Leadership Studies

With the amount of data available to companies doubling every year, new sources of data, and innovations in data collection, possibilities for marketers to
identify market niches and finely tune campaigns
are boundless. In the e-book market, for example,
three reading subscription service startups—Scribd,
Oyster, and Entitle—aim to turn a profit by discovering exactly what makes readers tick.
A flat monthly fee gives users unlimited access
to a broad selection of titles from these companies’
digital libraries. Like Barnes and Noble and Amazon,
the newcomers will collect an assortment of data from
their customers’ digital reading devices (e-readers,
tablets, smartphones), including whether a book is
completed, if pages are skimmed or skipped, and
which genres are most often finished. These subscription services intend to disseminate what they have
learned. The idea is that writers can use it to better
tailor their work to their readership, and book editors
can use it to choose which manuscripts to publish.
When customers sign up with these services, they
are informed that some of their data will be collected and used but assured that their identities will
be protected. Large independent publisher Smash
words is enthusiastic about the value of such data to
the authors who use its platform to self-publish and
distribute their work. Many contemporary authors
have already explored the feedback opportunities
available through their own Web sites, social networking sites, and Goodreads, a user-populated database of books, annotations, and reviews now owned
by Amazon. The subscription services will take this
type of market research to a more quantifiable level.
Preliminary data analysis has already revealed
that as the length of a mystery novel increases so
does the likelihood that a reader will skip to the end
to discover the resolution. Business books are less
likely to be finished than biographies, most readers
complete just a single chapter of a yoga book, and
some of the quickest reading is recorded for romance
novels, with erotica leading the pack. Shorter
chapters entice readers on e-readers, tablets, and
smartphones to finish a book 25 percent more often
than books with long chapters.
But does book completion translate to book sales?
And how will this knowledge impact the creative
process? Will quality be negatively impacted to
satisfy reader preferences? Before any of these
questions can be answered, authors will need
access to comprehensive data. And that depends
on the large publishing houses signing deals with
the subscription services. After nearly two decades
of market disruptions spearheaded by Amazon,
publishers are not flocking to supply titles. So far,
only Harper Collins has signed with Oyster and
Scribd, while Random House, Penguin, and Simon &
Schuster remain on the sidelines.
In the airline industry, nearly all carriers collect
passenger data, but some are aggressively pursuing
data mining to personalize the flying experience.
Previously unlinked data sets can now be consolidated to build comprehensive customer profiles.
Cabin crews equipped with tablets or smartphones
can identify the top five customers on the plane,
passengers with special diets or allergies, seat
preferences, newlyweds embarking on their honeymoon, and customers whose luggage was misplaced
or who experienced flight delays on their previous
flights. In-flight browsing history and Facebook likes
are even used to fashion relevant marketing pitches.
This “captive audience” aspect of air travel in
conjunction with the sheer volume of information
airlines collect presents a unique opportunity to
marketers. Allegiant Travel company has already been
able to sell show tickets, car rentals, and helicopter
tours to Las Vegas travelers. United Airlines’ revamp
of its Web site, kiosks, and mobile app, along with its
data integration initiative, have enabled it to target flyers predisposed to upgrading to an economy plus seat.
Not all customers are pleased. A user on Delta’s
FlyerTalk forum complained that a link from the
new DL.com Web site led to a personal profile that
included a lot more than her miles accumulated
and home airport. Annual income, home value,
and the age ranges of her children were included
along with expected data such as amount spent on
airfare, hotel preference, and type of credit card.
The resulting negative publicity prompted Delta to
apologize, but it defended its use of demographic
data and data not covered under its privacy policy.
Credit-card partner American Express had supplied
some data, as allowed under the policy. Global
information services group Experian supplied the
rest, unbeknownst to consumers.
These data-driven marketing approaches are not
