Monday, January 23, 2006

Customers who have looked at this Sony laptop have also bought... Pants!!!

I just realized that, in my Private self vs Public self post, I said almost all the things I wanted to say about merchant-customer privacy. Once the concept of "your public self versus your private self" is introduced, it becomes trivial to see why the list of things you previously bought (and the times when you bought them) should not be private: It pertains to actions done by your public self in a public place. Unless these things were bought online from a merchant that specifically tells you the fact you bought them will be kept confidential.

There are a few more dimensions to this kind of thing, so while I'm at it, I guess I'll just finish writing up my current thoughts on them.

So, yeah, many stores have a "profile" on you, and this profile is a list of the things you bought and when. Sometimes this is facilitated by a "savings card", sometimes by the store's asking your phone number, or it could be done by matching credit card numbers. Privacy-wise, what do you have to gain or lose with this? Economics-wise, what do you have to gain or lose, what do the other customers have to gain or lose, and what does the store have to gain or lose? (Right now I'm just talking about brick-and-mortar stores; I'll get to online merchants at the end).

Privacy-wise, the issue is clear and I've already addressed it: These purchases were made in a public place, in plain sight of everyone. Expecting them to be "private" in any way is ridiculous.

Now, you may say; "But there's a difference between scattered people possibly seeing (and then probably forgetting) what I bought on any one trip, and a database that precisely and eternally records what I buy on EVERY trip".

To that, I answer; "Not anymore, there's not". It used to be that bits of information made "public" in different places, in different forums, in different spaces, could be expected to never be compiled together. It used to be that you could, in plain sight, buy Item A in Store X and later buy Item B in Store Y, and expect those two pieces of information to never come together (and to never allow anyone to use them to make a "pattern" out of your shopping habits). It used to be that the people who knew of one purchase would not know how to reach information about another purchase somewhere else. Well, with the digital age, that's out the window. The nature of information has changed, the way it is stored and retrieved, in such a way that scattered public information can easily be grouped. All the things you do publicly can be brought together. And it's ridiculous to think that this compiling of different kinds of public information constitutes a violation of privacy. (This will come up again and again, like when I talk about your information appearing in Google search results and about social networking sites).

It's like there's a giant network of computers stalking EVERYONE. But since they only get to see the "public you", then they are not invading your privacy; just compiling public information.

If you don't want that information to be public, then you're going to have to pay cash and to give phony information when the store/business asks you for your phone number and whatnot.

What about the fact that, once a merchant has your name and address, they often sell it to marketers, resulting in you receiving junk mail? Isn't that "private information"? Well, yes and no. When the people in the store asked you for this information, you probably just gave it to them. Did you first ask with whom this information would be shared and under what circumstances? (Did you read the privacy policy?) No? Then you just gave away that information, and you have no right to expect that this information will not be shared.

If this information is so valuable, or so private, why did you give it away so carelessly? People often wonder how mailing lists, search engines, etc, find out information about them. Well, most of the time the people themselves gave the information away without bothering to find out where it was going. They just assumed it would be kept private, that the commercial institutions would pass up the chance to sell it, out of the goodness of their hearts. Um, yeah.

Why do the stores do this, anyways? Is it because they are mischievously curious to know things about YOU? Is it so that, if you buy a certain series of items, the computer at the store warns the FBI that you are probably a terrorist and/or a sex offender? NO! The store could not care less about YOU! It's so that they can have lots of data, which will allow them to group all their customers into a few (or several) sub-groups. It's so that they can say "the people who shop here most often seem to buy these items", and "the people who buy items in category C also seem to like buying items in category Q", and "smaller and more frequent shopping trips seem to include these items, while less-frequent and bigger shopping trips tend to include those items". This kind of information will allow them to better organize their store layout (it's anyone's guess whether that means that the items usually bought in the same trip will be placed closer together or farther apart), it will allow them to decide which products to sell at low prices and which products to sell at high prices (if everyone who buys product X also buys product Y, then we can sell product X at a super low price and advertise this, and meanwhile crank up the price on product Y and hope no one notices they're actually spending more money). It will allow them to figure out the shopping profile of the kind of customer that brings in the most profit, so that the store can taylor their product selection, their marketing, their prices, and their store layout to bring in and profit from that kind of customer.

The stores claim that savings cards "bring savings to our most loyal customers". So if you buy there a lot, each trip will cost less than it would if you did not have the card. This "motivation" to help their "loyal customers" is, of course, BS. While it may be true that a bunch of items paid for with a card will cost less than those same items would without the card, the seldom-mentioned fact is that most prices are RAISED upon the implementation of a card system, so you're paying about the same that you were paying before the card existed - maybe even more, if they're careful about which prices were raised and how much. You're probably not saving money compared to the pre-card days, you're just saving money compared to current non-card purchases. It's a big difference; It means the "savings" are an illusion and are only relative to artifically inflated prices. Ah, and meanwhile, the other people (those without cards) are 1: paying way more, and 2: shopping in a store that will slowly disfavor their "shopping profiles" by taking away the items that they buy and you don't, by raising the prices on the items that they buy and you don't, and by devoting less store space to the items that they buy and you don't. They want their store to cater to the most loyal (read: profitable) customers. They care less about the less-profitable customers, but unless some law says otherwise, there's nothing wrong with that.

