CHAPTER 8

Future of Consumer Behavior

Mary loves the ease and fun of being connected. In fact, she cannot imagine a world when people were not connected. She is quick to respond to and adopt new technologies. She often wonders what new delights would be invented in the future. There is a niggling fear in her mind—will her profiles and ­pictures be hacked, or used by an unscrupulous person or organization? She gets ­concerned with every report of hacking and even leaking of celebrities’ profiles. She had read a book sometime back—1984 by George Orwell— in which all information about people was controlled and used by an autocratic government. She wonders whether the future will be a consumer utopia or will it be an Orwellian nightmare, where everything we do will be watched, tracked, analyzed—and manipulated?

In the movie Eagle Eye, two people are shown to be manipulated to do dangerous things by a computer that tracks them and controls their every move. Eagle Eye is also the name of a company and the film makers probably chose the name because the multipatented transaction software platform, supporting real-time, multichannel digital offers, vouchers, and rewards, as explained on its website, matched the core idea of the movie.

Though the film was a science fiction, it has a scary scenario in which people’s data is used to manipulate them—a scenario that is very close to becoming reality at least as far as data availability goes. Using software to make offers to customers is fine, but the movie showed that data analysis can be misused by anyone who has the expertise to correlate different sets of data.

Schmidt and Cohen (2013) make a prediction in their book, The New Digital Age, “Soon everyone on earth will be connected.” For companies, it will bring big gains in productivity as it will give them a means to understand consumers better. For consumers in rich countries, it gives more convenience, access to a wide variety of goods, delivered very fast. In developing countries, it will mean helping millions of poor and scattered people without access to government or financial services to get out of poverty. Connectivity will help improve inefficient markets by bringing producers and consumers in contact with each other, reducing waste and improving efficiency. For consumers in such countries, connectivity will also be a means to access products and services that they do not have access to.

As consumers, we may like having our lives made simple by ­companies which track our habits and movements and practically all ­personal ­information. Wearable devices track our moods and heartbeats as well, telling companies how we feel. On our screens, there is endless content available, and robotics and voice recognition provide seamless forms of engagement with technology, easing the availability of products and ­communication across borders.

Unfortunately, all this convenience comes at a price. The ­technology that gives us ease through connectivity also gives the power of data ­manipulation to individuals and companies. As we try to look into the future, the ease and simplicity of buying products may also sow the seeds of an Orwellian nightmare. In this chapter, we try to map consumer behavior of the future and also identify the fears that data availability evoke.

Retail of the Future

We have seen in the earlier chapters that new ways of serving ­customers can be devised using new technologies. As data analysis becomes ­widespread and getting information about consumers becomes easy to farm, companies will be able to integrate the physical and virtual worlds. Retail will be helped by spontaneous availability of information. Some of the changes in business models are described in this section.

Integration of Online and Offline Worlds

We are already witnessing changes in both consumers and companies. Consumers compulsively check their phones and feel deprived if Internet access is not available. They check products and prices across channels on their phones even as they visit retail stores. Companies, on the other hand, realize that online tools must be used in integration with their physical facilities and structures. Online-only stores will thus move into the ­physical world, setting up stores where customers can experience, touch, and feel products, while brick-and-mortar stores will add online channels and treat their physical stores as delivery channels for orders obtained online.

Personal Lives No More

Consumers use the Internet as an extension of their lives. Bell (2014) explains in his book, Location is (still) Everything, “What we are finding is that the way we use the virtual world of the Internet—for commerce and for information—is dictated to a large extent by the physical world that each of us resides in.” Companies will find more ways of getting into their lives to offer solutions. When they do so, the lines between personal and public will get increasingly blurred.

