When you hit the grocery store, you probably assume that the can of soup you pluck off the shelf and drop in your cart is the same price for you as it is for everyone else shopping in aisle four, right? It might surprise you to learn that at some grocery stores, different shoppers can be charged different prices for the very same products during the very same time frame.
One price no longer fits all
Get ready, because the concept of "one price fits all" is quickly being replaced by sophisticated pricing strategies that use predictive analytics to offer customers individual price discounts. Retailers such as Safeway (SWY) and Target (TGT) are finely honing their ability to target customers with individualized coupons as well as product discounts on the basis of loyalty cards. Their goal is to change customer behaviour simply by making the right offers to the right customers, at just the right time.
A recent New York Times article describes a situation at a Safeway store in Denver, where a 24-pack of bottled water was offered at $2.71 to one customer and $3.69 to another customer at the same time. The first customer had a history of buying that brand, yet had never bought the bottled water. The discounted price she saw online was an incentive for her to add the brand's bottled water to her shopping basket at the store and contribute to increasing Safeway's bottled water sales. The second customer, however, was known to be brand loyal to Smartwater (KO) and not likely to change, so she only saw the regular price.
How do they know so much?
The ability to customize prices starts with an incredible amount of customer data that retailers collect, buy and analyze. Every time you swipe your credit card, fill out an online survey, call a customer help line, sign up for a website or return an item, your data is being tracked. Futhermore, companies can access demographic information based on your postal code, such as the size and ages of your family, your household income, your ethnicity, what kind of pets you have and your proximity to certain shops and services.
Beyond that, things can get pretty personal. Marketing companies that specialize in data collection can figure out specifics such as what credit cards you carry, where you went to school, what jobs you've had, where you've lived, whether you've ever been divorced, declared bankruptcy or had kids, your political interests, how many cars you have, where you donate your money and what kind of topics you search when you're online. (So much for the privacy of your own home!)
The stuff you buy, online or in person, is also tracked of course. When this data gets aggregated from all the places you shop, a lot can be inferred about you. A company with this information can see that you buy Cheerios (GIS) in bulk, that you've switched to LED lights and that you prefer Starbucks (SBUX) over Tim Hortons (THI). All this information is then used to entice you to buy those products at their stores, as well as predicting what other products they might be able to interest you in while you shop with them.
Target will be the first to know
Earlier this year, another New York Times story described an example of how this works - and how it can work a little too well. A Minneapolis father was going through his mail and was shocked to find coupons from Target addressed to his teenaged daughter. The coupons offered discounts on baby clothes and cribs. He angrily accused the store of encouraging pregnancy to a high-school student. A few weeks later, he sheepishly found out that his daughter was in fact, already pregnant. Who knew that Target would be the first to know?
First time parents: the holy grail
According to retail experts, consumers get very stuck in their shopping ways. Maybe you've always bought your cleaning supplies at Canadian Tire (CTC) and your toilet paper at Shoppers Drug Mart (SC). You would never buy these at Loblaws (L) because that is where you get your food. Perhaps you've bought Windex for your whole life and have never considered switching to a different brand. These are hard habits for retailers to break.
However, analysts have found that major life changes disrupt these patterns. Heading to college, getting married, getting divorced, moving homes, changing jobs and of course - having a child - all shift something in our psyche that makes us open to changing what we consume and how we buy. For retailers, these life-changing moments are huge opportunities to win more of your wallet. Shell-shocked, time-pressed, sleep-deprived first-time parents are the biggest opportunity of all and big retailers are increasingly aggressive about anticipating their needs and getting them while their brand loyalty may be up for grabs.
According to the Times, if a 23-year old woman visits Target in March and buys body lotion, a large purse that could conceivably work as a diaper bag and vitamin supplements, store analysts might estimate there is an 87% chance that she is pregnant and due in late August. Because of her past shopping behaviour, they know that if she receives a coupon via email, she will use it online. So they anticipate what products a woman of her demographic and income level, in the second trimester of pregnancy, would be interested in and send her discounts to encourage her to buy those items at Target.
Creepy or convenient?
Like most things nowadays, we give up our privacy for the sake of convenience. Facebook (FB) might be able to recognize our faces, but we still want to post pictures of our family's Thanksgiving dinner to share with out-of-town relatives and friends. Similarly, while many people might initially feel uncomfortable at receiving discounts and advertisements for products pertaining to stuff they haven't told anyone about - they also really like the idea of saving money on products they specifically need and want. So it looks like from now on when you tell people "they'll be the first to know", they'll actually have to get in line behind Target.