The Dark Side of Customer Analytics

Topics: Marketing, Loyalty program, Harvard Business School Pages: 26 (6279 words) Published: March 24, 2013


How can these
companies leverage
the customer data

The Dark Side of
Customer Analytics

Four commentators offer
expert advice.

by Thomas H. Davenport and Jeanne G. Harris

Reprint R0705A

An insurance company finds some intriguing patterns in the loyalty card data it bought from a grocery chain—the correlation between condom sales and HIV-related claims, for instance. How can both companies leverage the data responsibly?


The Dark Side of
Customer Analytics


by Thomas H. Davenport and Jeanne G. Harris

Laura Brickman was glad she was almost done
grocery shopping. The lines at the local
ShopSense supermarket were especially long
for a Tuesday evening. Her cart was nearly
overflowing in preparation for several days
away from her family, and she still had packing to do at home. Just a few more items to go: “A dozen eggs, a half gallon of orange juice,
and—a box of Dip & Dunk cereal?” Her sixyear-old daughter, Maryellen, had obviously used the step stool to get at the list on the
counter and had scrawled her high-fructose
demand at the bottom of the paper in brightorange marker.
Laura made a mental note to speak with Miss
Maryellen about what sugary cereals do to kids’
teeth (and to their parents’ wallets). Taking care
not to crack any of the eggs, she squeezed the
remaining items into the cart. She wheeled past
the ShopSense Summer Fun displays. “Do we
need more sunscreen?” Laura wondered for a

moment, before deciding to go without. She got
to the checkout area and waited.
As regional manager for West Coast operations of IFA, one of the largest sellers of life and health insurance in the United States, Laura
normally might not have paid much attention
to Shop-Sense’s checkout procedures—except
maybe to monitor how accurately her purchases were being rung up. But now that her company’s fate was intertwined with that of the
Dallas-based national grocery chain, she had
less motivation to peruse the magazine racks
and more incentive to evaluate the scanning
and tallying going on ahead of her.
Some 14 months earlier, IFA and ShopSense
had joined forces in an intriguing venture.
Laura for years had been interested in the idea
of looking beyond the traditional sources of customer data that insurers typically used to set their premiums and develop their products.
She’d read every article, book, and Web site she

HBR’s cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts.
harvard business review • may 2007

page 1

H BR C A SE S T UDY •• •T he Dark Side of Customer Analytics

Thomas H. Davenport (tdavenport@ is the President’s Distinguished Professor of Information Technology and Management at Babson College, in Wellesley, Massachusetts,
and the director of research for Babson
Executive Education. Jeanne G. Harris
( is an
executive research fellow and a director of research at the Accenture Institute for High-Performance Business. She is based in Chicago. Davenport
and Harris are the coauthors of Competing on Analytics (Harvard Business School Press, 2007).
page 2

could find on customer analytics, seeking to
learn more about how organizations in other
industries were wringing every last drop of
value from their products and processes. Casinos, credit card companies, even staid old insurance firms were joining airlines, hotels, and other service-oriented businesses in gathering
and analyzing specific details about their customers. And, according to recent studies, more and more of those organizations were sharing
their data with business partners.
Laura had read a profile of ShopSense in a
business publication and learned that it was
one of only a handful of retailers to conduct its...
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