Thursday, February 16, 2012

"How Target Figured Out A Teen Girl Was Pregnant Before Her Father Did" (and what the takeaway is)

Today The New York Times published a long article that goes into detail about ad targeting practices by multiple companies, and also explains how ad targeting works and the behavioral science behind it.  The article, by Charles Duhigg, a staff writer for the Times who has written a book on the science of habits, focuses primarily on Target, a company that "knows" when you're pregnant, and will send you ads for baby items accordingly.  I almost used the word "appropriately," instead of "accordingly," which would be a grave mistake, considering the word's connotation and judging by the fact that Target's program, at least at one time, used snail mail to deliver targeted advertisements to those expecting.  Duhigg shares this anecdote, which Forbes' Kashmir Hill (whose headline I quoted in my headline) describes as "so good that it sounds made up" (by Duhigg or one of his sources though Hill doesn't specify):

"About a year after Pole [Andrew Pole, an employee of Target working for its Guest Marketing Analytics department who was interviewed for the piece] created his pregnancy-prediction model, 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, according to an employee who participated in the conversation.

'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 didn't have any idea what the man was talking about.  He looked at the mailer.  Sure enough, it was addressed to the man's daughter and contained advertisements for maternity clothing, nursery furniture and pictures of smiling infants.  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.'"

Target later stopped being so obvious with its targeting of ads, and started embedding ads for toys and cribs amongst ads for random products (or rather, products selected to make the ads for toys and cribs look random).  But first, how does Target know when you're pregnant?

Target has a system that assigns unique identifiers to its customers whenever possible; the system uses trackable methods of interaction with the store, such as credit card payments, to sign you up with a "Guest ID number."  Then, the data collecting commences.  Data sources are both internal (e.g. what you buy at Target), and external (e.g. data Target buys).  As for external sources, "Target can buy data about your ethnicity, job history… if you’ve ever declared bankruptcy or got divorced, the year you bought (or lost) your house… what kinds of topics you talk about online, whether you prefer certain brands of coffee… your political leanings, reading habits… and the number of cars you own."  Target has been collecting "vast amounts" of data on regular customers "for decades," according to Duhigg.

But you need somebody to make sense (and drive profit from) all of that data.  That's where people like Andrew Pole come into play.  As Andreas Weigend, the former chief scientist at Amazon.com, pointed out (as was quoted by Duhigg), "Mathematicians [have become] suddenly sexy."  When Pole devised a system for determining if a woman was pregnant based on the available data, he soon found himself at meetings above his paygrade.  Here's what Pole's system entailed:

"Target has a baby-shower registry, and Pole started there, observing how shopping habits changed as a woman approached her due date, which women on the registry had willingly disclosed.  He ran test after test, analyzing the data, and before long some useful patterns emerged.  Lotions, for example.  Lots of people buy lotion, but one of Pole’s colleagues noticed that women on the baby registry were buying larger quantities of unscented lotion around the beginning of their second trimester.  Another analyst noted that sometime in the first 20 weeks, pregnant women loaded up on supplements like calcium, magnesium and zinc.  Many shoppers purchase soap and cotton balls, but when someone suddenly starts buying lots of scent-free soap and extra-big bags of cotton balls, in addition to hand sanitizers and washcloths, it signals they could be getting close to their delivery date."

The information that someone is pregnant is very valuable to Target:

"There are, however, some brief periods in a person's life when old routines fall apart and buying habits are suddenly in flux.  One of those moments — the moment, really — is right around the birth of a child, when parents are exhausted and overwhelmed and their shopping patterns and brand loyalties are up for grabs.  But as Target’s marketers explained to Pole, timing is everything.  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.  Which means that the key is to reach them earlier, before any other retailers know a baby is on the way."

And as Duhigg argues, Target's increase in profits is largely attributable to Pole's program:

"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 — when Pole was hired — and 2010, Target's revenues grew from $44 billion to $67 billion.  In 2005, the company's president, Gregg Steinhafel, boasted to a room of investors about the company's 'heightened focus on items and categories that appeal to specific guest segments such as mom and baby.'"

