How Tesco and co are testing the limits of customer data exploitation

Customers expect companies and organisations to gather data to target services and products at them, by the use of cookies on their websites, for example, or by retrieving data from loyalty cards, or monitoring the use of smartphone applications. In turn, this has raised customers’ expectations for improved service levels and a better relationship with their chosen suppliers.

Meanwhile, the government is fostering a culture of dynamic data sharing and it is clear from a range of recent policy announcements – the Open Data Institute, the NHS information strategy, and so on – that it sees enormous commercial potential in this for kickstarting UK growth.

But as large companies diversify – for example, as supermarkets sell insurance, offer banking or legal services, and even, in some cases, in-store pharmacies, surgeries and post offices – some organisations must be tempted to connect this data up in ways that might save them money, but at the same time risk intruding into the customer’s privacy, health, finances or lifestyle choices.

Rumours sometimes circulate of retailers gathering data about unhealthy eating, smoking, or excessive alcohol consumption from a customer’s purchases and using it to increase their insurance premiums, for example. Other, perhaps apocryphal, stories circulate too – such as the customer who injured himself after slipping on a wet floor in an American supermarket. According to industry lore, he tried to sue the store only to be told that the company’s records of his shopping habits suggested he was a heavy drinker and this, claimed the store, was the real reason he had fallen over.

In fact, such ideas are not too far beneath the surface of day-to-day political discourse. Last week, The Daily Telegraph reported that a Whitehall unit dubbed the “Behavioural Insight Team” was in talks with supermarkets over using their databases of customers’ shopping habits in a bid to improve the nation’s health – with the suggestion being that customers deemed to have “unhealthy” shopping habits (in terms of food, alcohol or tobacco, for example), might be contacted directly by the government in a form of social control via the checkout.

Health Secretary Andrew Lansley swiftly ruled out any government involvement, but perhaps only because ministers are thought to be wary of “big brother” accusations – in spite of the government drafting its controversial Communications Data Bill earlier this month, which has given rise to similar accusations.

So what strategies are currently being deployed by retailers and other organisations?

At IBM’s Smarter Commerce Global Summit in May, Boots’ director of customer loyalty, Ruth Spencer, said that the high-street pharmacy chain’s customers now expect it to use their data to target them. “Customers now believe [the company] uses its insight. They think ‘you’ve got my data, I expect you use it’,” she said.