Efficiencies in Retail and Logistics

Integration of channels will result in greater efficiencies by cutting down on inventories held at various points in their marketing channels. For expensive products like cars and white goods, this holds much ­potential. Car showrooms, for instance, will have no cars to show: ­Consumers
see and feel products on 3D imaging technology instead of physical ­products. They can experience the cars on simulators and then place an order on screens while selecting their preferences. Such things are already a reality. The Audi store in London delivers a virtual experience of every ­possible combination of the Audi range. The company’s website says, “Audi City is a new digital car showroom format that uses state-of-the-art ­technology to make clever use of precious city space.” The ­company ­delivers brand experience digitally, and saves on car inventories in ­showrooms and instead uses digital presentations to present the cars on huge screens. Visitors check out and select the interiors and exteriors, listen to the sounds of exhaust and opening and shutting of doors. The store also has paint, wood, and leather samples which can be viewed and touched. Customers use hand-held tablets and can configure a car and view their creation on the big digital walls. Companies thus save not only on inventories, but on real estate costs as well. In addition, it allows the brand to spread to new markets where it does not have dealers.

Online Companies in Physical Spaces

Online companies, on the other hand, will find—as many have already found out—that finding customers online and then servicing them is too uneconomical. Many will be forced to shut down: For instance, many start-ups just could not achieve the scale and economy of operations and had to be shut down. Companies will, therefore, use online interactions to deliver information and guide customers to the nearest retail stores, instead of online ordering. Creative solutions will thrive.

Crowdsourcing and Co-creation

The trend toward crowdsourcing and co-creating products will only increase. Creative ways of using consumers to help companies with design, production, and publicity will multiply.

Many new technologies will evolve to help e-commerce and for making the lives of customers easier.

New Technologies

Many technologies and databases are already being used to track customers and improve business efficiency, such as radiofrequency identification (RFID), digital displays, digital mannequins, magic mirrors, touchscreen kiosks, virtual fitting rooms, and 3D printing. Many others will become available in the future. Some of these technologies have the potential to be disruptive technologies, holding the promise of significantly reshaping the shopping experience.

RFID

RFID is used to identify and track objects by means of tags attached to them. These tags, about the size of a rice grain, consist of a small chip and an antenna. The chips contain electronically stored information, about 2,000 bytes of data or less, which is enough to identify objects. They have no power source, and are tracked either by electromagnetic ­induction or by reflecting radiofrequency. This makes them cheap. Since they use reflection of energy waves, they do not have to be within the line of sight of the reader. Embedded RFID tags are thus an efficient way to track inventories, vehicles, and even people and serve for Automatic ­Identification and Data Capture.

In production lines, such tags are used to track the progress of a ­package or product through the assembly line. Movement of physical goods can be tracked in supply chains and retail stores, while livestock and pets can have identification and tracking through RFID tags. In retail, they can enable automated checkouts and inventory tracking in real time. Such tags can be used as:

• Security tags for products;
• Web address for any product information;
• Virtual labels, assembly instructions, repair instructions, replacement, recycling, and so on; and
• Better inventory management from throughout the supply chain.

Digital Displays

Digital displays are used in stores and in high traffic areas (such as ­subway stations) to display products and codes that consumers can scan with their mobiles and place orders by connecting instantaneously with ­company or review websites. The displays change every few minutes to attract ­customers, and products displayed change with the time of the day. ­Digital signage precludes the need for opening a store and will ­significantly reduce real estate costs. Customers can simply take a picture of the products on the display screens and order while on the move.

Digital Mannequins

Digital mannequins are projection video images and allow retailers to display more products much more effectively than traditional mannequins. The images can be life-size or larger and create great impact as the mannequins move and change poses, in different outfits. The technology can revolutionize retail by displays that grab customer attention. Many companies are already using this technology, including Tesco, which entices customers by a virtual mannequin that appears to be speaking to customers and tapping on the window.

Magic Mirrors

The magic mirror is an intelligent photo booth with an interactive screen through which customers can see how they would look in different dresses. Deploying a plasma screen and a depth-sensing camera, it allows people to try on different fashion items available in the store by merely tapping on the screen. The mirrors use 3D technology to superimpose clothing items over a live picture of a customer. Employing movement sensors technology from gaming applications, magic mirrors judge the consumer’s size and adjust the size of the dress at the wave of a hand.

