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Data mining pushes marketing to a new level
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Kai Ryssdal: Almost everything you do, short of taking a long, lonely walk in the woods or something, leaves little bits of electronic data behind. Every time you search the Internet, you punch something into your mobile phone or you write on someone's Facebook wall, there's a giant industry right behind you sucking up all that data and using it to figure out how to sell you something. Toothpaste to life insurance. The data mining business, as it's known, is growing 10 percent a year, and as you might have guessed, the amount of data we produce is booming.
So today and tomorrow on the program, Marketplace's Stacey Vanek Smith is going to explore the $100 billion data-mining industry, and what, exactly, it knows about us.
Stacey Vanek Smith: I'm grocery shopping at Albertsons, and, when I check out, I hand over my member ID card.
Vanek Smith to cashier: Can I give you my card?
I get a discount on my groceries, and Albertsons gets information on everything I just bought. Along with my receipt, the computer spits out a coupon for a dollar off Skinny Cow ice cream sandwiches, which I buy all the time. And Us Weekly, which, well, I'm just trying to stay well-informed.
Vanek Smith: Thank you.
Those smart coupons are just the tip of the $100 billion data mining industry. Every time you search for something online, swipe your credit card or pull up directions on your cell phone, that action creates a little module of data about you. Data compilers collect that information and sell it -- usually millions of records at a time to marketers who use it to target consumers.
Robert Grossman heads the National Center for Data Mining.
Robert Grossman: This allows better targeting with less effort that can be more widely used by more companies and hopefully increase their margins.
Collecting data is just the beginning, then someone needs to make sense of it. Someone like data analyst Peter Harvey, CEO of Intellidyn. A travel company, which was looking to sell high-end vacation packages to Asia, recently came to Harvey with data on millions of potential customers.
Peter Harvey: We pass 5,000 data elements across them and figure out which of them are most likely to travel.
The attributes of the Asian traveler?
Sound Montage: Wedding march, farmers, soldiers shouting, man singing "when I'm 64"
Turns out, if you're married, a farmer, ex-military and over 65, you want to go to Asia! Harvey says data mining can double or triple the response to an ad. And companies will be able to hone in on potential customers even more precisely as data gets more individualized. Sites like Google, Facebook and Foursquare track what you're buying, what you're looking to buy and where you are.
Andreas Weigend teaches data mining at Stanford.
Andreas Weigend: Traditionally, companies knew transaction data. They knew how many latte macchiatos were sold at this location. They didn't really know who they were sold to.
And now?
Weigend: The company could very well know who the person is based, for instance on his mobile phone's ID, and could have the coffee ready before the customer even orders it.
Virtually every large companies mines its data -- it's how Amazon and Netflix come up with those recommendations that entice you to buy another book, another movie. It's how iTunes knows that if you like this song...
"Slow Life" by Grizzly Bear (with Victoria Legrand)
It should try to sell you this song?
"Gold digger" by Kanye West
Intellidyn's Peter Harvey says our data is pushing advertising to a whole new level.
Peter Harvey: Marketing will move from static to dynamic. And then within dynamic, it will be the rate of change in how fast you can do it.
More like how fast you can make sense of it. Demand is booming for analysts who build the computer models that can synthesize all this data for marketers. Eventually, most of the ads you see will be tailored to you. Which sounds great, but what about our privacy? Andreas Weigend says we lost that the minute we logged on.
Weigend: Maybe privacy was just a blip in history. It started when people moved to cities, where they had places to hide, and it ended with the Internet, when basically, there was no place to hide left.
My privacy in exchange for a dollar off ice cream sandwiches... Well, I guess it's a fair trade.
In Los Angeles, I'm Stacey Vanek Smith for Marketplace.
Kai Ryssdal: Tomorrow, Stacey makes that trade. She takes us on a tour of getting her own data mined. It's a good one; you're going to want to listen.
Predictive analytics and data mining systems have been around for quite some time. But this development is not without consequences and social media adds a new dimension to it. Think about data and text mining, correlation of certain words to behavioral patterns. Or what to think about the amount of alcohol you buy at your local liquor store (and pay with your credit card + liquor store bonus card). Unless stated otherwise, these data may be sold to marketing agencies or data enrichment companies. Buying patterns can then be linked to the likeness to be or become an alcoholic. This information may be useful to your employer or to your car insurance company, possibly also your medical insurance. 'Advanced' profiling and correlation are the real risks that come with social media. It is potentially disruptive technology.
I wonder what cluster I fall in? I live a relatively austere lifestyle in a paid-off house in a lower class urban neighborhood. 11-months out of the year I'm a cheap bastard who shops at Costco and Big Lots, so that during the 12th month I can go out and spend money on first-class travel, $3000 stereo systems, Expensive toys and authentic hardwood floors. Plus, I watch only about 4 hours of television per week. Go at it marketers!
What I can't get over is how wrong the marketing and data collection folks still get things.
They don't seem to be able to tell the difference between "I live for shoes and own 150 pairs" and "Damn, my tennies have worn out and they never have 5 1/2 WW in the store. Guess I'll order online."
I agree that mining dislikes would be wonderful. Heck, just keeping a record that someone of my name at my address once asked to be removed from your mailing list would be spiffy. . .but no, buy the mailing list from the catalog I actually purchase from, and bombard me with catalogs again. . .
In my opinion, the gold-mine of data that everyone, including even Facebook, is *refusing* to collect is our *dislikes.* Advertising costs money; It would reduce advertisers' costs significantly to be able to, for instance, not send ads for ice cream to someone who's lactose intolerant--or just doesn't like ice cream.
There's another side to data mining. Walmart for example if I am correct uses it to help determine what to order for a given store (predictive). In Rochester NY, the Wegmans Market Chain pioneered the shopper card and thus on of the major early forces in the consumer targeted mining of data. On a side While in Florida, at a Walmart, I noticed a lot of tvs at the checkout and I wondred if people were being evaluated based on their interest - another type of mining?
Data mining appears to be a scam perpetrated on marketing departments: nothing in Ms. Vanek Smith's report suggests anything but the profoundly obvious. But marketing managers need to pay big for such obvious insights, since they are provided by expensive consultants. (Does it really take an large data base and fancy software to determine that the most likely future purchaser of Skinny Cow frozen novelties is the current purchaser of frozen novelties, or that likely visitors to Asia are those with time and money, i.e., the retired, and since military can retire after 20 years of service, they are likely to retire at a much younger age?)
Data mining might have real applications in areas such as medicine, but in marketing it's all sizzle, no steak.
When you posted your comment about Big Brother, did you first read the "Privacy Policy" below? American Public Media now has some of your information that they may use according to that policy. You made a decision to give up some privacy in exchange for public comment, so did I. This is a far cry from 1984, but it does illustrate the need to read and understand how your data will be used and make an informed decision. It takes a little longer, and most people won't do it, but that's the price of privacy.
Stacey Vanek Smith mentions that $1.00 discount off a package of ice cream sandwiches is a fair trade for the fact that data mining registers that she purchases these ice cream treats.
But what happens when someday Stacey needs medical care for high cholesterol and is denied coverage because via data mining her health insurance carrier proves that Tracy brought her health problems upon herself by eating those ice cream sandwiches? Good trade off? I don’t think so.
Orwell predicted it. Big Brother is here.
Okay, so I am a woman of a certain age with teenagers and the way I see it is that voluntarily giving away privacy is the way they want it. Even though I'm paying now, they are the investors of the future and they could care less about privacy. But every time I'm listening to Market Place and something like Cake comes on, they think I'm cool! It's all I have!
