how they capture insights, nor have they created great, personal experiences for shoppers that give them a competitive advantage.

Recently, Wal-mart’s rival company, Target, has been distributing coupons attached to receipts that are based on the their customer’s past purchases. One provider of this technology is a company called Catalina, who currently has their systems installed in 6,100 supermarkets nationwide. In the article, “In Coupons, It's Catalina at the Checkout,” by Calvin Sims, the director of trade strategy for the Campbell Soup Company describes how they use this information. He says that Campbell “uses the new technology to issue coupons for its soups whenever a customer buys a competing brand,” which shows how this technology can induce customers to try new brands or products. Calvin Sims notes that on average, 9.4% of Catalina coupons are redeemed at stores compared to the 2.5% of coupons that are redeemed found in newspapers and circulars. Not only would this form of individualized marketing benefit Wal-mart if they used the coupons to promote brands with greater profit margins or low sales, but it would also benefit their suppliers and give them greater incentive to reach the expectations set by Wal-mart.

Professor Walls’ first lecture about the Impact of Insights is very relevant to this idea of needing to create personal experiences for shoppers. During this lecture, Professor Walls brought up Kazaa and other music sources to show that we can learn several things about reaching customers by analyzing the music industry. One thing to learn is that we will be successful if we watch how our customers use products, and then make actions and decisions easier for them. By “watching” customers’ purchases and then offering personalized coupons or other incentives to them, Wal-mart would be able to build relationships with customers and allow them to perceive that they are taking control of the marketing they face.

On another note, the privacy issue associated with the amount of information Wal-mart has gathered about their customers is not a concern for me. Although Wal-mart may be the first to have introduced this level of anti-privacy and customer research, I’m sure many other companies will soon follow suit. In fact, several of the stores I currently shop at ask for my address, zip code, or email address at each of the purchase locations. Although I don’t entirely understand how Wal-Mart currently uses their “data enhancement” techniques, I have already provided them with personal and billing information about myself when I purchased photos from the photo center on their website. The main difference, and the reason that some customers might be concerned about their privacy when shopping at Wal-mart is that Wal-mart derives personal information by their own means, rather than asking for it up-front from customers like other companies do. However, with the amount of people shopping at Wal-mart centers each week (an unbelievable 100 million shoppers), it would be very inefficient for customers to stop and enter information with each purchase.