Saturday, April 17, 2010

Web Coupons Know Lots About You

From the New York Times:

A new breed of coupon, printed from the Internet or sent to mobile phones, is packed with information about the customer who uses it. While the coupons look standard, their bar codes can be loaded with a startling amount of data, including identification about the customer, Internet address, Facebook page information and even the search terms the customer used to find the coupon in the first place.

Although this concept has been discussed for over a decade -- I almost started company based on it in the 1990s but decided that we were too early -- it is still far from fulfilling its potential. In the coming years, companies will do more and more true experiments, with treatment and control groups, to understand which marketing methods are most effective for different types of consumers and even specific individuals.

One effect is that we'll have more targeting communications and products that fit better for each consumers tastes and preferences. This makes is a win for both buyers and sellers, making the pie bigger.

Another effect is that sellers will better understand the how much each consumer is willing to pay for a given item in a given situation. They can use this knowledge to improve price discrimination. This increases sellers profits at the expense of consumer welfare. However, in most circumstances, the net effect is an overall gain in welfare even for this use of these coupons.

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