Mobile coupons help retailers track customers

(Illustration By Mark Allen Miller for The Washington Post)
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By Ariana Eunjung Cha
Washington Post Foreign Service
Sunday, June 27, 2010

Last month, Tara Kuczykowski walked into a Target store in Columbus, Ohio, pulled out her mobile phone and handed it to the cashier.

The cashier scanned the digital coupon on the phone's tiny screen, and Kuczykowski got $1 off sandwich-size Ziploc bags. Target got something, too: another entry in its database about her.

Invented over a century ago as anonymous pieces of paper that could be traded for discounts, coupons have evolved into tracking devices for companies that want to learn more about the habits of their customers.

Although they might look similar to the ones in Sunday newspaper circulars, many of today's digital versions use special bar codes that are packed with information about the life of the coupon: the dates and times it was obtained, viewed and, ultimately, redeemed; the store where it was used; perhaps even the search terms typed to find it.

A growing number of retailers are marrying this data with information discovered online and off, such as guesses about your age, sex and income, your buying history, what Web sites you've visited, and your current location or geographic routine -- creating profiles of customers that are more detailed than ever, according to marketing companies.

The department stores, grocery stores and fast-food outlets that have begun to use mobile marketing say this information will allow them to provide customers with truly useful, personalized offers in a world where they are constantly bombarded with advertisements.

Originally from Las Vegas but traveling in Seattle? Sears might suggest you pick up an umbrella. Didn't notice the two-for-one sale on rubber-band balls even though you had searched for them online earlier in the day? The office supply store might send you a message suggesting you turn back to aisle 10. So bored of turkey sandwiches that you haven't gone to your regular lunch spot for weeks? The restaurant might beam you an offer for 20 percent off.

"The big advantage of mobile coupons is the convenience, because your phone is like your underwear -- it goes everywhere you go," said Luke Knowles, founder of Coupon Sherpa, which partners with retailers to offer discounts through mobile phones.

There's a trade-off.

"The convenience provided by mobile coupons comes at a price: your privacy," said Jeff Chester, executive director of the Center for Digital Democracy, a Washington-based public-interest group.

The government is still trying to figure out to what extent mobile marketing and the practice of what's known as "behavioral targeting" need to be regulated. Although companies have argued that none is needed, a number of consumer advocacy groups have called on the Federal Trade Commission to create guidelines that would require mobile marketers to reveal what personal information they collect and how they use it.

Pioneers on the phone

Companies such as Starbucks, McDonald's, KFC, Office Depot, CompUSA, Zales, Gap and Planet Hollywood have experimented with mobile marketing for several years, but only recently have some begun to roll out national campaigns as sales of Apple iPhones, Google Androids and other smartphones with screens have surged.

The campaigns are in the early stages, and there's no uniformity in how mobile marketing is done, although nearly all the programs are "opt-in," meaning that you have to sign up. To enroll, you usually only have to send a text message such as "COUPONS" to a special phone number or sign up on a Web site, although some companies require you to download an application onto your smartphone.

Target in March became the first to roll out scannable mobile bar code coupons at its 1,750 stores nationwide. Each month, it offers five coupons on such essentials as sunblock and cereal.

Target's terms and conditions for its mobile coupons service notes that it can collect "your cell phone number, your carrier's name and the date, time and content of your messages." A spokeswoman for Target clarified that it means the company "reads the content of messages sent to Target in order to fulfill guest requests."

The company, she noted, also has an extensive privacy policy that applies to desktop and mobile browsing and details how Target uses cookies to identify how a specific user is using its site, may merge that with information from "other sources" and share the information it collects with "carefully selected" third parties.

Also in March, J.C. Penney unveiled weekly mobile coupons that contain a special code that cashiers must type in; the offers, which have included $10 off on a $50 purchase, are similar to those you might get in your mail or e-mail. And Sears and Kmart have launched mobile shopping sites that promote location- and weather-based items such as Chicago Bulls T-shirts for those in Illinois and power generators to those who have just been through an ice storm.

Beam up savings

Within a month or so, coupon lovers will be able to walk into a national fast-food chain and shake their mobile phones near a cash register to beam over discounts through a system created by CopiaMobile, a Scottsdale, Ariz.-based startup.

Companies are loath to talk about what kind of information they collect and analyze, but Knowles of Coupon Sherpa said that up to 10 to 15 pieces of information -- from what search term you typed in to your phone number -- could be passed to a store from the bar code of a mobile coupon.

Some companies are combining offline demographic and purchase information with online data such as search history to categorize each customer into one of 67 groups, said Karen Greenberg, vice president of sales for CopiaMobile. One system of consumer segmentation -- which includes categories such as "Park Bench Senior," "Young Digerati" and "Heartlander" that were pioneered by a company bought by Nielson -- is a de facto standard among marketers. But until a boom in the amount of information available to marketers thanks to the Internet, the categories were typically applied to Zip codes rather than specific people.

Many companies have the technology -- and customers' permission, thanks to the privacy policies that users accept routinely without reading -- to track minute details of people's movements but have held off from revealing how much they know with marketing offers that might come off as invasive.

"We can already tell if you are near or inside a store and can give you particular offers, but that's the kind of thing we're moving fairly cautiously on so that the user can get to know us and trust us first," said Robert Drescher, chief executive of Cellfire, a San Jose-based mobile coupon company that works mostly with grocery store chains such as Safeway, Kroeger's, Vons and ShopRite.

Even Kuczykowski, a tech-savvy 34-year-old mother of five children younger than 9, isn't exactly sure what she's giving up for the coupons. She said she's comfortable allowing companies to collect all sorts of information -- her age, location, even her children's ages -- but even she draws a line.

"I would be concerned," she said, "if they get very granular and are tracking me specifically."

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