Muneek Shah (AM 2112)

Name

Muneek Shah (AM 2112)

Subject

Written Ability and Communications

Case Analysis The Dark Side of Customer Analytics

Submitted to

Mrs. Jayashree Rammohan

Date

10 November 2012

Muneek Shah (AM 2112)

Executive Summary:
The case The Dark Side of Customer Analytics is about two companies ShopSense and IFA starting a new venture to share consumer data. ShopSense, a grocery store, has an opportunity to generate easy profit, by selling data of its consumers to IFA an insurance company. However ShopSense is in dilemma, should it sell data without consumers concern or not, will it be accounted as ethical or not. Some options and recommendations have been provided out of which Rewards program for consumers who permit ShopSense to sell their information is the best choice.

Muneek Shah (AM 2112)

Situation Analysis:
The case talks about decision dilemma of two companies, ShopSense (grocery chain) and IFA (insurance company), to start a new venture for data sharing. IFA wants data of ShopSense customers to come up with new insurance schemes according to the lifestyle of consumers. This need of IFA to collect data to discover patterns in consumer buying is known as Data Mining. ShopSense has collected customer data for its loyalty card program, through which ShopSense is able to perform customer analytics to understand the needs, wants and desires of its customers.

To determine quality and reliability of ShopSense data, a small data sample was taken by IFA to derive correlation between consumer purchases and medical claims. IFA was satisfied with the possible errors, what if the consumer is purchasing unhealthy products for its family and not for himself, how this would affect the correlation.

While situation of ShopSense was completely different, top management was not totally convinced with sharing of information with IFA. Some doubted the way in which the data would be used IFA and others were concerned about, what if the consumers came to know about selling their data to other companies?, would it affect the reputation of company?, would it end up diluting or destroying valuable and hard-won customer relationships?. However by selling this data t IFA it was easy money for the ShopSense for coming years.

Muneek Shah (AM 2112)

Problem Definition:
What kind of data should ShopSense share with IFA? How ShopSense can ethically get through this process, without losing the consumers trust?

Decision Criteria:
Decision should be based upon 1. The use of data by IFA, in what way IFA is going to use the data given by ShopSense, the identity of consumer should be kept anonymous. 2. The sharing of data should be ethical; consent of consumers should be taken before sharing of information takes place. 3. The sharing of information should be beneficial to consumers; it should not have negative effect on consumers.

Alternatives:
Following options are should be considered by ShopSense: 1. To share the database of loyalty card program with IFA, selling information to companies is not an illegal act, but it counts as an unethical act for a reputed company. To be on the safe side and maintaining market image, it is better to ask for consumers permission before selling their data to companies. When consumers apply for the loyalty card

Muneek Shah (AM 2112)

program they should be asked whether or not they are fine with their information sold to other companies for their benefit. So ShopSense should only share information 2. Not to share the data with IFA and continue using data in house for consumer analytics 3. To share the consumer database with IFA, but not to disclose in public and also to its employees, except companys top management. The consumers should not get know about what the company is doing with their data. But by doing this ShopSense has a sword hanging over their necks for this unethical act. 4. To consider how the data is going to be used by IFA, and not overlook the fact that it might have negative effect on consumers. ShopSense should ask IFA what kind of data sampling they want from them. If ShopSense finds anonymity of consumers is at stake than it should decline IFAs offer and keep the data secure. 5. Design a Rewards programs for consumer using Three Vs approach of strategic segmentation, Valued Customer (Who to Serve?), Valued Proposition (What to Offer?) and Value Network (How to Deliver?). To employ this option, first ShopSense to identify the customer segment to serve, then offer them rewards for allowing their data to be shared with other companies and as rewards offer huge discounts on selected products.

Muneek Shah (AM 2112)

Recommendations:
Depending on the problem statement and decision criteria, I recommend following options to ShopSense: 1. To find out how IFA is planning to use the database, this could lead to negative effect on consumers. The next time consumer approaches IFA for medical insurance, he might end up paying more than what he would have paid before the sharing of data by ShopSense, because of error in correlation derived by IFA on basis of consumer buying patterns. IFA considers products purchased by consumer, are the products consumed by them, it might happen that consumer would have purchased for others. If IFAs way goes against the interest of consumers then it might cost ShopSense by loss of consumers trust in the company. 2. Design a Rewards programs for consumer using Three Vs approach of strategic segmentation. To employ this option, first ShopSense has to find consumers that are fine with sharing of their information with others, and then look for offer that might attract other consumers to also opt for this program. In the Value network of the Three Vs approach, ShopSense should give the Rewards program consumers heavy discounts on in store products. By employing this option ShopSense could also approach other companies who are in need of data mining, and can form a year round agreement them for sharing of database. This will create a big opportunity for revenue generation

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