As you might expect, Target was disgruntled (a stronger word perhaps?) by Mr. Duhigg's research into this matter, and the company appears to have prevented Mr. Pole from speaking with Duhigg, who was prohibited from visiting Target's headquarters.  ("I’ve been instructed not to give you access and to ask you to leave," said a "very nice security guard named Alex.")

What's the takeaway?

I always look for concretes.  If there is an issue with data being public, I try and think of a concrete way in which that data could hurt someone.  In this case, that concrete example has been identified already, and it is the father finding out his daughter is pregnant through a catalogue.  So what led to that?  Well, Target was sending these personalized catalogues in the mail.  If the catalogues were being sent via email, it would be a bit of a different situation.  But not a very different situation, as I will soon explain.  There are a few problems with sending catalogues in the mail that are targeted based on the fact that you're pregnant:

1) You might know that Target knows.
Target has made its targeted advertisements more subtle, but you still might be able to figure it out.  Worse, your friends or parents might be able to figure it out.  And since you haven't figured it out, you see nothing wrong with showing them your catalogue ("check this out!").

2) You know they know, and you also know you didn't give them that information.
If people haven't already come to understand that Facebook targets ads based on the things you "like" and the things you post, they will.  It will be common knowledge in the future if it isn't already.  But you're giving that information to Facebook explicitly.  The reaction is, "Oh, okay, they've personalized my ads."  The reaction to Target's catalogues (when people realize their ads are being personalized) is likely to be less friendly (especially when people realize Target knows they're pregnant).

3) The catalogue can easily be read by someone it is not intended for.
Inferences can be made.

4) Pregnancy is sensitive information.
You might not want everyone knowing you're pregnant.  You also might not want to be reminded that you're pregnant.  Say you're a teen giving your baby up for adoption:  a barrage of advertisements for toys and cribs might make you change your mind, and that is an extremely bad thing if you are not in a stage of life or environment that is suited for child-rearing, which you aren't in if you're a teen.  It's not just bad for you, it has profound implications for the child.


Numbers 1, 2, and 4 explain why sending these personalized advertisement by email wouldn't help much.  So is there a way that Target can personalize ads without violating privacy?  I don't know.  I can't think of a way, but that doesn't mean there isn't one.  There is also the question of how Target is obtaining the data:  the buying and selling of data, for instance, is not a topic I have researched, and thus I won't comment on it at this time, but it doesn't make me very comfortable.

I want to say I would like to see targeting advertisements based on pregnancy made illegal, but that is a bold statement, and I try to sit on such opinions for a longer time before I make them official.

An interesting part of Duhigg's article that I did not yet touch on is the concepts of how habits are formed and their nature.  The science of habits is particularly relevant to marketing, Duhigg explains.  Marketers try to tap into the "cue, routine, reward" system that drives so much of our behavior.  In the case of Target:

"…if Target piggybacked on existing habits — the same cues and rewards they already knew got customers to buy cleaning supplies or socks — then they could insert a new routine:  buying baby products, as well.  There's a cue ("Oh, a coupon for something I need!") a routine ("Buy! Buy! Buy!") and a reward ("I can take that off my list").  And once the shopper is inside the store, Target will hit her with cues and rewards to entice her to purchase everything she normally buys somewhere else.  As long as Target camouflaged how much it knew, as long as the habit felt familiar, the new behavior took hold."

It is interesting just how much our behavior is predetermined so-to-speak, both by our biology (how our brains work) — and because of our biology, or perhaps our bottom line — coupons.

Perhaps if we were more discriminating about our purchasing decisions, and less automatic, Target wouldn't be so concerned about targeting ads.  There might not be as much in it for them.  Or perhaps there still would be.  What do you think?  Comment below.

Correction December 29, 2012:  In the original version of this post, two instances of the word your were incorrect.  They should have been you're and this post has been edited to correct this.