When trying to advertise using mass media, advertisers often play a numbers game. They attempt to provide a convincing message in a convincing manner to receptive consumers by trying to determine what percentage of a particular audience matches the demographic, socioeconomic, and psychological profiles for which the message was designed. Systems like PRIZM, which combines Census-based demographic and socioeconomic data with behavioral and psychological data, have been helpful in finding which geographic areas have a significant proportion of a particular type of consumer. (Try looking up your ZIP code here to see the top five segments in your area. Seriously, do it. It's actually kind of fun...)
Unfortunately, even with segmentation tools like PRIZM, you'd be quite lucky to find that a desired one of their 67 designated segments (some with slightly odd labels such as #51 "Shotguns and Pickups" and #37 "Mayberry-ville") constitutes even 5-10% of certain geographic areas. Even so, for many types of marketing, finding a geographic market that has 10% of a desired population could be incredibly profitable. But why settle for 10% when you can have even more. Much more.
For years, many psychologists (and marketers alike) have argued that the best predictor of future behavior is past behavior (as opposed to attitudes and opinions). Thus, if marketers could examine your behavior, they could likely tell more about you than if they were to attempt to assess your attitudes. There are a few reasons for this, but the most convincing is that while you can lie about your attitudes, your behavior often tells much more truth than you'd like.
In the past, marketers had to use survey or limited observation data to make inferences for a larger group of consumers. Then came retail store scanning devices that allowed for a greater tracking of purchases for consumers who used credit cards and retailer loyalty programs. Now with e-marketing, online and mobile technology has allowed for marketers to monitor not just what you buy, but how you buy it. Not only is there a record of your purchases, but also when you purchase (time of day, time of week, etc.), how you came upon a website (e.g., going directly to the website as opposed to clicking through from a link or ad), the time you spent on a page before clicking for more information, the other products you examined prior to deciding, etc. Much of this is done using cookies, small bits of information your browser stores on your hard drive and accesses at a later time to determine prior surfing behavior.
What's Good about Behavioral Targeting?
The major benefit of behavioral targeting is that we as consumers will be offered products and services that we're likely to desire. It's like when you log into Amazon and you're presented with a set of book titles that were purchased by other people who bought the last book that you bought. Amazon is betting that you are similar to the other people who bought the same book. And more often than not, they're probably right.
Behavioral targeting is also how Facebook offers you advertisements that are mysteriously related to your travels around the internet, your Likes, and your associations with various online organizations. There's really no mystery at all. They just take the data and match you up with ads that are more likely to interest you.
And the Bad?
The bad side of behavioral targeting? The potential for privacy invasion: the biggest concern for consumers is that behavioral targeting is something akin to marketers stalking your every move. As much as consumers like the convenience of targeted ads, as well as the avoidance of "junk mail," SPAM, and annoyingly irrelevant advertisements, these same consumers also become concerned that giving away too much information about themselves might make them vulnerable to particularly manipulative marketing efforts.
What Will the Market Decide?
Advertising industry organizations have already been hard at work trying to put together a self-regulatory system to keep consumers informed about behavioral targeting and to allow those consumers to opt out of advertising that is targeted based on behavioral tracking. As with most self-regulatory efforts, at least part of this effort is likely an attempt to preempt legislation that might be even more restrictive. In fact, the efforts came largely in response to the U.S. Federal Trade Commission's concerns regarding behavioral targeting.
But now that the self-regulatory effort has come to the implementation stage, consumer groups are demanding that the U.S. government develop formal legislation that will force marketers to have more transparency in behavioral advertising, and to have regulations that are enforceable. As it stands now, the default mechanism on browsers and websites is that behavioral targeting will occur, unless the consumer takes proactive steps to stop it from happening. It's kind of like walking into a hotel room that has an activated video monitoring system. Although it may not be hard to cover up the lens, there's not much you can do unless you know that it's there.
Behavioral targeting. On the surface, it just looks so sensible, or does it?
Batten, Julie (2011), “Online Behavioral Advertising - Are You Implementing a Self-Regulatory Program?” ClickZ - Marketing News & Expert Advice (August 29), <http://www.clickz.com/clickz/column/2104581/online-behavioral-advertising-implementing-self-regulatory-program>.
Batten, Julie (2011), “Smart Ads for Smart Advertisers...Are You One of Them?” ClickZ - Marketing News & Expert Advice (July 6), <http://www.clickz.com/clickz/column/2084175/smart-ads-smart-advertisersare>.
McDonald, Greg (2011), “Consumer Group Wants New Internet Privacy Law,” Newsmax (August 30), <http://www.newsmax.com/TheWire/Internet-privacy-law/2011/08/30/id/409139>.
Miyazaki, Anthony (2010), “Would You Click This Icon to Protect Your Privacy?” E-Marketing for Sensible Folk (October 11), <http://e-marketingforsensiblefolk.blogspot.com/2010/10/would-you-click-this-icon-to-protect.html>.
PRIZM Segmentation System: http://mybestsegments.com