Over 400,000 people visited Farnam Street last month to learn how to make better decisions, create new ideas, and avoid stupid errors. With more than 100,000 subscribers to our popular weekly digest, we've become an online intellectual hub. To learn more about we what do, start here.

How Companies Learn Your Secrets

Companies don’t need to ask you if you’re pregnant, they know from the change in your purchases. And sometimes they even know you’re pregnant before you do. This fascinating article in the New York Times takes a look at habit formation and the rise of data mining.

In order to conserve energy, the brain will try to convert any repeated behavior into a habit. And habits, despite our best intentions, are hard to break:

But conserving mental energy is tricky, because if our brains power down at the wrong moment, we might fail to notice something important, like a child riding her bike down the sidewalk or a speeding car coming down the street. So we’ve devised a clever system to determine when to let a habit take over. It’s something that happens whenever a chunk of behavior starts or ends — and it helps to explain why habits are so difficult to change once they’re formed, despite our best intentions.

The process to create a habit is a three-step loop.

First, there is a cue, a trigger that tells your brain to go into automatic mode and which habit to use. Then there is the routine, which can be physical or mental or emotional. Finally, there is a reward, which helps your brain figure out if this particular loop is worth remembering for the future. Over time, this loop — cue, routine, reward; cue, routine, reward — becomes more and more automatic. The cue and reward become neurologically intertwined until a sense of craving emerges. What’s unique about cues and rewards, however, is how subtle they can be.

Once a habit is formed and reinforced, your brain stops participating in the decision-making. According to the times article, simply understanding our habits makes them easier to control. Cue’s are the key.

Our relationship to e-mail operates on the same principle. When a computer chimes or a smartphone vibrates with a new message, the brain starts anticipating the neurological “pleasure” (even if we don’t recognize it as such) that clicking on the e-mail and reading it provides. That expectation, if unsatisfied, can build until you find yourself moved to distraction by the thought of an e-mail sitting there unread — even if you know, rationally, it’s most likely not important. On the other hand, once you remove the cue by disabling the buzzing of your phone or the chiming of your computer, the craving is never triggered, and you’ll find, over time, that you’re able to work productively for long stretches without checking your in-box.

The best part of the article, however, is how marketers apply the loop of cue, routine, reward. Consider the early history of Febreze. When it wasn’t selling the marketers realized that the original cue—a stinky smell—wasn’t effective because people couldn’t detect most of the bad smells in their lives. If you live with 12 dogs, you become desensitized to their scents. The Febreze reward (an odorless home) was meaningless to someone would couldn’t smell in the first place. Procter and Gamble eventually realized that cleaning has its own habit loop. Rather than trying to change the loop, they decided to change the reward.

Each ad was designed to appeal to the habit loop: when you see a freshly cleaned room (cue), pull out Febreze (routine) and enjoy a smell that says you’ve done a great job (reward). When you finish making a bed (cue), spritz Febreze (routine) and breathe a sweet, contented sigh (reward). Febreze, the ads implied, was a pleasant treat, not a reminder that your home stinks.

Increasingly stores are mining your purchasing habits to better tailor promotions to what’s happening in your life.

…when some customers were going through a major life event, like graduating from college or getting a new job or moving to a new town, their shopping habits became flexible in ways that were both predictable and potential gold mines for retailers.

Customers going through major life events don’t really notice their purchasing habits have changed, but retailers both care and notice. And no life event is more important, from the retailers perspective, than a baby.

At that moment, new parents’ habits are more flexible than at almost any other time in their adult lives. If companies can identify pregnant shoppers, they can earn millions.

The only problem is that identifying pregnant customers is harder than it sounds. Target has a baby-shower registry, and Pole started there, observing how shopping habits changed as a woman approached her due date, which women on the registry had willingly disclosed. He ran test after test, analyzing the data, and before long some useful patterns emerged. Lotions, for example. Lots of people buy lotion, but one of Pole’s colleagues noticed that women on the baby registry were buying larger quantities of unscented lotion around the beginning of their second trimester. Another analyst noted that sometime in the first 20 weeks, pregnant women loaded up on supplements like calcium, magnesium and zinc. Many shoppers purchase soap and cotton balls, but when someone suddenly starts buying lots of scent-free soap and extra-big bags of cotton balls, in addition to hand sanitizers and washcloths, it signals they could be getting close to their delivery date.

As Pole’s computers crawled through the data, he was able to identify about 25 products that, when analyzed together, allowed him to assign each shopper a “pregnancy prediction” score. More important, he could also estimate her due date to within a small window, so Target could send coupons timed to very specific stages of her pregnancy.

Continue Reading

Still Curious? Try reading, The Power of Habit: Why We Do What We Do in Life and Business, which will be published on Feb. 28.

Date:
Filed Under: