Database Marketers Tell How You Get on the Lists

Jennifer O'Neill, Medill News Service

WASHINGTON--Think back to the five most recent purchases you made online. Can you remember, or do you even know, what happened to the personal information you entered?

Probably it was sold, says Ted Wham, president of Database Marketing for the Internet, a consulting practice that applies database-marketing techniques online.

Wham posed this question to a group gathered Tuesday at the Federal Trade Commission for a public workshop on privacy and consumer-data exchange. The FTC called the meeting to stay informed about how companies are gathering consumer information and what they do with it, not to find new enforcement targets or create policy proposals.

"There is a great trust deficit out there now," says Commissioner Orson Swindle, who may chair the FTC when the current term expires in September. The FTC's ongoing challenge is to balance the public's privacy issues with legitimate business concerns, the commissioners note.

Your Name Is Out There

Some 100,000 distinct mailing lists are available for purchase in the U.S., according to Wham. As e-commerce grows, so do consumers' concerns about the privacy of their personal information. Customers of both online and traditional businesses are learning more about how their names get on one of these lists.

Organizations that compile such lists acquire customers' personal information by accessing public records, conducting product surveys, collecting warranty cards, and purchasing mailing lists from catalogs or magazines, says Mary Culnan, a professor of management and information technology at Bentley College. Demographic information from state and local government documents, such as property records, allows companies to pinpoint wealthy areas where people are more likely to have disposable income. Warranty cards and magazine subscription lists reveal customers' spending habits and allow companies to focus their marketing effort on customers who have already demonstrated an interest in a particular kind of product.

"It is important to know if your customer is living in a rural area if you're trying to sell them a lawnmower. You wouldn't want to market it to someone living in an urban high-rise," says Elizabeth Brown, senior vice president of Claritas, a company that provides marketers with demographic research.

Social, Technological Changes

This is a relatively recent type of marketing effort, and reflects changes in American buying habits as well as the advance of technology lsuch as the Internet.

"Pre-World War II, buyers and sellers used to know each other and vendors could see who was buying what and why," says Johnny Anderson, chief executive officer of HotData, a "virtual warehouse" of business profiles and consumer demographics for marketing in e-business. But modernity and the Internet have empowered consumers with information and broken down the need to travel to stores, so businesses needed to find new ways to learn about their customers' preferences and habits.

"Business success is leveraged by the service it can give consumers," Anderson says. And when companies don't have a physical presence, they require alternative ways to target their audience.

"We compile all this information not because we're being nosy, but because we're looking to develop a relationship with consumers," says Lynn Wunderman, president of I-Behavior, a database targeting service for direct marketing companies. "People's differences are more important to us than their similarities, and customers respond better when those differences are recognized." Wunderman's company consolidates both online and offline purchase information about consumers.

Direct marketing is about companies investing their money wisely, and customers getting information relevant to their wants and needs instead of lots of unwarranted solicitation, Wunderman says.

"It's a win-win situation for all of us," she says.

New Uses for Old Lists

The fact that consumers have no control over many of the lists on which they end up raises warning flags with Paula Bruening, staff counsel for the Center for Democracy and Technology.

Voting and property records, hunting, fishing, boating and flying licenses all show your interests but this information was not meant to be used in a database or for marketing purposes, she says.

"Public information was given up in order to participate in functions of life, like voting, and to say that that information is used for other things and that's just the way it is, needs to be re-examined," Bruening says. "We require notice and choice for personal information collected through commercial purchases online, but there is little protection for public information protection."

Marketers say they don't expect to end their list management practices any time soon, and foresee even more ways to target consumers.

"Business often has an insatiable appetite for information, they will collect as much as they can until it degrades their chances of consumer response," Wham says. "It's easier to go from the hub to a spoke," he adds, referring to consumer lists as the heart of direct marketing campaigns. "But how do we come up with a 'master universe' of all the computer products an individual has bought or all the brands of clothing a person wears? That kind of individual consumer information would be a gold mine for marketers."

FTC May Watch, Not Touch

The FTC scheduled the workshop in the wake of letters sent to the commission and other government officials by Alabama Senator Richard C. Shelby. Shelby expressed concern about a group of more than 70 companies that has proposed a standard method of pooling and exchanging data on consumer buying habits and other personal information.

Congress is considering at least a dozen bills that would affect online privacy, and many more have been introduced in various state legislatures. Privacy advocates are calling for increased regulations in order to protect personal privacy, but business groups have countered by proposing self-regulatory guidelines or a single national standard that would preclude individual states from setting more stringent requirements.

FTC Chairman Robert Pitofsky says the workshop's goal is to educate the commission and spot issues that bear watching by its members.

"We are not looking for enforcement targets," Pitofsky said, nor is the commission pursing legislative proposals. "We're trying to find out in a new area--a fast-changing, dynamic area--what's going on." Swindle, however, says additional laws regulating the exchange of data between companies may not be needed.

"I believe that issues related to the real harm that might be caused by this are well addressed by existing laws," Swindle says. He also warns of possible economic consequences if data exchanges are restricted.

(Patrick Thibodeau of Computerworld Online contributed to this report).