Keep Your Hands Off My Zip Code!

Discussion
Feb 14, 2011
Tom Ryan

The California Supreme Court last week ruled that California’s
retailers can no longer ask for the ZIP codes of customers who make purchases
with credit cards. ZIP Codes were determined to be "personal identification
information" and
such requests violated state consumer privacy laws.

In the lawsuit filed against
Williams-Sonoma, Jessica Pineda of Menlo Park, CA, contended the store used
her name and ZIP Code to identify her address and then stored the information
in a database for later marketing. She also contended that the retailer had
the ability to sell her information to other businesses.

Williams-Sonoma argued
that ZIP Codes did not provide personal information because they pertained
to a group, not an individual. Besides, for some marketing purposes, it also
claims that asking for ZIP Codes is partly a security precaution.

Two lower
courts had rejected the suit, but the Supreme Court said a ZIP Code was part
of a person’s address and therefore covered by the state’s 1971 Credit Card
Act.

Speaking to the Los Angeles Times, Gene Stonebarger, an attorney
for Ms. Pineda, said the decision would help protect consumers from credit
card fraud and identity theft. The ruling will affect more than a dozen lawsuits
in the state against major retailers that seek and store consumer ZIP Codes.

Eli
Portnoy, a retail and marketing expert, told the LA Times that
there has been "a gathering storm, a backlash" by consumers
against requests for personal information but he believes retailers will continue
to seek such information.

"Companies will still find ways," he said. "The goal in any
business is to know your customers as well as you can."

Discussion Questions: How important are attaining Zip Codes for retailers’ marketing and consumer research purposes? Do you detect to see a further backlash from consumers against stores or companies in gathering personal information?

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21 Comments on "Keep Your Hands Off My Zip Code!"


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Dick Seesel
Guest
10 years 2 months ago

On the one hand, I understand why Zip Code information is vital to understanding where your store’s customers live, so you can target your marketing accordingly or even determine opportunities to add locations. On the other hand, I don’t understand why this information isn’t readily available as part of the credit card database (bank cards or proprietary cards) that retailers ought to be able to “mine.” Bottom line: consumers are already sacrificing a certain degree of privacy every time they choose to pay with plastic instead of cash, so I find the new California rules more intrusive to businesses than necessary.

Max Goldberg
Guest
10 years 2 months ago

The more information a retailer can gather about its customers, the better it can personalize its advertising and offerings. Consumers, particularly those over 35, are concerned about how much information retailers and others are gathering. Younger consumers seem to mind, but only when too much information comes back to haunt them. Expect to see more skirmishes over privacy and data collection in the months to come.

Bill Robinson
Guest
Bill Robinson
10 years 2 months ago

This is ridiculous on so many levels. How can the retailer infer a person’s identity from a zip code? An average zip code includes about 8,000 people.

In an Internet-social network-pervasive communication world, how could a 1971 law have any relevance to 2011 identity issue?

To the retailer, what is so useful about zip code information? You can achieve the same result from sampling or from your loyalty system.

Why would a court take on this case when it was rejected twice in lower courts? Our courts are loaded with real issues.

The principal of privacy is something that should be respected at the retail level. But zip code? Give me a break.

Fabien Tiburce
Guest
Fabien Tiburce
10 years 2 months ago

I am a huge supporter of customer and online privacy but I really fail to see how providing a ZIP code could, in any way, endanger a customer’s privacy. What it does allow the retailer to do is better understand their customers by combining these zip codes with commonly available socio-economic datasets. This helps the retailer better understand their customers and thus better serve them.

In my opinion, this particular law is more privacy fear-mongering than privacy protection.

Roger Saunders
Guest
10 years 2 months ago

There is no question but we will continue to see a backlash, largely from trial attorneys, in the gathering of information. The industry might not feel that zip codes are personal information, and most rational folks would agree with them, as zip codes average over 3,500 households, and can be as high as 10,000 households per postal code. Rational thought has little to do with a goofy suit like this one.

Retailers, in their intent to better serve their customer base, will continue to uncover and model “segmentation” strategies. The zip code and zip + 4, is a useful tool to help serve that quest to build the better mousetrap.

It does demonstrate that retailers have to have alternative models that help them segment consumers, in order to lay out effective and efficient media allocation, as well as store merchandising and operations initiatives. Those alternative models are available, and the better retailers are making use of them.

David Biernbaum
Guest
10 years 2 months ago

Retail stores ought to have the right to ask for zip codes and consumers should have the right to make the choice on whether or not they wish to offer the information.

Ralph Jacobson
Guest
10 years 2 months ago

This is truly hilarious. Shoppers willingly give far more private information to merchants in order to receive discounts, yet since no discount is given typically, when the zip code is requested, we seem to think there is something sinister going on, while the merchant is merely trying to service the shopper better through supply chain optimization, by gathering this data. Funny.

Ed Rosenbaum
Guest
10 years 2 months ago

In the one corner we have the retailer who needs to be able to get promotional information out to the consumers in order to successfully sell merchandise and remain in business. In the other corner is the consumer who wants their privacy not violated by retailers sending information. Also, this free flow of information can be sent to others the consumer prefers not to have it.

My choice is on the side of the consumer. The retailer will and certainly will find other ways to communicate with the consumer. I am on the side of the court in this case.

