Evan Schuman's StorefrontBacktalk

A grocery chain has gotten involved in a deal where it is sharing extensive POS customer data with a business that is marrying that data with those same consumers’ entertainment-watching history. The goal? To overlay the two to see what those consumers are buying after they watch certain entertainment shows or commercials.

In this particular effort, the retailer has chosen to mask the individual consumer identities—for now—and is trying to draw general conclusions based on the actions of people in that Zip Code. But the technology was there for them to tie everything back to the individual consumer, raising quite a few data and privacy strategy issues.

This grocery project involved digital video record (DVR) data, but it could have just as easily been the more extensive data available from cable, satellite or other broadband entertainment companies. Many of those companies already provide phone and Internet access. How complete a consumer profile would be possible just merging the data from two companies, if it’s a broadband firm plus a prominent retailer?

“From a pure technology point of view, the ability is already in place today that would allow vendors to capture data detailing individuals’ viewing and buying habits to a granular level and would allow them to perform data analytics using high-performance databases that uncover specific predictive patterns,” said John Thompson, CEO of Kognitio’s North American operations, which is one of the companies involved in this grocery project. Kognitio is providing the analytical database. “If those patterns were used, and there’s no indication that anyone is doing so, they could be used to target individual consumers.”

The grocery setup allows as much as 50-TBytes of data to be collected for various targets, Thompson said, which is quite ample for creating a wonderfully comprehensive profile.

Today, such efforts are limited only by the retribution fears of the retail execs involved. There are no practical technological limits nor are there many significant laws prohibiting such sharing and analytics. Even the privacy policies that most consumers sign are designed to protect the retailer and not the consumer so those shouldn’t pose any collection hardship. So what is halting them? It’s the fear that consumers will get very angry with them.

This gets us to a key point. There are two perception issues at play here. The first is what the retail managers and executives think will alienate consumers and the second is whether those consumers will in fact believe it’s a privacy violation that they’d find objectionable.

Clearly, the demographics—especially age and education—of the consumers have to be closely examined. For a true GenY audience, privacy is barely a factor, as anyone who has recently visited YouTube, MySpace and Facebook understands. And even for older consumers who might feel more strongly about privacy, it’s a question of incentives. Are you willing to offer 10 percent off all purchases for consumers who participate in a trial? Putting a pricetag on privacy is not hard. Finding the money to pay for it is.

Let’s go back to those two groups. Historically, the retail manager will likely project his/her own beliefs on consumers, which is fine if that manager shares the same demographics as those consumers. But if it’s a 54-year-old Ph.D male, his gut instinct on the privacy sensitivities of the 16-year-old girls buying the clothing in his store may not be fine-tuned. If that manager turns to focus groups and consumer surveys to figure out those answers, the distance between that manager and the truth gets much wider.

It’s likely those consumers will be ready to make those privacy deals a lot sooner than the retailers will expect. And a few early opt-in programs with generous incentives may prove to be quite eye-opening.