Are Targeted Ads Worth the Privacy Price?

Are Targeted Ads Worth the Privacy Price? author Webmaster1 On: 11/28/2011 Views: 65



This blog post is part of the HBR Online Forum The Future of Retail.

Is the entire marketing profession headed in the wrong direction? My article (co-authored with Leandro Dalle Mule and John Lucker) in HBR's December-issue spotlight on retailing deals with one tenet of marketing orthodoxy — that customers will respond well to targeted "next best offers" (NBOs). We describe how the best consumer marketers are finally starting to pull together information about the customer, the product or services they might want, and the purchase context — all to make NBOs so precisely targeted that customers pounce.

I don't question this orthodoxy personally. I am so besieged by junk email, for example, that I almost cried tears of joy the other day when I got a discount offer from one of my favorite restaurants (Selva Grill in Sarasota, which makes a skirt steak to die for). I knew it was just a random hit, but it made me think of the power of NBOs involving products and services I really want. I bought the restaurant discount offer, and I'm guessing that if more NBOs were well-targeted, the wheels of commerce would spin much faster. I'd be willing to sacrifice some privacy for this; in fact, I've always subscribed to the Scott McNealy comment: "You have zero privacy anyway — get over it!"

However, some of the amazing NBO capabilities we describe in the article made me uneasy about the privacy implications. Microsoft, for example, has an incredible ability to tailor "offers" for its Bing search engine (the product is free, so Microsoft is just trying to get you to use it) based on a variety of factors — including your location, age, gender, and recent online activity — that it can determine from your cookies and other sources. If you have signed up for Microsoft Passport, the company has even more information about you that allows for targeting the offers even more effectively. I was dazzled by Microsoft's ability (facilitated by the Infor Interaction Advisor software they use) to instantly compose a targeted email the moment you click on an offer in your inbox; it all takes about 200 milliseconds. Microsoft says it works extremely well to lift conversion rates. And I don't think that Microsoft abuses personal information. But on reflection, I wonder to what degree customers will tolerate this sort of thing once they know what's going on.

A recent study of American adults, in fact, suggests that consumers are a lot less enthusiastic about targeted offers than marketers imagine. The title of the report says it all: "Americans Reject Tailored Advertising." 66% of the respondents said they did not want websites to show them ads tailored to their interests. 49% said they didn't even want discount offers tailored to their interests. And young people were not much more interested in being targeted than old folks like me. What's more, when consumers are informed about common ways that marketers gather the data they use to tailor ads, between 73% and 86% say they would not want such advertising.

When I have discussed this study with analytics and marketing people, they've professed disbelief. But the survey is pretty well done. And if you're from outside the US, I'm guessing that your customers are even less desirous of becoming an online bullseye than these Americans were. While respondents in other surveys have not been quite so negative about targeted ads and offers, it is clearly time for marketers and senior executives to take seriously the issue of customer privacy and preferences for targeted ads and offers. You could start, for example, by asking your customers if they really want them!




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