Cashing In on our Buying Habits

ChiloquinNews article 2/27/2012

 

This piece has been excerpted from a New York Times article. You can read the full story here.

 

One study has estimated that habits, rather than conscious decision-making, shape 45 percent of the choices we make. There are dozens of habits we rely on every day. Some are simple, like automatically putting toothpaste on your toothbrush. Others are so complicated that it’s remarkable to think that a habit could have emerged at all. Take backing your car out of the driveway. When you first learned to drive, that act required a major dose of concentration. Now, you pull into the street without thinking. The brain will try to make almost any repeated behavior into a habit, because habits allow our minds to conserve effort. But conserving mental energy is tricky, because if our brains power down at the wrong moment, we might fail to notice something important, like a skateboarder zipping past. So at the beginning and ending of the habit our brains perk up with a ‘cue’ and a ‘reward’ (phew, got out into traffic once again!) There is the cue, the routine, and the reward. Over time, this loop — cue, routine, reward — becomes more and more automatic. Habits aren’t destiny — they can be ignored, changed or replaced. But it’s also true that once the loop is established and a habit emerges, your brain stops fully participating in decision-making. So unless you deliberately fight a habit — unless you find new cues and rewards — the old pattern will unfold automatically.

 

Enter the retailers. They know what your buying habits are. For decades, Target (not the only one, to be sure) has collected vast amounts of data on every person who regularly walks into one of its stores. Each shopper is assigned a unique code — known as the Guest ID number — that keeps tabs on everything they buy. “If you use a credit card or a coupon, or fill out a survey, or mail in a refund, or call the customer help line, or open an e-mail we’ve sent you or visit our web site, we’ll record it and link it to your Guest ID. We want to know everything we can.” Also linked to your Guest ID is demographic information like your age, whether you are married and have kids, which part of town you live in, how long it takes you to drive to the store, your estimated salary, whether you’ve moved recently, what credit cards you carry in your wallet and what web sites you visit. Target can buy data about your ethnicity, job history, the magazines you read, if you’ve ever declared bankruptcy or got divorced, the year you bought (or lost) your house, where you went to college, what kinds of topics you talk about online, whether you prefer certain brands of coffee, paper towels, cereal or applesauce, your political leanings, reading habits, charitable giving and the number of cars you own.

Most shoppers don’t buy everything they need at one store. Instead, they buy groceries at the grocery store, toys at the toy store, and they visit Target only when they need items they associate with Target. But Target sells everything from milk to electronics, so one of the company’s primary goals is to convince customers that the only store they need is Target. But it’s a tough message to get across, even with the most ingenious ad campaigns, because once consumers’ shopping habits are ingrained, it’s incredibly difficult to change them.

 

They discovered that when some customers were going through a major life event, like graduating from college or getting a new job or moving to a new town, their shopping habits became flexible in ways that were both predictable and a potential gold mine for retailers. The study found that when someone marries, he or she is more likely to start buying a new type of coffee. When a couple moves into a new house, they’re more apt to purchase a different kind of cereal. When they divorce, there’s an increased chance they’ll start buying different brands of beer. Consumers going through major life events often don’t notice, or care, that their shopping habits have shifted, but retailers notice, and they care quite a bit. At those unique moments, customers are “vulnerable to intervention by marketers.” In other words, a precisely timed advertisement, sent to a recent divorcee can change someone’s shopping patterns.  

New parents are a retailer’s holy grail. Among life events, none are more important than the arrival of a baby. At that moment, new parents’ habits are more flexible than at almost any other time in their adult lives. If companies can identify pregnant shoppers, they can earn millions. Because birth records are usually public, the moment a couple have a new baby, they are almost instantaneously barraged with offers and incentives and advertisements from all sorts of companies. The key is to reach them earlier, before any other retailers know a baby is on the way. Specifically, Target wanted to send specially designed ads to women in their second trimester. “If we could identify them in their second trimester, there’s a good chance we could capture them for years.”

 

The only problem is that identifying pregnant customers is harder than it sounds. Target has a baby-shower registry, and they started there, observing how shopping habits changed as a woman approached her due date. Analyzing the data, running test after test, some useful patterns emerged. Lotions, for example. Lots of people buy lotion, but women on the baby registry were buying larger quantities of unscented lotion around the beginning of their second trimester. And sometime in the first 20 weeks, pregnant women loaded up on supplements like calcium, magnesium and zinc. About 25 products, when analyzed together, allowed them to assign each shopper a “pregnancy prediction” score. More important, her due date could be estimated to within a small window, so Target could send coupons timed to very specific stages of her pregnancy.

 

About a year after the pregnancy-prediction model was created, a man walked into a Target outside Minneapolis and demanded to see the manager. He was clutching coupons that had been sent to his daughter, and he was angry. “My daughter got this in the mail!” he said. “She’s still in high school, and you’re sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?” The manager apologized and then called a few days later to apologize again. On the phone, though, the father was somewhat abashed. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”

 

“We have the capacity to send every customer an ad booklet, specifically designed for them, that says, ‘Here’s everything you bought last week and a coupon for it.’ We do that for grocery products all the time.” But for pregnant women, Target’s goal was selling them baby items they didn’t even know they needed yet.  What Target discovered fairly quickly is that it creeped women out that the company knew about their pregnancies in advance. “Then we started mixing in all these ads for things we knew pregnant women would never buy, so the baby ads looked random. We’d put an ad for a lawn mower next to diapers. We’d put a coupon for wine glasses next to infant clothes. That way, it looked like all the products were chosen by chance. And we found out that as long as a pregnant woman thinks she hasn’t been spied on, she’ll use the coupons. She just assumes that everyone else on her block got the same mailer. As long as we don’t spook her, it works.” Soon after the new ad campaign began, Target’s Mom and Baby sales exploded. The company doesn’t break out figures for specific divisions, but between 2002 and 2010, Target’s revenues grew from $44 billion to $67 billion.

 

Over the past two decades, the science of habit formation has become a major field of research in neurology and psychology departments at hundreds of major medical centers and universities, as well as inside extremely well financed corporate labs. Those people who are chilled by stores’ tracking and profiling them may want to consider going the way of the common criminal — and paying for far more of their purchases in cash.

 

 

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