Can I Please Just Give You My Money?

It’s getting nigh near impossible these days to walk into a store, pick out what you want, pay and then leave.  First, there is the gauntlet of items kept under lock and key to prevent shoplifting.  It’s gotten so bad and annoying that my youngest son suggested to our District Attorney that his reelection slogan should be, “Free the deodorant.”

Then, when you finally have your items, the store, of course, wants to know your phone number, name, or email address as part of their membership program. 

If you aren’t a member already, they try their best to get you to join. 

At DSW this weekend, it got nasty for me.  I’m not into shoes, but I do need to wear them.  I probably buy at most two pairs a year.  When I went to pay, the clerk asked if I was a member of their membership program, and, I said no.  He then told me how easy it is to join. I said no thanks.  He then went on and on about the virtues of the program until I finally had to say, “I just want to pay for my shoes and leave.” 

Shocked at my unwillingness to develop a deep and meaningful relationship with DSW, he got quiet and rang up my purchase.  The credit card screen, of course, had to try and get me to use this as an occasion to donate to whatever charity they support.  Again, another example of how hard it is to just buy what you want and leave.

But back to their membership program.  Why did the store clerk persist?  My bet is that he is incented for every new member he can acquire.  And why does DSW and every other retailer want to start a “relationship” with me and everyone else who passes through their doors?  It is, of course, so that they can track my purchases and find more things to sell me.

This quest for customer data is not, in and of itself, bad nor a compliance and ethics issue.  Getting to know your customers better is a good thing.  Offering them things they want, and not troubling them with things they don’t, is also good.

But, there are plenty of signs around us of the risks of this relationship data gluttony.  For one, the more data a company has, the more harm that can be done when there is a breach.

Second, there are troubling stories emerging about how that data might be used.  Numerous reports have emerged that retailers are looking to start “personalized pricing” programs.  Under these schemes, everyone will be charged a different price for items that they buy based on their past purchase history.  We’re not talking, “Hey, I saw you just bought some sunscreen, here’s a discount coupon for skin lotion.”  We’re talking, “Hey, you buy expensive sunscreen.  You’re willing to spend, let’s try and charge you 20% above average for everything else.”

Is that ethical?  It’s doesn’t feel ethical to me, but I’m not an ethicist.

Is it compliant?  The FTC has already started to weigh in[1] about what it thinks is permissible.   It turns out that many things that companies have tried may run afoul of the rules.

Retailers should also be mindful of discriminating based on race, age, gender, religion or some other protected category.  Whatever the law may say, the likely reputational harm could be devastating.

What are the odds of that happening?  Probably higher than many would think.  Certain products have very strong racial and ethnic skews to them.  Use that data in a formula for setting pricing, and a company could quickly find itself having to explain why one racial or ethnic group, or gender, is charged more for an item.

It’s not that farfetched a scenario.  Let’s say the Jewish Holiday of Passover is coming, and a retailer could offer Manischewitz wine at a lower cost to people its system thinks are Jewish, based on the data it previously collected.   Smart, but if that means the retailer is charging Christians more for the same item based on their presumed religion, there may be serious problems.

There can even be inadvertent discrimination.  Many products are disproportionately purchased by one racial or ethnic group or another.  For example, a 2018 report from Nielsen[2] revealed that 14% of the US population at the time was black, and they accounted for 22% of the women’s fragrance, 21% of the feminine hygiene and 20% of the men’s toiletries market.   A pricing model may fail to recognize that using purchase history of these items may not be as innocuous as it seems and have discriminatory aspects.

Compliance teams need to ensure that they are involved in decisions about how all of this consumer data is collected and the increasingly novel ways it is used.  If we are not included, no matter how many prices the company charges customers, the company, itself, may pay a hefty price of its own.

[1]Derek Kravitz, “Is That Price Personalized? The FTC Says Companies Should Have to Tell You”,

 https://www.consumerreports.org/money/prices-price-comparison/personalized-pricing-surveillance-ftc-policy-a9891636455/

[2] “Black Impact: Consumer Categories Where African Americans Move Market,”  https://www.nielsen.com/insights/2018/black-impact-consumer-categories-where-african-americans-move-markets/