All of which sounds very very good to me. It makes excellent business sense. The fact that the store is hiding their true intentions (they say "We want to reward YOU with savings" rather than "We want to make more money off people like YOU"), and the fact that they falsely claim "big savings" over prices that are too high anyways, are a little annoying and dishonest, sure. But the idea of doing all this makes good business sense and will allow for the store to be more profitable, selling only the more profitable items and drawing the more profitable customers.

One interesting side-effect is that if you provide phony information when they ask you for your name, phone number, address, etc etc, it won't make the least bit of difference. They will still get to see your shopping profile, and will still be able to aggregate your shopping data with that of similar customers. At least you won't get junk mail. (But you might also miss out on their preferred-customer-only gift certificates and coupons! Are those worth getting junk mail? Up to you). Some people are so paranoid about privacy, they have put much effort into making fake supermarket savings cards. If tons of people download these and all use effectively the same card, this may harm the supermarket's ability to track their purchases... or it might be doing the supermarket a favor by having a whole class of customers (techie dorks) use a single card!

So you see, this has nothing to do with "your private information" (unless you give it away and don't bother to make sure this information won't be sold to junk-mailers). It has to do with running a business more efficiently.

So far I've been talking about brick-and-mortar stores. Online merchants have an even easier time: They can match sales in their database by address, credit card info, or name, so in their case it's trivial to group their customers into different categories (and thus to find out which kind of customer is most profitable so that more marketing can be aimed at them, and also to find out which prices can be raised based on what items are usually bought along with what items).

Online merchants can go one step beyond: they can create algorithms that recommend items to YOU based on your individual shopping/browsing history and on the purchases made by people with similar histories. Now, it could be said that what you buy online is NOT public, so the privacy policy of the online merchant might (but might not) allow the merchant to share information about you and your shopping habits (and/or your wish list) with anyone. Whatever their privacy policy says, though, this does not prevent them from having a computer look at your shopping history and, with no human intervention, tell YOU that "We have noticed you are interested in [blah]. People who also seem to be interested in [blah] have also looked at and/or bought [this other thing]".

Personally, I think this is GREAT. regularly recommends this to me that I genuinely would be interested in. I usually know about them, but sometimes not. So they make money, I learn (or am reminded) about neat stuff, my privacy is maintained (if I care about that), everyone wins.

The title of this post comes from the fact that a friend of mine, a Microsoft programmer, has gotten Amazon recommendations for items unrelated to the items he bought or looked at. Sure, it may be true that "People who have looked at the Sony Vaio PCG-GRT100P have also bought... Pants!!!", but that's because most people buy pants, not because pants have anything to do with laptop computers. Are users of Sony's laptops more likely to buy pants (or to not know that you can buy pants online) than most other people? Since the items are recommended by correlating shopping/browsing histories, and not by considering the relatedness (or lack thereof) of the items, the results can sometimes be quite humorous. Or controversial.

Besides, isn't it just NICE when the people at a store know you? If I shop a lot somewhere, I want the people there to know this, so that when I send them an email or something, they see that my business should be valued. In a related note, most retail stores today cut costs by paying their employees very little, which causes high turn-over rates and does not make for knowledgeable or motivated sales associates. Almost-gone are the days when you could walk into a store and be greeted by the same genuinely cheerful person, year after year, a person who would call you by your name, ask you how the family is doing, ask you how that new (whatever you bought there last, or talked about buying) is working, and say "we just got these in, I bet you're gonna love'em". Personally, I'd feel great if I were treated like that. And it just doesn't happen anymore. Is that mom-and-pop store employee violating my privacy by remembering what I bought and remembering things about me? Sure, maybe it's less frightening when a person does it, not a computer or a huge greedy faceless corporation, but that person is also primarily doing it for the sake of keeping his store profitable - the fact that he gets to be nice in the process is just a welcomed side-effect. Or am I being too cynical? Maybe I am.

One last interesting point I could bring up is the concept that the information these stores have on you could literally be treated like property. Heck, the stores go through a lot of trouble and expense to acquire that information - it must be worth something! How much? Could you sell it? Who'd buy it?

It might be useful to treat your "personal information" as property whose ownership is shared between you and the people/company with whom you do business, and who provide you with serivces. Once you tell them your personal information, their privacy policy is a contract that determines how much they own that information, what they can do with it, with whom they can share it. This concept will be brought up again when I talk about information that ends up online, and about how John Battelle feels about this.

One last thing: Sometimes you purchase something, and the price is something like "$300 or $250 after rebate". You buy the thing, pay $300 plus tax, and then when it comes time to get the rebate, you find out the rebate people want information about you, like your career field and occupation title. That's just wrong - it's deceptive and misleading. It assumes your information has no value, since it says you get the rebate without having to provide anything other than $300 (and proof of purchase). At the same time, it's effectively paying you $50 (or whatever) just for your information. That kinda puts a value on it right there. Of course, you can just lie - but then are YOU being deceptive, "selling" information that is inaccurate? Now everything gets REAL confusing. It becomes necessary to formalize the value of your information before we can safely make progress past this mess.

However, one could say that (under some definitions of "privacy"), the information asked for on the rebate (your career field and occupation title) is not really private. What I mean is, if you ever made that information public - such as mentioning your career field and occupation title in some non-private forum, or to someone you did not know well enough to be sure your "secret" would not be spread - then your career field and occupation title are not private. In other words, unless you keep your career field and occupation title a secret (only telling it to people you trust will not tell others, and never revealing it in public where random people could hear/read it), then asking you for this information is NOT a violation of privacy.


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