Mining Info: What's In It For Me?

Despite the hype, there's not much pay dirt for the consumer

If all my data are being mined, why am I not getting what I want? One of the great frustrations of being an online shopper is hearing all the fuss about data mining and how it is making Internet retailers so much more savvy than their brick-and-mortar counterparts. That's frustrating, because most of the benefits are going to the Web upstarts, not to the consumers. Although the promise of customized products and services is dangled before us in cyberspace, it has, so far, been the exception rather than the rule.

Online consumers, being asked to register, E-mail, and respond to surveys in record numbers, might wonder where all this great revelatory knowledge is going. If I'm really to believe that online merchants are going to outsell my old favorite stores thanks to the data they've mined from me, they'll have to do better than Inc.'s much-praised practice of book suggestions based on my past purchases.

Truth is, at this point in the development of the Information Economy, data mining is still a tactic used primarily to cut costs, not satisfy consumers. That shows in the kinds of marketing that online retailers now proffer. I've shopped at NetGrocer Inc., baring my shopping list to the Web merchants. Back in their data banks, they now have me clearly pegged as a buyer of everything from Alpha-Bits to Mott's apple juice boxes and a wide array of short-cut products from soup mixes to instant cereal. What can we extrapolate from all this information? How about that I'm willing to shell out a few extra bucks for a saved minute or two. But the marketing communications I've received from NetGrocer are concerned mostly with delivery discounts. My data scream: willing sucker for high-margin convenience product. Instead, I get a couple of dollars off on shipping.

SUGGESTIONS, PLEASE. NetGrocer may shave some bucks off its marketing budget by targeting me, rather than distributing that delivery discount far and wide. But the benefit to the company is not much of a gift to the shopper. It's certainly not enough to keep me from trying their competition. Now, if NetGrocer were to come back from using my information with suggestions of other time-saving products, a shopping list/menu planning program, or some other offer that simplified my shopping life, I'd know they truly know me. And I would be hooked.

Admittedly, that's a lot to ask from any retailer, traditional or virtual. E-tailers are only now coming up against a problem that has plagued the traditional business community for years. Data mining has been around a long time, and many retailers of all kinds still aren't very good at it. Data, it seems, are a lot easier to gather than they are to use.

"EPIPHANY." In fact, one of the biggest examples of failed data mining comes from the earthbound world of retailing: the death of the Sears, Roebuck & Co. catalog. Here was a beloved institution of American consumerism. As it teetered on the brink of extinction in the early 1990s, many Wall Street analysts told me the catalog would survive, thanks to its extraordinary database of American consumer behavior. But data are useless if you can't make them work for you. "We think: `If we just get more and more data, at some point we will have this epiphany and know what to do,"' says Leonard Fuld, president of Fuld & Co., a Cambridge (Mass.) consulting firm. "But in many cases, companies just get frozen. They can't make sense of it all." The Sears catalog, a potential data gold mine, died.

Still, the fact that data-directed marketing is hard does not get online shops off the hook with consumers. Better knowledge of the consumer and improved customer service are part of what the online community promises when it beckons to us to shop virtual. In the lightning-fast development of the E-commerce community, the novelty of being online and open 2 4/7 is wearing off. Consumers are now taking a hard, cold look at the two worlds of retailing and making decisions about which merchants serve them best. Internet companies boast of their ability to be smarter, better, and faster--thanks to all the data they're collecting. And investors may cheer the cost-savings that data mining is producing. But don't keep us shoppers waiting too long. Those brick-and-mortar stores haven't closed yet.

Before it's here, it's on the Bloomberg Terminal.