Amazon Shopper Panel — Ethical way of data collection?
HBS Case Study: Paying consumers for their data?
Customer data is a big business. Companies regularly capture, store, and analyze large amounts of quantitative and qualitative data on their consumer base every day, from consumer behavior to predictive analytics. Some companies have built an entire business model around consumer data — sometimes, they sell data to a third party and sometimes use it to create targeted ads.
A program like Amazon Shopping Panel is a double-edged sword that will shape the marketing and data analytics landscape in a significant way.
Amazon Shopper Panel?
The Amazon Shopper Panel is an opt-in, limited program where participants can earn monthly rewards by sharing receipts from purchases made outside of Amazon and answering surveys.
Value of Shopper Panel program for Amazon?
Amazon plans on leveraging this particular ‘consumer research panel’ to improve and optimize its product portfolio:
· They can utilize consumer data with AI-driven optimization tools for Amazon Advertising campaigns to improve discoverability and increase Ads conversions. Amazon’s advertising department is growing 44% YoY in Q1 of 2020, hitting a record of $3.91 billion in earnings from advertising dollars alone. Getting more accurate user data will help them compete with Google and Facebook.
· With additional user data Amazon can learn even more about their purchasing behavior which will help them create even more detailed customer profiles and understand consumer trends, habits and forecast their purchases.
· Buy giving away Amazon gift cards as rewards, they will also drive consumer loyalty.
Without the Shopper Panel data, what can Amazon do?
Amazon is still collecting consumer data without Shopper Panel user data through its Alexa voice assistant, an e-commerce marketplace, Kindle e-readers, Audible audiobooks, video and music platforms, home security cameras, and fitness trackers.
Alexa-enabled devices make recordings inside people’s homes, and ring security cameras capture every visitor. Such information can reveal a person’s height, weight, health, ethnicity, and political leanings.
Kindle reading and buying habits can capture users’ whereabouts on any given day and sometimes whom they have met.
Amazon Marketplace collects data from users as they navigate the site, such as browsing each page and purchase history. The company monitors what you look at, your shipping address, guess your income level, etc. They also use external datasets, such as census data, to gather demographic details. Amazon also keeps track of what items were viewed, the users’ shipping addresses, and the reviews left by the user. With the help of Big Data, they can forecast the next order and ensure that the manufacturers track the inventory to execute the orders quickly.
As per DW research documentary, Amazon watches consumers’ purchases and marketplace browsing data and generates up to 15K pages of data just about one user. They can compound a lot of user data, know if a user is on vacation based on the location IP, and create a personality profile.
Challenges with the Amazon Shopper Panel?
This program has a lot of potential problems and has the following impacts on the ecosystem:
· Paying people for their receipts from these sellers ensures Amazon will have a steady stream of data from its IRL competitors, fostering anti-competitive business practices.
· Other brands will learn from this and find more creative ways to obtain and utilize customer data.
· It might be possible that the people who would participate are not typical shoppers. It will be challenging to say how reliable the data would be.
· Asking customers to perform multiple uploads seems inefficient and time-consuming. The serious and premium consumer might not participate.
· Amazon might use the data to understand why people aren’t buying that item on Amazon. If they start to see patterns, they will evaluate the LTV of getting into those categories; making their private label, finding better vendors, adjusting pricing, etc driving consumers to spend and buy more.
· It will give Amazon Monopoly Power as E-Commerce ‘Gatekeeper’. They currently have anti-trust investigations; running a program like this will put them more at risk.
· Amazon owning user data will be incredibly powerful in the coming years; that’s why the US government is finally looking into the possibilities of smashing it.
· If the data bridge happens, consumers have no protection.
· Data is dangerous if it’s centrally controlled by Amazon.
· Amazon will start self-producing all the products and set prices that consumers are willing to pay and gain up market share. This will create a monopoly in the market, which might result in the closure of small offline and online retail shops.
· Amazon also has cloud services; they work with governments and other businesses. Any kind of data integration will be truly profound and dangerous.
· Data of a user is priceless and paying users 10$ per month is not fair.
· Amazon has many businesses across the board. It’s not clear how user data will be used across platforms; this will be raising concerns about privacy and data exploitation.
Finally having one company that will wake you up, offer you milk and answer all my questions — sounds scary, and the price we pay all will pay for this will be our freedom and privacy in the long run.
The Shopper Panel program — Impact on Consumers?
· Due to the pandemic, consumers have shifted drastically to online shopping. Having access to consumer data, Amazon can learn about customer shopping behavior and show them products that will best fit their budget and taste.
· With the rich database, Amazon will know us better than we know ourselves. Amazon will ship goods to consumers they know will be needed before they plan the order with AI predictive modeling techniques.
· Amazon wants to become a One-Stop shop forever.
· This trend will empower customers to share data in a compliant and transparent environment. Endless browsing and hurting for products might end. Customers will be offered a customized Amazon home page that fits their needs and wants.
· In the end consumers WIN as they get high-quality products and services at low and competitive prices
The Shopper Panel program — Impact on Competitors:
· Competitors like Walmart or others might try similar programs to pay users for data, and they will use the data as follows:
- To improve the customer experience
- To refine the company’s marketing strategy
- To transform the data into cash flow
- Challenge Amazon’s market share.
- Launch marketing campaign to switch amazon customers to their platform.
- On the other hand, Amazon uses the data captured to compete, and these data points give us proof.
Over time, Amazon will have greater insight into shopper behavior at many key retailers, both B&M and Online. Data like this will be beneficial for them to retarget consumers and increase market share against their competitors.
This is an extremely low-cost way of getting market research data. It gives them a good handle on what is happening outside their ecosystem. As per this data — Target is losing lost customers to Amazon.
The Shopper Panel program — Impact on Market:
· Amazon’s Shopper Panel can offer additional insights beyond its store to small- and large-scale sellers and brands which will boost their sales.
· With rich database — Data-driven technologies like AI, Big Data, and Blockchain will predict what a customer wants to buy and might replace human customer decision-making.
· Amazon is using blockchain technology in its advertising product. A “blockchain ledger” billing and reconciliation system to provide data transparency & protection to the user.
· Ethically collecting data, rewarding consumers financially, and giving data protection will be the trend even as eCommerce metaverse kicks in.
· Deployment of new data privacy regulations globally will change the way businesses capture, store, share and analyze consumer data.
· Data and AI will enable Marketing professionals to turn to APIs and tools on a pay-as-you-go basis, enabling them to stay small and experiment at almost zero cost — Empowering consumers and markets to a sustainable model.
Collecting user data through such programs, using Blockchain technology to ensure data transparency, and giving users ownership of their data will be a beautiful pivotal moment in marketing.
The ability to collect data transparently, understand it, process it, extract value from it, visualize it, and communicate it will be a hugely important skill in the next decades