flawless. Even customers who accept the inevitability
I N T E R A C T I V E S E S S I O N : O R G A N I Z AT I O N S
IDENTIFYING MARKET NICHES IN THE AGE OF BIG DATA
Chapter 3 Information Systems, Organizations, and Strategy 101
1. Describe the kinds of data being analyzed by the
companies in this case.
2. How is this fine-grained data analysis improving
operations and decision making in the companies
described in this case? What business strategies
are being supported?
of profiling are miffed when they receive unsuitable
offers based on faulty personal information. A
Qantas survey of frequent fliers found that most
customers want a line drawn between data collection
to facilitate useful offers and data collection that is
too intrusive. British Airways crossed the line with
its “Know Me” program. Google Image searches
were used to identify VIP customers as they entered
the airport and first class lounge. The practice has
since been discontinued. Customers can opt out of
British Airways personalization services—but not its
data collection. Upon request, a note is added to the
customer profile, which nonetheless continues to
grow. None of the carriers currently allow customers
to opt out of their data programs.
As car companies explore their Big Data
opportunities, customer privacy will become an
issue for them as well. Ford Motor Company began
exploring how integrating databases and using
complex algorithms could lead to increased sales
three years ago when it developed a program for
its dealerships to more closely match car lot inventory to buyer demand. Using buying trends, local
and national vehicle supply, and current car lot
inventory, Ford devised a program to make purchasing recommendations to dealers. Not only did vehicle turnover rate improve, but net price—the price
a consumer pays minus the manufacturer subsidy—
rose, fueling an upturn in Ford’s profits.
But Ford is thinking even bigger. Performance
monitoring using vehicle Internet connections to
collect fuel economy, mechanical failure, and other
3. Are there any disadvantages to mining customer
data? Explain your answer.
4. How do you feel about airlines mining your
in-flight data? Is this any different from
companies mining your credit card purchases or
Web surfing?
safety and performance metrics could soon be
used to improve product engineering. What’s more,
onboard connections can be used to message drivers
about potential breakdown issues, perhaps heading
off an expensive recall. Since Ford estimates that by
2016, up to a third of all its consumer communication will occur inside vehicles, possibilities abound.
Leased vehicle usage data could inform end-of-lease
marketing pitches; driving pattern, schedule, and
driving maneuver data could suggest routes most
compatible to a driver’s habits; car location data
could be sent to traffic management systems to
control stop lights; data from networked cars could
alert other drivers to hazardous conditions and traffic
jams, and current car value and payment data can
advise drivers of their optimal trade-in date.
It’s not hard to foresee the privacy issues that
could come into play as drivers realize that not only
their location, but their every movement inside their
vehicle is being tracked. There are implications for
law enforcement—traffic tickets and accident blame
attribution. Balancing privacy dilemmas with convenience, security, and expediency of transactions will
be the challenge going forward for all companies as
they explore emerging big data analysis capabilities.
Sources: Tim Winship, “Big Brother Unmasked as … Delta Air
Lines,” smartertravel.com, January 28, 2013; Jack Nicas, “When Is
Your Birthday? The Flight Attendant Knows,”
Wall Street Journal,
November 7, 2013 and “How Airlines Mine Personal Data In-Flight,”
Wall Street Journal, November 8, 2013; David Streitfeld, “As New
Services Track Habits, the E-Books Are Reading You,”
New York
Times
, December 24, 2013; Ian Sherr and Mike Ramsey, “Drive into
the Future,”
Wall Street Journal, March 7, 2013.
CA S E S T U DY Q U E S T I O N S
technology is based on universal standards that any company can use, making
it easy for rivals to compete on price alone and for new competitors to enter the
market. Because information is available to everyone, the Internet raises the
bargaining power of customers, who can quickly find the lowest-cost provider
on the Web. Profits have been dampened. Table 3.5 summarizes some of the
potentially negative impacts of the Internet on business firms identified by
Porter.
102 Part One Organizations, Management, and the Networked Enterprise

Last Updated on February 14, 2019 by

See also  Building and Sustaining an Evidence-Based Practice Clinical Environment