- The Washington Times - Monday, June 18, 2001

SPECIAL REPORT

John Doe buys a fisherman lamp from a home store.
A month or two later, he is inundated with the likes of "Ships and Sea," "Lighthouse Depot," "Murray Brothers," "Home Decorators" and "Whales & Friends" catalogs.
He has never ordered from these companies before, nor even seen their catalogs, so why the sudden interest in him?
Simply, the retailer sold or exchanged his name and address with the catalog companies, which have similar databases full of potential new customers.
Its a practice that has gone on for decades, but the growing concern over online privacy is prompting privacy advocates and shoppers to wonder exactly how much personal information is being collected, saved, swapped or sold.
"Everything thats happening in the e-world is magnifying whats happening in the [traditional] retail world," said Catherine Bartholow, president of RTC Direct, a D.C. advertising agency. "Consumer awareness is much higher because of whats going on the Internet."
Thousands of retailers, from department stores to catalog companies, collect information. The scope of that information varies from Bed, Bath & Beyond asking for a customers ZIP code as he buys merchandise at the counter to Sears, Roebuck & Co. collecting names, addresses, household income and purchasing patterns through customers using its store credit card.
Retailers say gathering the detailed customer information is critical to targeting their marketing efforts, building strong relationships with potential customers and keeping their costs down.
By knowing a customers ZIP code, Bed, Bath & Beyond, for example, can target its advertising to a certain geographic area. Sears, on the other hand, can send relevant sales fliers to customers who would at least be interested in hearing about discounts and sales related to previous purchases.
In addition, retailers share, exchange or even sell their customer databases — usually just addresses and names — to other companies looking to increase their own customer databases. And that results in dozens of unwanted catalogs or solicitations to customers who may have some interest in them but never asked for them.
Traditional retailers have been collecting information from customers for years, storing it and using it to gain more business and sell more products.
Grocery and drug stores have jumped on the bandwagon. They offer discounts on products for members only — collecting a database of information about who shops there and what they buy. Those who dont have memberships usually cant get the discounts.
"People have become accustomed to the practice of information use off-line," said H. Robert Wientzen, president and chief executive of the Direct Marketing Association, which represents direct marketers, catalogers, Internet retailers, magazine publishers, book and music clubs, and financial service providers. "Online theres significant concerns [about privacy] causing people to have concerns about off-line privacy — thats never happened before," he added.
On-line marketing is the most sensitive issue for consumers, while telemarketing, seen as an intrusion of their personal time, is their next biggest concern, said Alan Westin, president and publisher of Privacy and American Business, a nonprofit think tank that researches and analyzes business-privacy issues.
About two-thirds of American consumers dont mind getting direct mail marketing pieces, according to studies done by the Hackensack, N.J., organization.
Many companies exchange customer names and addresses with other businesses that have similar databases full of potential new customers.
That explains why consumers may be inundated with maritime and home publications if they bought a lamp with a sea theme.
"The more active consumers are, the more catalogs they are going to get," Mr. Westin said.
While some shoppers like receiving the unsolicited mail so they can compare prices and have more of a selection, plenty of people want the unwanted mail to stop.
Consumers still express their frustration over their lack of control of the use of their names, addresses and demographic profiles, Beth Givens, director of Privacy Rights Clearinghouse at a Federal Trade Commission Workshop, said in March.
In general, if a consumer provides his name, phone number, address or other personal information, it could easily end up on mailing lists.
Something as simple as filling out a warranty and product registration card, donating money to clubs and charities, and listing a name and phone number can result in unsolicited mail and telemarketing calls, according to the Privacy Rights Clearinghouse, a privacy advocacy group based in San Diego.
"The American consumer has little control over what is done with his or her personal data if he or she completes consumer surveys, fills out warranty cards, purchases items from a mail order catalog, subscribes to a magazine or joins a book or music club," Ms. Givens said.
Calling 800, 888 and 900 is risky, as well.
When dialing numbers with these prefixes, a customers phone number can be recorded by a system called Automatic Number Identification and then sold to marketers for mail and phone solicitations.
But despite their concerns about privacy, "people are still willing to give information to someone they trust," Ms. Bartholow said.

Getting rid of the junk mail
More consumers are taking steps to reduce the amount of junk mail or unsolicited phone calls as well as protect their personal information.
The DMA gets 60,000 to 150,000 requests per month from consumers who want to be taken off mailing and telephone lists. The DMAs Mail Preference Service has about 3.5 million names, and the Telephone Preference Service has about 4 million names. Both lists had 1.5 million names five years ago.
"Consumers are fearful," said Pat Faley, DMAs vice president of ethics and consumer affairs. "I think consumers get privacy and security mixed up in their head."

