Posted by: pen2bit | February 2, 2009

Retailers Use Customer’s Data as Club Bouncers!

 How do you feel when you want to return an electronic device and you are to pay a restocking fee, meanwhile same product in the same retailer , by one of your friends, was returned with no such charge? You may say “unfair”. Or consider another incident, you have heard about a sale event in a store and you try to get the advantage and buy some goods. You have reached the place, first of all, you never see a sign of any sale event, secondly, in the store, when you ask about the event there you found about “Silver medal” customers who are invited. As a result you cannot attend the event. Would you say “Unfair” again? You were not allowed to attend an electronic held nightclub party (sale event) and you were stopped by a typical digital club bouncer – cashier. But how they clustered you customers? Simply you were sifted through your previous shopping data and shopping patterns!

 The above samples that you may or may not have experienced are parts of “customer-profitability analysis”. This process of customer categorizing has been around for a while, but the brand new recession brought it up and put it in one of the very first priority for recession –struggling strategy for CFOs.

Bouncer- picture from Gettyimages

Bouncer- picture from Gettyimages

 My question here is “ will this process be a fair one to help a firm to survive?”

I think the process is not a fair process because of two main reasons, first; it gives producers a dominant position to consumers.  Second reason is the unfairly-informed customers who never could be clearly informed about the process and the rules of getting the “Silver class” member cards or higher.

Producers will be able to ignore big portion of consumers. We all know returning rate is a well known criterion to measure a product’s quality and success. And the more limited financially people the pickier they are! Strained consumer should always be aware of a fine to return, consider the point that not all of consumers are “sliver medal” to exempt from that charge. The consumer cannot be a free arbitrator of what he is experiencing about quality and characteristics of product versus what was advertised or seen on the boxes. He also is living in this society and is dealing with recession and has its own concern for his personal recession –struggling strategy.  This way, producers who supply Best buy for example were freed from judgment of more than one million “unprofitable” customers mentioned in CFO’s article*.

Picture from Gettyimage

Picture from Gettyimage

The process of “customer-profitability analysis” is a complicated process which in its fastest run will take six months. It applies cost data records of individual transactions and customer demographics*. Customers buying patterns and behaviors build up the customer segmentation. I feel even financially capable customers are not fed with ample amount information on how to gain honor of being a silver member. Unfortunately many people cannot afford to be one.

 

 As a result in a short run the solution works and  we can see Best buy survives the recession but Circuit City has filed

for bankruptcy protection and also Tweeter a retailer of about 100 stores is shutting down*. But in long run what will happen to consumers and quality? Based on what Byrnes said for most of the companies 30 percent of customers are not profitable *so that means help them not to be customer any more in other words “you can’t fire me, I quit” attitude. I think finally there should be a monitoring source to help that chunk to be treated fairly and help them to be accounted as a customer regardless of their share from profit, and this process of winnowing is just a way to ignore some people due to their financial situation and is not fair.

 *http://www.cfo.com/printable/article.cfm/12835154

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