AmEx's Data Mining Techniques Spook Its Customers

One distinguishing feature of IMC is its strong emphasis on data analytics. Now more than ever, quantitative insight and analytical skills are essential tools for gleaning meaningful consumer insights from the overwhelming surfeit of consumer data that most large corporations possess.

As both a marketer and a consumer, I find these treasure troves of data both exciting and somewhat terrifying. Last week at Davos, Richard Edelman bemoaned the general erosion of trust in corporate entities, and to be sure, this is a critical issue for IMC as well. Analytical skills are important, but being able to build relationships with consumers based on mutual trust is what ultimately builds shareholder value over the long term.

In this volatile economic climate, then, consider this New York Times article from January 30 that revealed American Express’ targeted rate increases for cardholders who used their Amex cards at specific establishments:

The question, then, is how much of the data they can use before spooking their customers. Kevin D. Johnson, a 29-year-old Atlanta resident who runs a marketing and communications firm, received a letter from American Express last October saying that his credit limit was being lowered. One reason was that other customers who had used their cards at places where he had shopped were late in paying their bills.

Read the full article at the New York Times.

UPDATE: After Good Morning America picked up this story, American Express clearly felt the sting of the bad P.R. of this data mining technique, and announced that it would stop the practice.

Does this practice take regression too far? Is there a line between “choosing your best customers” and outright discrimination? Would this policy incite you to choose a different credit card company?

We'll keep an eye out for future stories about issues in marketing ethics. And send us your suggestions!

-- Colleen Maley