Keeping a close eye on U.S. consumers

April 24, 1995|By Dallas Morning News

Jay Lichtman, a self-described "electronic bloodhound," managed to sniff out the most personal details of a Dallas woman's life in about an hour using nothing more than her name and a basic desktop computer.

Mr. Lichtman, president of Finders Limited, an Arizona company dedicated to doing background checks for lawyers and finding long-lost friends and relatives, conducted the search as an experiment to see how much information he could obtain through easily accessible databases.

He discovered the woman's birthday, address, Social Security number and marital status. He found that she drives a Saturn, has a perfect credit rating, has never been arrested for a crime and subscribes to several publications ranging from the Nation to Vegetarian Times. Mr. Lichtman even got his hands on her checking and savings account and credit card numbers and their balances.

"Once I have a name and at most a previous address, I can obtain all the data in the world," he said, adding that information on consumers is gathered from several sources including credit card applications, magazine subscriptions and telephone directories.

As computers get more powerful and marketers grow increasingly concerned about reaching specific consumers, databases are being used to tap into the economic profiles of customers, their buying patterns and brand preferences.

Database marketing, which is referred to interchangeably as direct-mail, direct-response, frequency, loyalty, one-to-one and relationship marketing, not only helps companies find these consumers, it allows businesses to talk to them regularly.

"At Neiman Marcus, we have no asset greater than our database," said Billy J. Payton, vice president of marketing and customer programs at the Dallas-based retailing giant that runs InCircle, considered one of the premier loyalty programs in the country.

But while this kind of marketing and database research is a growing trend in the business world, critics call it an invasion of privacy.

"It's nobody else's business how many cars I have, if I subscribe to dirty videos, if I bought software for psychoanalysis, if I'm a gardener or an antique car buff. It's my business," said Robert C. Bulmash, president of Private Citizen Inc. a public advocacy group in Naperville, Ill.

The U.S. advertising volume for direct mail has steadily risen over the past few years from $23.7 billion in 1990 to $29.3 billion in 1994, according to a preliminary estimate by Robert J. Coen, a forecaster at McCann-Erickson Worldwide.

Marketers build their databases by renting existing lists and overlaying them with their own list. This data is expensive and may cost up to 20 cents per name, said Mark Rhodey, senior vice president of business development at the Dallas office of Rapp Collins Worldwide, a $186 million agency that specializes in database marketing.

Direct mail is also costly, because of rising postal rates and paper costs. The average cost per thousand or the cost of reaching an audience on a per thousand basis for direct mail was $151 in 1994, said Mr. Coen. Only newspapers and magazines were more expensive, at $166 and $172 respectively. But the consumers are highly targeted, so response rates are good and easier to measure.

"Network television is no longer the king of advertising," said Mr. Rhodey, adding that a consumer can receive up to 5,000 ad messages per day from glancing at the nightly news or listening to the radio or surfing the Internet.

The channels for advertising have become very fractured," he said. "That minimizes the impact of a big media buy because you don't get the penetration you once did. (Direct marketing) gives marketers a chance to create better value with some target channels."

Database marketing is also cost-efficient. It is often said that a company spends up to five times more money to entice a first-time customer than it does to hold on to a current client, said Richard G. Barlow, president of Frequency Marketing, Inc.

Specific consumers are targeted in a variety of methods once the information from databases is compiled. Customers are reached via mail, telephone, television, their computers and even billboards that have toll-free numbers.

Direct-response programs, especially specialty catalogs, are popular because of today's busy lifestyles, said David Kubes, president of DDB Needham Direct. After working all day, a consumer can come home and shop via catalog or television.

bTC Still, there are some customers who do not want companies such as Neiman Marcus and American Airlines to be able to obtain virtually everything about them through databases.

Mr. Bulmash founded Private Citizen Inc. in 1978 because he was concerned about telemarketing. After intense lobbying, the Federal Trade Commission proposed rules in February that would require telemarketers to identify themselves, state that they are selling goods or services and prohibit them from calling before 8 a.m. or after 9 p.m., among other things. A final decision is expected in August.

A Lou Harris survey last year showed that 84 percent of those polled were concerned about threats to personal privacy, compared with 54 percent in 1970, said Alan F. Westin, a Columbia University Public Law and Government professor and privacy expert who founded a newsletter called Privacy and American Business.

Some companies like Neiman Marcus have automatic "opt-out" policies that allow consumers who do not want to be included on any databases or direct-mailing lists to simply check a box. Mr. Westin and Mr. Bulmash want all businesses to automatically give customers this choice.

In addition, the Direct Marketing Association offers a free Mail Preference Service to people who wish to cut down on the amount of advertising they get by mail. After registering with the service, a consumer's name is added to a delete file that is made available to business subscribers four times a year.

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