How Do Companies Know Consumers So Well?
MINNEAPOLIS (WCCO) – It seems to happen every day. Netflix recommends someone watch its new show, Target emails about patio furniture or a banner ad pops up for shoes similar to those a customer just bought.
So, how do companies know us so well? Good Question.
"There's so much information that comes across when you're using a computer or a smartphone interacting with a site," says Bill McGeveran, a professor of privacy issues at the University of Minnesota School of Law. "They'll place cookies or other devices on your phone or computer that track you from one to the next."
Experts say the largest companies have the easiest time figuring out who to target with advertisements. They have access to customers' buying history and can make educated guesses about what people might buy next based on other people's purchasing decisions.
It's called next likely purchase model, says Kris Lynch, founder of SmartBase Solutions, a data-based marketing company.
"If someone buys a diamond necklace, what's the next likely thing they will buy," Lynch said. "If it's a diamond bracelet, then when people buy a diamond necklace, the next email or message, I would use a diamond bracelet."
Big companies have large data departments with statisticians who work to determine how to reach specific audiences. Smaller companies can hire groups for that same service. The number crunchers use algorithms to figure out patterns of groups (say, women 30-35 years old), but also how to send specific marketing to individuals.
"We could buy additional behavior lists and overlay onto someone so we could see other things about them," Lynch said.
For example, vehicle registration lists are public and can be used to determine what kind of car someone owns. Companies like Google will also sell lists to advertisers.
"Google gathers that information on you in return for you using Google Maps and Gmail for free," Lynch said. "They would sell it to a retailer to say we have people that fit the profile for your product and you can send them messages via banner or social media based on your profile."
McGeveran points out it's not just online shoppers who give out information about themselves to companies. Buying products with credit cards, having a store loyalty card or simply carrying a phone into a store that can track customers all provide information.
So, should we be worried about privacy or content with convenience?
"I think it's something we should keep our eye on, but I think there's real extreme views on both sides," says McGeveran. "It's good to have some rules about it, but not thinking that the world is ending because of this."
