S1E6 - Predictive Analytics - Target Knows You're Pregnant

This Week we are going to do a deep dive into the world of predictive analytics and how companies are using the data they collect to influence our behaviors and directly target only the individuals they know will be receptive to their products.

Predictive analytics is based on mathematical equations that assist in narrowing down the data collected *to allow companies to essentially see or anticipate how individuals will respond or behave when given certain options or opportunities.

Over the year’s companies’ have popped up offering their Predictive analytics services to organizations with the goals of increasing traffic, forming profiles for individuals, monitoring how much can be made from each individual sale, as well as how to improve their marketing techniques and a whole bunch of other data that allows companies to make more much quicker.

Predictive analytics is essentially the use of four key methods to collect, analyze and present data on individuals to see trends, behaviors, and likelihoods of spending money on a product or service.

This data is eventually used by companies to make their products or services better or more accessible to consumers.

The key methods used are the following.

1. Data collection

2. Data Modeling

3. Statistics

4. Deployment

This may all sound really boring to most people, but the concept behind Predictive Analytics is quite interesting and very creepy once you dive into the details.

In early 2002 Andrew Pole had just started working for Target, his work was mostly statistics based. He analyzed data and calculated the likelihoods of particular outcomes. Simple enough. At some point his colleagues asked him how they could predict whether a woman was pregnant or not even if she didn’t want anyone else to know.

Now for a company, knowing the answer to this question could make them a lot of money. For a company like Target, this would be incredibly important information specifically because pregnancy is one of the few things that leads to a multitude of money eating life changes.

Like weddings, pregnancy changes every single aspect of our habits. IT leads to more money spent on our health, our lifestyle, and because of its unpredictability even our daily budgets change due to unplanned expenses.

And for a company like Target, that sells basically everything under the sun, pregnancy happens to be the holy grail in terms of profit for the company.

Expecting mothers seek out registries, parenting literature, vitamins, new furniture and baby proofing essentials, baby care and a whole bunch of other goods that creates an influx of new money for these companies.

Andrew developed a list of 25 products that when bought together, would indicate that the woman purchasing was most likely pregnant.

Now how did Target know who bought these 25 products together?

Well, the use of rewards programs is a method used by almost any company out there. A customer simply sets up an account with their name, contact information and address. Any products they purchase in a store such as target is then linked to their account.

Companies typically use rewards such as discounts, or sales available only to members to incentivize individuals to join the program. Members don’t usually understand how their data is used, and most people don’t actually care, as long as they feel that they are getting good deals on products out there.

The down side is, these companies end up knowing much more about your behaviors, than you do.

Once Andrew figured out this list of 25 products, the data was used to specifically market pregnancy related products to women who were expecting.

In one instance, the system Andrew developed resulted in a strangely twisted scenario described in countless articles one of which is a business Insider article written by Gus Lubin on Feb. 16, 2012,

that describes the following:

“[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."

The list created by Andrew had exposed a teenage girl’s pregnancy before she had even had the chance to tell her own parents that she was pregnant.

The idea that a company can know so much about an individual is shocking and deeply disturbing. At some point our privacy has to be respected by large organizations, and in my opinion, specifically marketing products to individuals based on data collected on them should be explained more clearly. Additionally, in cases such as this one, Target should have been aware of the girls’ age and been able to handle the matter carefully.

The company itself did not take the emotions that may surround teenage pregnancy into account when they initiated targeted marketing to a minor. The system itself uses mathematical equations, and AI learning to categorize consumers, but the lack of human decision-making lead to a situation that could have resulted in some traumatic or even violent consequences for not only Targets employees but also the young girl going through a very emotionally difficult moment in her life and the lives of her parents.

Of course, Predictive Analytics has evolved since early 2002. The data collection methods, data analyzing, and deployment aspects have most definitely become more complex as well but when we look at the lack of human input, can we really put our trust into machine learning to handle matters that fall in the grey area?

The privacy fanatic in me screams no. Not only for the less occurring cases like the one I just mentioned but also for the other way’s companies use this data to change our behavior.

You may be thinking that just because you become pregnant or get a new job and companies begin targeting ads to you based on these changes in your life, doesn’t mean that they are taking away your ability to decide whether you buy something or not.

Well, here is the other disturbing part of how predictive analytics can change you and your behaviors.

In the early 1990’s a large company called Procter & Gamble began a secret research program into human behavior and how they can use our habits to change our ability to make purchasing decisions to increase their profits.

They began experimenting on mice and how their brains worked as they were rewarded at the end of a maze with chocolate.

In an article in the New York Tunes written by CHARLES DUHIGG in the beginning of 2012 P&G found that initially the mice would enter the maze and slowly sniff around trying to figure it out.

The scientists would place the mice in the maze then lift a small gate that made an audible clicking sound while opening.

Once the gate opened, the scent of the chocolate became stronger and the mice would move faster searching for the reward.

The sensors implanted into their brains initially registered a spike in activity whenever the mice would sniff the air noticing that there was chocolate somewhere in the maze. Over time the mice found the quickest way to the chocolate and these sensors began registering less activity.

The mice began forming a habit. Before the clicking sound of the gate, the mice were slow, curious, and the sensors were the most active.

