Targeting consumers based on their past behaviors and demographic information has become an accepted “best practice” in marketing strategies. A new twist on such targeting could be coming to a grocery store near you.
If you have followed my blog you know that behavioral targeting is controversial because of the privacy issue. Regulators, industry trade groups and Congressional committees have all weighed in on the topic.
When it comes to online behavioral tracking, regulators would like to see a consumer “opt-in” approach, while trade groups prefer an “opt-out” approach to deal with the privacy concern. In the meantime, browser applications have added their own “do not track” capabilities as a browsing option.
The online world is not the only way behavioral tracking is done. Loyalty cards and telephone numbers are other examples of identifiers used by businesses to track shopping behaviors.
In most cases, the behavioral data is combined with other information that exists to create targeted and personalized offers. The end result is that consumers receive targeted ads or coupons for products based on their potential interest in them.
Several grocery chains are testing the next step in the evolving process of personalizing the marketing process. They are adding personalized pricing to what have been personalized product offerings.
Based upon the huge amount of data that has been collected through its loyalty card program, Safeway is one chain testing the personalized pricing concept. The Just for U personalized pricing program uses its data and predictive modeling to select those customers who are more likely to purchase a product with the right incentive. Those shoppers get a lower price for that product than other shoppers.
Here’s how it works. The predictive modeling program uses the data and algorithms to determine what product, pricing and offer might entice a shopper to purchase a certain product not bought previously. These products typically have a higher margin of profit for the store. The personalized offering could include:
- A more expensive brand for an item purchased previously; using past data that the consumer is not highly price-conscious.
- A larger sized product for brand items purchased previously; using existing data of household income and family size.
- A different product from a brand used regularly by the shopper; using past data of brand loyalty and purchases from the brand.
In each of these scenarios, only shoppers who are more likely to purchase get the offer with the adjusted pricing based on their previous shopping habits. The offer and personalized pricing can be delivered via traditional coupons, website, email and mobile apps. The more sophisticated digital targeting technology applies the individual pricing via the customer’s loyalty card.
The data and targeting algorithm is refreshed when the consumer redeems an offer at a certain price point, increasing the predictive power for future offers. Another advantage of the personalized approach is that it is more difficult for competitors. They can’t match something they can’t see!
Mobile marketing technology can also increase the effectiveness of such offers. Mobile apps today can track specific customers to specific store aisle locations. Combining store location with shopper data allows the store to create and deliver personalized offers in real time. Customers are provided with targeted offers with personalized pricing for specific products as they pass them in the aisle. Safeway recently upgraded its Just for U with a mobile app that does just that.
Coupons have been used to provide a pricing incentive to purchase products for many years. Kroger uses them for personalized pricing. Kroger tracks the specific price at which a shopper redeems a coupon and adds that data to its existing information on the shopper. It is then used to personalize future pricing offers to that individual customer.
Expect personalized offers and pricing to move to real time as more and more stores send their geo-targeted offers to shoppers’ mobile devices. Expect Kroger to move personalized pricing to mobile devices in the near future.
Here’s a good article on the subject of personalized pricing.
If you are more concerned about your privacy than receiving more relevant offers, then you should:
- Stop using your loyalty/frequent shoppers cards, etc.
- Stop giving your phone number to businesses
- Stop allowing tracking cookies by using the “do not tract” feature on your browser
- Stop redeeming coupons
- Stop subscribing to offline and online content such as magazines, blogs, etc
- Stop using credit/debit/gift cards
- Stop …..
You get the picture. Privacy is a matter of degree. Some loss is the price you pay for living in a modern world. It is also the price you pay for more relevant and personalized offers from the stores you frequent.
Do you like the idea of individual pricing?
Does it seem fair that you pay one price and the person in line after you pays another?
How much privacy are you willing to give up to receive such offers?
I suspect that many of us have different opinions on this issue?