Building trust
Why do consumers have such little control over their personal information?
"Thats how business is done in the free world," Mr. Westin said. "There are no laws against it and the amount of harm to a person is [minimal]. The worst that can happen is [you get] a stuffed waste basket."
The industry for the most part is self-regulated.
Reputable companies have spent their lifespan building their businesses to safeguard customers information.
There are some regulations such as the Fair Credit Reporting Act, which protects credit information from being sold, and the Gramm-Leach-Bliley Act, which established standards for safeguarding customers financial information.
The Direct Marketing Association has its own set of privacy rules called the "Privacy Promise" to which its members must adhere.
The 4,700 DMA member companies must tell their customers what they are doing with the information they collect and give them the option not to participate.
Many successful companies have policies that prohibit them from selling customer names and addresses and other personal information.
The data are valuable marketing tools that help them target the appropriate audience and build lasting relationships with those shoppers who may spend more money with them.
Clothing catalog giant L.L. Bean has a vast database of millions of customer names — a valuable asset for outside parties and for the companys internal marketing efforts.
The company doesnt sell or rent those names or share telephone numbers and credit-card information with other companies, said Rich Donaldson, a spokesman for the Freeport, Maine, company.
Instead, the company uses the information to identify consumers interests, popular merchandise, buying patterns — essential information when trying to pinpoint its marketing.
L.L. Bean, however, does exchange name and address information with companies or organizations that have interests that complement L.L. Bean on a limited basis.
The exchange is done on a one-time-only basis so the other party cant use the names again or sell them to another company.
"The companies are similar or complementary to [L.L. Bean]," Mr. Donaldson said but would not disclose specific company names. "We get hit with countless requests because they know we have a vast customer database."
The company couldnt possibly handle all the requests, and if it did it would "open up a Pandoras box of abuse," he said.

Building relationships
Retailers have changed their marketing strategy over the years. Instead of focusing on selling one product, now they are trying to develop long-term customer relationships, Ms. Bartholow said.
"They are now recognizing the importance of their relationship between their brand and their customer," she said. "Its all about building trust over time."
The ultimate goal of retailers is to "understand what consumers want and to provide more value to their consumers," Ms. Bartholow said.
For example, Sears obtains countless bits of information from consumers who use its credit cards.
"Sears credit [cards] give us access to point-of-sale information that we wouldnt get when people use cash or [other credit cards]," said Jan Drummond, a Sears spokeswoman.
The department store has about 60 million credit card holders — 32 million to 33 million are active purchasers who buy something at least once a year. And Sears gains about 4 million new accounts a year.
The information collected includes everything from the customers name, address and what they are buying to when they are buying it. Paying with cash doesnt reveal that information.
Ms. Drummond said the department store chain does not sell or rent its customer database because its too valuable to the company. However, some of the companys departments may buy names from outsides source to enhance their marketing efforts.

Pros and cons
The practice of exchanging names and addresses has both benefits and risks for the companies.
Mr. Wientzen, who enjoys woodworking, gets just about every magazine and catalog that has to do with the industry. He likes the mail blitz because he enjoys spending money on his craft.
"For the most part, the fact that I get so many catalogs causes me to spend more money," Mr. Wientzen said, adding that he doesnt think hes much different from other consumers.
Even though companies may be trading names with their competitors, its beneficial to the industry, he said.
"It increases total spending and benefits everyone," Mr. Wientzen said.
Just as a competitor of L.L. Bean can "steal" a customer away when the companies trade names, so too can L.L. Bean steal a customer away.
Like L.L. Bean, Lands End does not sell or rent its lists, but does exchange customer names and addresses with select companies.
"By exchanging names with a competitor, youre exposing your customer to a competitive offering from another catalog," said Dave Johnson, director of direct marketing for the Dodgeville, Wis., catalog company. "But it also gives you the opportunity to market to more consumers."

Keeping prices down
At L.L. Beans stores, including local sites in Tysons Corner and Columbia, Md., customers are asked for their phone number at the register for internal use, Mr. Donaldson said.
The company uses the phone number to find out the customers purchasing history, which tells company officials about his merchandise and customer loyalty.
The company wants to send relevant offers, catalogs and discounts to people likely to use them, and the data collected help marketing officials determine who they should be targeting.
"We want to make sure were spending those marketing dollars wisely," Mr. Donaldson said.
According to a DMA study, American consumers would pay an additional $1 billion for clothing from catalog or Internet retailers if companies couldnt collect detailed information about their customers. The additional cost would be a result of extra marketing costs being passed along by catalog and Internet apparel retailers.

Loyalty rewarded
Sears Craftsman Club members — a group of frequent purchasers of Craftsman tools — are rewarded constantly for their loyalty through discounts and special sales. But in return, the customer provides Sears with detailed information about his purchasing history.
"From that information we can develop marketing programs that are meaningful to them," Ms. Drummond said. "The more data we have, the more relevant our marketing is."
The Hoffman Estates, Ill., department store chain saves money because the "people on the receiving end of the direct marketing have a much more likelihood of buying," Ms. Drummond said.
Loyalty programs — from supermarkets to department stores — are one of the strongest ways to build a relationship between a retailer and a customer.
"The intent of these programs is to identify their best customers — to understand the current customer base," Ms. Bartholow said.
"Retailers look at that information to keep their customers happy. The purpose is to make their relationship stronger," she said.

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