Home > data science, modeling, musing > Consumer segmentation taken to the extreme

Consumer segmentation taken to the extreme

December 23, 2012

I’m up in Western Massachusetts with the family, hidden off in a hotel with a pool and a nearby yarn superstore. My blogging may be spotty for the next few days but rest assured I haven’t forgotten about mathbabe (or Aunt Pythia).

I have just enough time this morning to pose a thought experiment. It’s in three steps. First, read this Reuters article which ends with:

Imagine if Starbucks knew my order as I was pulling into the parking lot, and it was ready the second I walked in. Or better yet, if a barista could automatically run it out to my car the exact second I pulled up. I may not pay more for that everyday, but I sure as hell would if I were late to a meeting with a screaming baby in the car. A lot more. Imagine if my neighborhood restaurants knew my local, big-tipping self was the one who wanted a reservation at 8 pm, not just an anonymous user on OpenTable. They might find some room. And odds are, I’d tip much bigger to make sure I got the preferential treatment the next time. This is why Uber’s surge pricing is genius when it’s not gouging victims of a natural disaster. There are select times when I’ll pay double for a cab. Simply allowing me to do so makes everyone happy.

In a world where the computer knows where we are and who we are and can seamlessly charge us, the world might get more expensive. But it could also get a whole lot less annoying. ”This is what big data means to me,” Rosensweig says.

Second, think about just how not “everyone” is happy. It’s a pet peeve of mine that people who like their personal business plan consistently insist that everybody wins, when clearly there are often people (usually invisible) who are definitely losing. In this case the losers are people whose online personas don’t correlate (in a given model) with big tips. Should those people not be able to reserve a table at a restaurant now? How is that model going to work?

And now I’ve gotten into the third step. It used to be true that if you went to a restaurant enough, the chef and the waitstaff would get to know you and might even keep a table open for you. It was old-school personalization.

What if that really did start to happen at every restaurant and store automatically, based on your online persona? On the one hand, how weird would that be, and on the other hand how quickly would we all get used to it? And what would that mean for understanding each other’s perspectives?

Categories: data science, modeling, musing
  1. JSE
    December 23, 2012 at 9:16 am

    It’s certainly still the case that if you go to a restaurant enough, the people who work there get to know you and know your order. Why would that have changed?

    At the Carousel in Princeton they used to call me “Captain Patty Melt.”


  2. December 23, 2012 at 9:23 am

    This is a business model from an oligarch for other oligarchs. It is the model where people who don’t have excess money like today’s middle class should be pushed aside to make way. This has never ended well for a country down this path.


  3. Nathanael
    December 23, 2012 at 11:28 pm

    Persona fraud would become very common very quickly. Even I could do it. The trouble with this sort of consumer segmentation stuff is that it depends on people *not* deliberately gaming it. In real businesses which do well with consumer segmentation, they don’t care if people do game it; the segmentation is deliberately very rough. But attempting more precise segmentation will be a big fat dramatic belly-flop.


  4. mike
    December 27, 2012 at 1:34 pm

    Why just think of the ability to affect prices to extract the highest “value” from each individual. Think Airline Pricing. Or Amazon where depending on you zip code you can see different prices even when not logged in.

    Oh, yeah this would be great. Each price is individually created by the machine that knows way more about you than you realize and has profit maximization as the goal.


  5. albrt
    December 27, 2012 at 4:29 pm

    I think the key point here is that this is all completely inevitable. Computers are finally getting powerful enough to profile millions of people, so it’s going to happen, over and over again, forever.

    One person gets a special table at a crowded restaurant.

    One person gets blown up by a Predator Drone.

    It’s a new, value-added version of fate. Accept it and move on. It doesn’t matter whether it’s fair, or even whether the models are accurate within an established tolerance. It can be done so it must be done. Just ask the Obama drone brigade.


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