Consumers can check the latest fashion items without going to a store and searching for suitable products. Products are changed by tapping the screen, which also allows customers to adjust the lighting to see how they will look in different conditions. Magic mirrors will do away with ­changing rooms in stores, since they allow consumers to try on ­different dresses, sizes, and colors without actually changing clothes. Once the ­purchase decision is made, payment is made by simply tapping on the magic screen. Many stores are already using this technology, including eBay.

Self-Service Touchscreen Kiosks

Self-service kiosks allow customers to browse and make purchases from product lines available in-store and also the extended ranges available online. Orders can be collected from the store or delivered to homes. Barcode scanners allow customers to look for product ratings, reviews, and suggested accessories. Combined with augmented reality technology, kiosks can be used to generate a life-size 3D image of the product scanned from a catalog.

Virtual Fitting Rooms

In virtual fitting rooms, customers enter their basic measurements and a virtual mannequin is created for dimensions. Alternately, a 3D ­scanner is used, which takes over 3.5 million body measurements to create a ­virtual mannequin of the exact body size as the customer, which can then be used to try out various dresses and accessories. Technologies such as magic ­mirrors and virtual fitting rooms are able to get the exact size of the ­person, thus reducing the returns rate. It is helpful for customers too, as they can try out all types of dresses and variations suitable for their body type without trips to the changing room.

3D Printing

3D printing—in which consumers can print objects from a computer design—promises to dramatically change the way business is conducted. The technology is already making a dent in industrial design. 3D ­printing has the potential of reinventing supply chains by reducing inventories held by retailers and dealers. Stores of the future may well have no physical goods at all, but large displays and virtual models showing the ­products, which consumers can modify to their tastes and can then print them out even as the customer waits.

Also known as additive manufacturing, it is a technique in which products are built layer by layer using a computer-driven, additive process. It can build plastic and metal parts directly from computer aided design (CAD) drawings that have been cross-sectioned into thousands of layers. It is possible to print out an object using these drawings in the same way as we use printers these days. Retailers thus reduce their investments in finished goods and offer a far broader array of customized products. 3D printers may lead to mass customization of consumer goods in the future, and, connected with a database of designs, would open a number of possibilities such as the following:

• Many products would not be stocked, but made as and when needed, leading to efficiencies in production and supply chains.
• Products could be customized for individual customers and inventories reduced to zero.
• Quick product development and prototypes would lead to shorter lead times for product development and speed to market.
• It gives the freedom for anyone to become a designer, making fast fashion even faster.
• In developing countries, people can print out whatever tools they require to improve their productivity.

Mass customization offers the ability to produce custom output, ­combining the low unit costs of mass production processes with the ­flexibility of individual customization. According to The Economist (2011), “Three-dimensional printing makes it as cheap to create single items as it is to produce thousands and thus undermines economies of scale. It may have as profound an impact on the world as the coming of the factory did.”

All these new technologies add up to a utopia of unlimited goods and choices, fulfilling needs in a jiffy. These and other technologies will ­continue to evolve, giving more and more choices to consumers and tools for better efficiency to companies. But technology is a double-edged sword. These same technologies accumulate data about consumers, ­making us all in effect into naked apes.

Consumer Utopia or Naked Ape?

Easy availability of information and infinite customized choices forms the ultimate consumer democracy. But all this convenience comes at a price. The information shared by consumers is used in a myriad of ways to help them, but this very information poses loss of privacy as well. Already, some consumers feel stalked, with some of their most personal data used by companies to target them. People do not mind as long as it is used to offer products or services, but increasingly, the information is being used in ways never intended (Exhibit 8.1). Big data can combine different data sets to pinpoint individuals in their most personal habits.

In his book, The Black Box Society, Frank Pasquale (2014) writes that companies track our personal behavior by scrutinizing clues that we leave online, to create incredibly detailed portraits. The problem arises because there are no checks about what firms are doing with this information. “Hidden algorithms can make (or ruin) reputations,” he says. The book calls for controlling powerful interests that abuse information for profit. But whether any legislation or moral concern prevents data misuse remains doubtful.

In the digital age, will humans become the naked ape, to borrow a phrase from Desmond Morris? Are we going to become mere cogs in the data machine? As people realize this, will they be comfortable with the idea of sharing information online?