But as the clicking sound began, the sensors registered less of a response and the mice began following the same memorized path that led them to the chocolate the quickest.

Over time, the sensors showed that as the mice became accustomed to the regular routine they thought less. Their brain activity and decision making decreased and they resorted to following the regular path to get them to the reward instead of sniffing slowly and searching through each corridor to find the reward.

P&G realized that by using our habits they could make purchasing decisions for us without investing millions in advertisements and marketing.

And to test this out they created a product that most of us have in our homes at this very minute.

They created Febreze. When they first released Febreze into the market, it failed miserably. The targeted ads showed that Febreze would remove bad odors from your home, car, gym bags etc.

The problem P&G ran into was that they didn’t realize that most people become accustomed to the bad odors that surround them over time and as a result, these people didn’t even think about getting rid of the smells in their homes or cars.

P&G had banked on the fact that people were irritated by the smells and that they were searching for a way to make their homes smell better. That wasn’t the case.

Individuals didn’t notice the smell at all, which meant they weren’t rushing to the store shelves to buy Febreze.

Well P&G searched for an hired a Harvard Business School Professor who went out into peoples homes to look for why Febreze wasn’t selling. Eventually the professor found that instead of telling people that they need to get rid of the bad smells in their lives, P&G could instead piggyback on the ingrained habits individuals had already formed to sell Febreze.

Instead of creating a new habit, ie using Febreze when you smell a bad odor, the ads showed images of a clean room with a made bed and a woman spraying Febreze as a reward.

The ads began to promote Febreze as the small spritz at the end of a good cleaning session.

Just finished vacuuming the living room? Spray a little Febreze for a job well done.

“The marketers needed to position Febreze as something that came at the end of the cleaning ritual, the reward, rather than as a whole new cleaning routine.”

P&G added more perfume to Febreze to distinctly signal your brain that you had accomplished something, and consumers began associating the action of spraying Febreze, and the distinct Febreze smell with accomplishment.

Your brain loves rewards and is always searching for a way to get to a reward quicker and with less effort. For instance, if you drive the same route everyday to work, you have probably had a day where you remember getting in the car and making it to work only to realize that you don’t remember the actual drive itself.

Your brain has formed that habit and typically taps into that routine once it senses small cues that its time to implement the routine.

Within two months of P&G changing its marketing to piggybacking on the habit’s consumers had already formed, sales of Febreze doubled. A year later, the product made P&G $230 million dollars and is now an integrated part of most of our cleaning routines.

The problem with this is that because our brains are seeking the easiest way to a reward, we become more vulnerable to making bad decisions because our habits are being used against us.

Once our brain is in a habit loop or routine, we think less crucially about our decisions. So, you may be walking in a store and spritz of Citrus is in the air, which signals your brain to the last time you cleaned your wood floors with Pine Sol. Next thing you know, you’re at home unpacking a bottle of Pine Sol that you don’t even remember grabbing in the store.

OR you are out with your friends and you hear the distinct chime of a notification that some one liked your most recent selfie. Next thing you know, your phone is in your hand and you are scrolling mindlessly through your Instagram feed for the tenth time in the last hour.

Experiments done by MIT found that

“The process within our brains that creates habits is a three-step loop. First, there is a cue, a trigger that tells your brain to go into automatic mode and which habit to use. Then there is the routine, which can be physical or mental or emotional. Finally, there is a reward, which helps your brain figure out if this particular loop is worth remembering for the future. Over time, this loop — cue, routine, reward; cue, routine, reward — becomes more and more automatic. The cue and reward become neurologically intertwined until a sense of craving emerges.”

These habits are extremely hard to break, and when companies insert their products into your habits, they essentially guarantee that you won’t be able to stop using their product unless you break the corresponding habit.

The tobacco industry is a great example of how a habit can lead to decisions that are detrimental to the individuals health yet the product is such an ingrained part of the persons routine or habit that it takes a gargantuan amount of physical, mental and emotional effort to stop.

The urge to stand outside with a group of friends to smoke a cigarette in the cold winter months becomes so strong that even the physical discomfort is negligible.

Although these habits are strong and the path is well worn in, breaking habits and routines can be done with enough effort.

Even though companies may argue that targeted marketing through predictive analytics makes our lives easier, we as consumers must begin to evaluate if the ease is worth not being able to think clearly when it comes to our health, our privacy and our long-term goals.

We may think that those discounts we get by signing up for a Safeway rewards card is worth adding to the data on our individualized profiles with each purchase, but at a certain point, is the vision we have for our life worth it? Is our control over our decisions worth it?

Sure, unnecessary purchases here and there won’t make a big dent in our financial goals for the next 10 years, but what happens when the habit routines and loops formed by our brains becomes so overwhelmingly ingrained, that those unplanned behaviors become more frequent? What happens when companies accidentally notify our employers, insurance companies, or family of our health concerns or unplanned pregnancies by using the data on our profiles?

What happens when the urge to buy, overrules our common sense?

I think the best route would be to implement regulations on which information can be collected and how these companies use the data on file.

Ethical and clearly outlined rules should be part of the discussion when it comes to the development of all technology, and companies creating or using predictive analytics in their business practices shouldn’t be any different.

All data says something, and for a company to know more about you than you do, just doesn’t sit right with me.