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

Sooraj Shah

If a consumer agrees to share information with retailers, can they complain when data about their shopping habits and lifestyle choices are used to milk them for more money?

Walker added: “If Tesco could point to a particular section of the policy for its loyalty card to show that the data could be used from a consumer for different provision [to the campaign management tools], then that would be interesting.”

The current Tesco Clubcard data protection statement says that the company uses the data it gathers to “understand [customers’] shopping habits to improve its service and unless [the consumer] indicates otherwise, contact them with offers and information about products and services of interest to [the consumer and his/her] family.

“[Tesco Clubcard] will share your details among Tesco companies at home and abroad (eg Tesco Personal Finance), and businesses that process Clubcard information on our behalf (eg printers who need certain details to print our mailings).”

Walker said that if a policy states that a company uses a customer’s data across all of its operations, then that is something that consumers need to consider the implications of. “There is nothing to suggest they can’t do that, but then you would have the public relations angle, which is: Do customers think this is fair?” she said.

According to the Informatica survey, 30 per cent of respondents felt that they have had their data exploited by firms in the past, either by it being passed to a third party without their permission, or by information being used to discriminate against them.

If some diversified retailers are using data in this way - or are tempted to, to gain the fabled “single view of the customer” (which is the goal of CRM technologies) – then it would not be the first time, according to Andrew Jennings, chief analytics officer at analytics provider FICO.

Jennings gave the example of US retailer Target, which, according to a recent New York Times article, was found to have predicted a high school girl’s pregnancy. It did so by analysing the girl’s shopping habits, and then with the use of predictive analytics, identified a pattern of products that are typically bought in early pregnancy. The retailer reportedly sent out coupons for other products that she might have needed for her new baby. The girl’s father, meanwhile, had not been aware of his daughter’s situation.

Jennings said that if a retailer decides to use such methods, then it must ensure that it does so appropriately, and apply the same analytical logic to what the repercussions of that decision might be. “You’ve got to be able to do that really well, because if you send the coupons to the wrong people, then the customer will ask ‘How and why am I getting all of this?’” he said.

In the UK, Tesco has risen to dominance across several areas of the retail sector. According to a spokesman from consumer data protection agency ALLOW: “It is no coincidence Tesco’s recent retail dominance has coincided with its takeover of Dunn-humby in 2011. Dunnhumby provides the skills to understand customers better than anyone else.”

In fact, the reverse is true: Tesco has recently been losing ground to its rivals and in June 2012 posted its sixth consecutive quarter of falling sales. In April, the chain reported its first drop in domestic profits for 20 years, prompting CEO Clarke to announce a £1bn makeover of the company. So the clear connection between analytics and profits is not so easily stated.

The use of loyalty cards to collect custo-mer data is both an opportunity and a challenge, according to Gareth Herschel, research director at Gartner.

“There is a distinction between personally identifiable data and anonymised data. So, for example, if the people who shop at a particular store tend to buy unhealthy foods and the retailer offers all its customer base private health insurance, then this kind of data usage is not illegal as it is not information that concentrates on specific people.

“But with a loyalty card all of these transactions can relate back to a particular customer, as opposed to just broad buying patterns,” he said.


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