Humans in the Data Machine

This brings us to the question: Is there a limit for big data analysis for consumer analysis? Or will our existence become bits and bytes in a big analytical marketing machine? Will human judgment have a role to play, or will companies know everything about us and send us things as and when we should need them? Will shopping be reduced to some clicks on our mobile phones or thought-directed commands on wearable devices?

This is an imaginable scenario. But it also ignores the fact that ­shopping has always been a multidimensional affair—people like to hang out with friends, check products, browse shop windows, and walk the High Street. We buy many things on impulse, for the sheer joy of ­catering to our desires. All shopping is certainly not merely ­recognizing needs and ­following a series of steps to fulfill those needs. “Human ­behavior is nuanced and complex, and no matter how robust it is, data can ­provide only part of the story. Desire and motivation are influenced by ­psychological, social, and cultural factors that require context and ­conversation in order to decode,” write Lee and Sobol (2012).

The authors give the example of a wink, which can be interpreted as a signal or a mere twitch. That meaning can be understood only by a human who understands the cultural and emotional significance, and not by data analysis. Indeed, some instances of embarrassing customers by using data have been reported as follows:

• Data analysis of purchase patterns revealed that a girl was pregnant. She was sent offers for pregnancy-related products, even though she had not disclosed the fact to her family.
• A patient received a call reminding him to rebuy antidepressant pills, which was seen as embarrassing, paternalistic, and an intrusion on privacy.
• A senior vice president of a taxi providing service threatened that it had records on personal lives of journalists who dared to write critically about the company.

It is easy to get carried away by the promise of data-based marketing. It is indeed a powerful tool, but just that—a tool for the help of humans. It cannot solve all problems of understanding consumers; ultimately a human will have to see how it can be used. Customer relationships cannot be reduced to a set of numbers, but it is also important to understand cultural and emotional bonds as well. Brands have to try to build love, as Kevin Roberts writes, which can be done by a combination of online and offline methods, and that is where the real role of marketing comes in. “That requires understanding customers as people—nuanced, dynamic, unpredictable—not just collections of data,” write Lee and Sobol.

Also, the future may not be so connected after all. An alternative ­scenario is that people realize the dangers of misuse of online data and the loss of privacy—and begin to switch off. This becomes plausible if data is hacked in a big way and people are harmed as a result. If sometime in the future, a large number of people suffer because of leakage of data, it is quite possible that they begin to switch off. It is not such a distant prophecy—already some people are deleting their social media profiles.

However, it would be quite difficult to switch off from the addictive power of the Internet. The advance of technology offers another scenario as well. Davenport and Kirby (2015) write that automation has taken away much of the drudge work from humans; artificial intelligence is taking away decision-making work also. As a consequence, more jobs will be taken away by machines. “Unless we find as many tasks to give humans as we find to take away from them, all the social and psychological ills of joblessness will grow, from economic recession to youth unemployment to individual crises of identity,” they write. Human civilization may well see a future of jobless growth. If large parts of the population are economically disadvantaged, will we see a society firmly divided into haves and have-nots? This scenario may well be somewhat like the dystopia described in Suzanne Collins’ The Hunger Games. In the books, Panem is a country with a wealthy Capitol and 12 districts living in poverty. Will our world look like Panem in the future?

A Faustian Bargain

It is a Brave New World with a difference—here the objective is to know the needs of customers and sell to them. Consumers are happy that they get things even before they want them. But it is also a Faustian bargain: while people are happy to shop and transact, companies get ever more data that is farmed from consumers’ online activities and sensors to track every aspect of their lives.

And this also tempts governments, terrorists, hackers, and other groups—why not use all this data to control or subjugate populations?

As Schmidt and Cohen (2013) explain, “The impact of data revolution will be to strip citizens of much of their control over their personal ­information in virtual space, and that will have significant ­consequences in the physical world.” The potential for someone to access and manipulate our online identities will increase. Every online activity will be tracked and regulated by the government. It is like living in a glass bowl, where every action is visible, every movement analyzed. “As smart-phones become loaded with ever more sensors, and with software that can interpret their users’ emotional states, the scope for manipulating minds is growing,” cautions The Economist (January 3, 2015).

