All of us have been classified and installed in a digital caste system through which we systematically are included in or excluded from the daily flow of consumer culture. In contrast, before this age of market fragmentation and segmentation, the growth of the mass consumer market had an egalitarian effect. "Everybody could join the 'class' of consumers in the marketplace," wrote Susan Strasser in Satisfaction Guaranteed: The Making of the American Mass Market. Today's rush toward market segmentation, she argues, "codifies increasing class distinction."But, as a specialist in cluster analysis should know, the wave of the future is also marketing to smaller and smaller clusters on down to clusters of one. The new school of marketing, 1:1 marketing, shifts the focus from market share (selling a product to as much of the market as possible) to customer share (getting as much of an individual customer's business as possible). By focusing on the depth rather than breadth of customer relationships, 1:1 is exclusionary by definition. The customers that matter most are those offering the greatest depth of relationship, those with the highest Lifetime Customer Value.Who cares? What's the harm?
"Our big concern," said Janlori Goldman, the ACLU attorney, "is that the market is going to make certain decisions about people without ever meeting them, without ever talking to them, without ever really knowing who they are. The biggest danger in that kind of a situation is that those decisions will be discriminatory, that they will be based upon their race, their sexual preference, their religion, or their gender. A bank in Boston refused to provide mortgages to people who had a certain zip code. Just like that! If you lived there, you didn't get a mortgage. Well, who do you think lived in that zip code? Low-income blacks."
David Miller, a Claritas senior vice-president, told me clustering techniques pose a danger only when misused. "By nature, segmentation is discrimination. I'm discriminating against people I don't think are willing to buy my product. I don't think anybody's going to complain all that much if Citibank chooses to promote jumbo CDs to wealthy neighborhoods as opposed to poor neighborhoods. That's pretty innocuous. It's a whole different story, however, if somebody decides he's going to promote a necessary service only to one group and deny the opportunity to a second group. That's a redlining question."
Most companies, he argued, have a powerful motive to steer away from such exclusionary strategies. Virtually everyone out there is trying to get everyone into their sales," he said. "Every single person we've dealt with has a legitimate question--how do I reduce my costs, make more money, become more profitable, and increase my market share? For good or bad, that's the wave of the future for the United States."
A primary principle of the 1:1 share-of-customer strategy is the Pareto Principle--the idea that 80% of any company's business comes from 20% of its customers (Peppers & Rogers, p. 108). According to a VP at American Express, the best customers outspend others by ratios of 16 to 1 in retailing, 13 to 1 in the restaurant business, 12 to 1 in airlines, and 5 to 1 in the hotel/motel industry (ibid.). For example, frequent flyer programs capitalize on the Pareto Principle by offering extra special deals to business flyers.
An entire chapter of The One-to-One Future is devoted to differentiating customers. Under a section called "Some Customers Have Negative Value" the authors write:
A corollary to differentiating your best customers by rewarding them and
pampering them is that you should also identify your worst customers, and get
rid of them. Michael Schrage, a Los Angeles Times columnist and author
of the book Shared Minds, maintains that having the ability to identify
and "fire" your worst customers is crucial to providing good customer service.
In a marketplace where corporations are increasingly vertically integrated and
where the same corporations offer everything from batteries to health insurance
to at-home banking, this is quite scary.
