LONDON– Where should businesses draw the line when it comes to data mining?
This year, an irate man from Minnaepolis rang retailer Target to complain about an advertising campaign in which his daughter was recieving coupons for baby clothes, cribs and other items. In fury, he demanded to know why the firm was sending his daughter — still in high school — these kinds of promotions.
After verifying that the student had recieved baby-related offers, the manager apologized, and then rang back a few days later. Somewhat abashed, the father apologized, as it turned out his teenage daughter was due later in the year.
But how did Target know the girl was pregnant before her father did?
The answer is Big Data — the collection of vast quanitities of information, sorted to expose patterns and trends. In this case, Target assigned each customer a shopper ID in order to tailor marketing campaigns based on their purchase patterns. The personal nature of pregnancy hit the mark a little too close, so the firm began adding additional, random items to make marketing appear less intrusive.
For businesses that have invested in the idea of Big Data, being able to identify and predict consumer trends means that it is possible to change product lines and services in line to what consumers may prefer, and therefore increase sales and profitability. As customers are now more powerful than ever — due to social media, global communication platforms and the ability to bargain hunt and compare rivals online — firms are being forced to find new ways to stand out from the crowd.
Data mining is nothing new, and ‘Big Data’ may be little more than a buzzword or a fad that will eventually vanish. However, the difference between now and ten years back is that businesses can store information somewhat affordably, and go back to ask questions that are current and important now, rather than in the past. Tools are more easily available to analyze this information, and with increased connectively through apps, mobile and the Internet, if you can separate the wheat from the chaff, it is the key differences in storing and analysis which are important.
Big Data can provide an insight into how businesses can innovate, predict future customer trends and capitalize on the wealth of data firms collect from customers every day. However, business activities based on patterns gleaned from Big Data — as shown in the Target example — can also be uncomfortable and potentially intrusive for consumers.
At the Financial Times Innovate 2012 conference in London Tuesday, supermarket Tesco’s CEO Phil Clarke mentioned how Big Data was transforming his company’s take on retail, and reaffirmed “business rule number one: know your customer.” Monitoring customer trends allowed the firm to make the transition from 1955’s shopping by fax to today’s online grocery store, and create innovative blueprints that can be deployed across the entire enterprise.
Tesco also use Big Data insights to tailor product offerings and anticipate customer needs. As an example, the supermarket has installed virtual shopping in the U.K.’s Gatwick Airport, and customers in Seoul can purchase their shopping from underground stations.
However, Clarke also mentioned “the Internet of Things,” the idea that future devices and lifestyles will all be connected through digital networks. Smart wine racks that let the owner know when a bottle has been removed, turning on the washing machine from the office or using Google to find your child’s lost toy at home, the concept is expected to hit us in the future — and is one Tesco plans to exploit.
“A lightbulb could blow at home and automatically add itself to your weekly shop. You wouldn’t need to tell us you need to feed a family of four - we’ll know,” Clarke said. “We’ll even know your budget.”
If Big Data and “the Internet of Things” has such potential to intrude into our daily lives, a fine line will have to be met between connecting consumers and businesses as well as maintaining individual privacy.
We give away vast amounts of data every day, from location-tracking on our smartphones to allowing applications to connect to our social media accounts — documenting anything we share through digital networks — as long as we believe we are gaining something valuable in return, such as a more personalized service or tailored discounts.
However, as data mining becomes more entrenched and visible within the enterprise, strict guidelines must be put in place to protect consumers. By becoming more transparent, businesses can not only be clear on what data is mined and how it is used, but may be able to instill customer loyalty and trust in a market made globally competitive due to the Internet and empowered consumers.
This post originally appeared on ZDNet.