As a consequence, there is the possibility that consumers will start ­feeling uncomfortable with the kind of information that they share online. It is likely that people start fretting about the limits of privacy. In addition, there is the real fear that data that people share online can be misused for ulterior motives.

Misuse of Data

Very accurate customer profiles provided by big data analysis tell us about people and their behavior, but also are open for misuse. They contain thousands of pieces of data that accurately describe the socioeconomic and ethnic profiles of people, along with their habits and psychology. Some companies have profiles on millions of consumers, which are used to categorize people into precise segments. “This application of big data technology, if used improperly, irresponsibly, or nefariously, could have significant ramifications for targeted individuals,” says a White House report (2014), highlighting the threat that big data poses.

Data can be misused in various ways as follows:

• By using algorithms and getting information that is more accurate than traditional credit scores, consumers can be denied credit, employment, or other benefits. The ­information may be generated for marketing purposes, but can also be used to influence individuals’ opportunities to find housing, job opportunities, or find out the future health of applicants. For instance, a person’s past history is available in detail in pictures and comments they made on their social media sites.
• The data can be used to label populations on some characteristics which can lead to discrimination. For instance, The Wall Street Journal (2012) found that some retailers use an algorithm to generate different discounts for the same product to people based on location: People in higher-income areas received higher discounts than people in lower-income areas. Individuals can also be classified to enable discrimination and reinforce social stratification.
• The fight against terrorism gives enormous powers to ­governments to collect data about individuals. Movements of people are tracked secretly by the government monitoring their mobile phone records, e-mails, and social media. This data can easily be misused by dictators or even democratically elected governments for nefarious ends; it could also fall in the hands of criminal organizations or a future dictator.
• Loopholes in social media sites and cloud storage have resulted in the release of private pictures of celebrities and other people. Ordinary people too can find their deeply ­personal data hacked and posted publicly.
• Internet companies frequently bypass the privacy settings of people without their knowledge or consent. Apps transmit personal identifying details to tracking companies.
• Companies can increase insurance rates by using genetic data for people who may have the possibility of getting a certain disease in the future.
• Big data analysis gives powers of predictive policing: It helps in knowing the likelihood of a crime before it is committed, based on the likelihoods analyzed by data analysis. Would it also lead to imprisoning or surveillance of people based on their likelihood of committing a crime in the future?

The real danger is racial profiling: The personal data can be misused by the government or criminal organizations for ulterior motives. “The history of the 20th century is blood soaked with situations in which data abetted ugly ends,” write Mayer-Schönberger and Cukier (2013). They give the example of invading Nazis, who used civil records in the Netherlands to round up Jews. “The five-digit numbers tattooed into the forearms of Nazi concentration camp prisoners initially corresponded to IBM Hollerith punch card numbers; data processing facilities facilitated murder on an industrial scale,” they write.

The difference now is that data available is much more in­ quantity and much better in targeting individuals. Even the movement of people can be tracked today. Social data and algorithmic models can predict which people are likely to be dissidents.

Though it is shocking, the digitally connected age also means the age of constant surveillance. Our e-mails, phone records, social data—and practically everything we do—are being watched.

Dixon and Gellman (2014) in their report, The Scoring of America, write that scores are being calculated for all citizens. “New consumer scores use thousands of pieces of information about consumers’ pasts to predict how they will behave in the future,” they write. People do not know what aspects of their behavior are being scored and how those scores will be used. Consumers who do not know about the existence or use of consumer scores cannot have any say in who used the scores, or how.

Whether people remain comfortable with the complete loss of their privacy or whether the backlash against big data gathers momentum, however, remains to be seen. The future is another country. A possible scenario is that people remain connected but learn to safeguard their ­personal data. They only share the data when they need to and only with companies that promise complete security. Perhaps that is more plausible. Or, the future is something we have not imagined so far and we must wait to find out how the connected consumer evolves. What shape Big Brother takes remains to be seen.