Mel Kleiman
Guest
10 years 2 months ago

This is going to create a real problem for not only the retailer but also for the credit card company. Many times when you go to buy gas, the question asked to verify the card is “What is your zip code?” It is also used by credit card companies when for verifying the card in online purchases.

Cathy Hotka
Guest
10 years 2 months ago

I’d love to hear some examples of how a retailer can better serve me by knowing my zip code.

Gene Detroyer
Guest
10 years 2 months ago

Businesses react as if getting this information is their right. It is people’s right and freedom to act anonymously, even when using a credit card. If businesses need the info they can go find it somewhere. Associating a specific sale to specific customer then using the data for other than operational purposes is well beyond the rights of any company. Bravo for California and the other states that are considering this.

Remember, companies do not have a conscience. It is their job and objective to take every means available to expand their business. That is the way they are built. They can only be limited by laws and regulation. I repeat, companies do not have a conscience and it is not part of their DNA.

Rick Myers
Guest
Rick Myers
10 years 2 months ago

I didn’t think about the fact that they have your name from the credit card and if you give your zip code there are plenty of sources they could cross reference your address. Sounds like a really costly way to build a customer file for direct marketing that to me isn’t all that effective to begin with.

Mark Swenson
Guest
Mark Swenson
10 years 2 months ago

The retailers aren’t using the ZIP codes alone. They get your name from the magnetic strip on your credit card when it’s swiped. They ask for ZIP code so they can combine them together. With first name, last name AND ZIP code they have a much better chance of getting a positive match in the database. Since it was made illegal to buy ZIP codes of cardholders from banks a few years ago, they’ve been asking for ZIP directly from the consumers so they can identify transactions.

Craig Sundstrom
Guest
10 years 2 months ago

I saw this headline over the weekend, and while my initial reaction was along the lines of those here saying “how silly!” upon reading the actual story–more detail than appears here–it made more sense (Mel might be relieved to know gas purchases are exempt because the data isn’t stored).

But I think Mr. Portnoy’s complaint…er, observation sums it up best: “Companies will still find ways.”

Kai Clarke
Guest
10 years 2 months ago

Companies do not need to have this information. This is a reflection of marketing methods which do not reflect today’s consumer concerns for personal privacy. When a consumer purchases a product from a store, it is the consumer who should have full control of what information, if any, they decide to give to the store. The store has all of the information that they need, they should simply ask the credit card company for the data. Asking the consumer, instead of the credit card company, gains tacit approval from the consumer for the store to use this information. This is wrong and a violation of personal privacy laws in most states.

Jim Maloney
Guest
Jim Maloney
10 years 2 months ago

Many retailers use this to detect fraudulent credit card usage. It’s less intrusive to the customer than asking for a photo id.

Bernice Hurst
Guest
10 years 2 months ago

As ever, my view is based entirely on the consumer’s right to choose. If they want to give away a zip code, which does seem to be relatively harmless in the general scale of giving away private data, so be it. But equally, if they choose not to, they should not be prevented from making a purchase. The arguments made here about the potential value of zip code details make sense to me but choice outweighs it all as far as I’m concerned. I have no doubt at all that if retailers are not allowed to save and use this tidbit they will find lots of alternatives.

Steve Montgomery
Guest
10 years 2 months ago

As many have already pointed out, consumers have gotten more sensitive about what information is being provided. When asked for information that I don’t see as relevant I decline to provide it–such as being asked about my ZIP Code in Williams-Sonoma. On the other hand I know I need to provide that same information when purchasing gas and using a credit card to pay at the dispenser. While I think the lawsuit was a bit over the top, I agree with a person’s right to not provide information they don’t want to in order to complete a purchase.

Mark Burr
Guest
10 years 2 months ago

Zip Code is almost an irrelevant factor today. It used to mean something–empahsis on ‘used to’. Today, not so much.

I am with Cathy Hotka. I can’t think of a single example of how a retailer has better served me by knowing my zip code.

This should tell us much more about the mindset at Williams-Sonoma than anything else.

Matthew Keylock
Guest
Matthew Keylock
10 years 2 months ago

The reverse append approach to gathering customer data via data held on the credit card and through gathering ZIP codes is a challenge for me in 2 ways: (1) the data you get back is not always that accurate particularly in the cases of common surnames and (2) if you want to know your customers better, you should do it openly and in a way that positively engages customers and enhances their experiences with you in store and in home. Too many businesses adopt this approach as a half-way house to getting to know their customers and it shows. I would much prefer to see businesses either commit to be customer-centric and do it right, or decide that they will focus their efforts on winning via other strategic approaches.

Mike Ryan
Guest
Mike Ryan
10 years 2 months ago

On the surface this does seem a bit silly but Zip codes do have value to crooks. If hackers were to get a database of credit cards with names and zips they are much closer to being able to get away with online fraud.

When a crook tries to use a card to do some online shopping/stealing and they don’t know the address and zip they will likely fail the Address Verification Service check and the merchant has prevented a fraudulent transaction. If the crook has the zip and the name they could easily get the address and now they are past the first line of defense for online retailers.

Similarly most brick and mortar retailers require a zip for AVS checking in store for cards that will not read through a mag stripe reader. One would hope that this is one of the exemptions the articles mention.

I agree with most of the posts, zips are not very personally identifiable but that doesn’t mean they aren’t valuable and worth protecting.

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