Save $$$ While Spending $$$: Predictive Behavior Algorithms, FTW

When I go out to purchase an item, nine out of ten times my decision is based on the type of coupons I have for the store, the average cost of the item on sale, and the establishment’s return policy. However, I must confess these stores send me promos that I receive via snail mail because of my loyalty/rewards status, coupons that weren’t tied to a reminder to buy x, y, or z but rather encouraged me take percentages off any items I wanted to purchase. Even Barnes and Noble sends me coupons! How convenient, right?

Wrong! The problem was, and always will be, that I needed to spend money to save money. Imagine my surprise when I counted my receipts for the 2015 tax year, and realized the thousands we spent under the guise of saving hundreds. Tallying up the “You saved:” totals I estimated at least $500+ USD worth of discounts in one store alone, and as impressive as that is, imagine the amount we had to spend to reach that level of success. (We got our cruise on sale, which to us was a major win. Not all of the spending is on miscellaneous items though nor a win, sadly. :D) But how did they know what would entice us?

To the delight of my inner inquisitive nerd, the answer stumbled out of The Power of Habit and Subliminal, reads that expanded my knowledge of modern marketing, and explained the mechanics and proliferation of predictive behavior algorithms. It didn’t surprise me to learn that most of the coupons and offers I got, and still receive, were tailored to my type of spending. The math geniuses for these retail companies gather as much data about you as legally allowed to form a comprehensive customer profile. They learn to cater to your likes and dislikes to get your foot in the door, so to speak. Their goal is to become your preferred provider of goods ans services. Sneaky, sneaky!

Here’s how they do it:

Big Box retailers offer the consumer a membership or loyalty plan that comes with a traceable ID number. With this ID they can tie all your purchases to your profile, especially if you use credit cards to pay, which they also tie into the database file. They later solicit information from your credit card, such as a billing or mailing address, or track that info by using your phone number (or alternate ID, or email). Once they confirm who you are and where you live, the fun begins.

Remember, all this is legal (as of Jan 2016) and based on available data. The law allows them to use your credit card or customer info to fish data on you from all over the system.

Now that they have pinned your location, shopping trends and in some cases credit report data down, the algorithms can be fed information to determine your, and by extension, your family’s composition, status and future needs. From their perspective they have a better chance at hooking you as a loyalist for life if they can continue to provide you with the goods you have sponsored in the past or can present better options before you even need to consider them. Impressive, isn’t it?

The algorithm at Target was rumored to be so powerful and accurate that it could predict or rather tell when a customer was pregnant just by analyzing her shopping cart and past purchases. Profiles for multiple circumstances can be created as to identify any type of person and situation. Tailored coupons would then be sent directly to you via email or post for items you were most likely to purchase or consider buying. Customers wouldn’t notice unless they compared coupon booklets! Inception, anyone?

Even if you opt out and attempt to remain anonymous, the fact that you have a membership or rewards card with any retailer makes it possible for them to track you in this manner. The third parties that provide the data are allowed to share it with sister companies and unless you read the fine print you won’t even know the extent of the data mining operations. Although in my case it is advantageous and helps my family save money, it can seem creepy and intrusive to some, especially those who wish to keep their likes private for personal and security reasons. It takes a very sharp mind to unmask the patterns of marketing strategies these days, and more often than not people end up spending cash to get a deal when they weren’t looking for an item, much less needed it.

The only true deal imho (in my humble opinion) is the one where you used a coupon or discount on an item you had already planned to buy or must replace. Saving $50 USD when you spent $500 USD that you didn’t mean to use is not truly smart, nor a saving! In that case the retailer won. This is why Black Friday makes zero financial sense to me. I’d rather employ other saving strategies before submitting to the propaganda of the event, especially for items I never meant to purchase or obscure brands I don’t trust.

Whenever you get a coupon from a loyalty or rewards retail partner take into account that the purpose of the ad, flyer or coupon is to get you inside their store and sell you some goods. Unless you like the tailored attention and have ample budget to appease the retail gods, I suggest you throw the coupons and offers away. I can’t stress enough that the best deals are those where you do not need a discount to begin with, the deals you weren’t expecting on items you had already planned to obtain.

In the end, the retailers are the only ones that know the true cost of an item and how much profit margin they are winning or losing by manipulating their customers into accepting bargains. Don’t play into their hands thinking you will save because in the long run, and as long as you spend your money on stuff, the house always wins…

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