Birth of the cybersalesman

IT finance: `Datamining' will soon bring global marketing aimed at the individual. Mark Vernon reports
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Indy Lifestyle Online
Imagine this. The year is 1999. You pick up the post on the doormat. Amid the junk mail, one piece looks interesting enough to open. In your semi-conscious state, its precision hits you between the eyes.

"Dear ..., Welcome to the first day of spring. Last year you added to your wardrobe a number of summer clothes. In particular, we hope that you were satisfied with the cotton chinos. This year, we wonder whether you would like to freshen your selection of short-sleeved shirts - it is a couple of summers since you bought a new one! Our new range is being launched next week. We would like to offer you a special 25 per cent discount, as a loyal and valued customer. With very best wishes."

Unsettling though it may be, a new wave of IT is emerging that will soon bring just such a marketing campaign through your letterbox. The particular sphere of technology lurking behind this marketer's dream and consumer's nightmare is "datamining". According to the research body Meta Group, the market is set to grow from $50m in 1994 to $300m by 1997 and $800m by the turn of the century. IT suppliers have already recognised its significance. IBM, for one, has just opened a pounds 31m showcase laboratory to develop products. Among the leading end-users are financial services organisations.

It is well known that to be a bank, a building society or an insurance company in the mid-Nineties is to experience a degree of competition previously unknown, following mergers and acquisitions, and massively increased customer expectations. Dealing with the crisis is leading to the rapid deployment of IT - customer-facing technology, to be precise. Enter datamining.

Ever since the appearance of IT in financial services, banks and others have been amassing information about their customers. And amassing is the word. These databases are now routinely measured in tens of terabytes. But until recently it had been impossible to do much with this wealth of information.

The latest wave of client-server technology, however, has led to software that can "mine" its way through whatever the marketing department cares to throw at it.

The savings are already being revealed by financial organisations. Royal Sun Alliance has recently reported a pounds 60,000 saving on selling by direct mail, and a northern bank has saved up to pounds 250,000 on one promotion alone.

A good example of the development of these tools can be found in the start-up company MicroStrategy. For Michael Saylor, a next-generation Bill Gates figure, spreading the gospel of datamining to financial giants sitting on data gold-mines has become a mission in life.

Mr Saylor began with another hoarder of customer info - McDonald's. A few years back it woke to the fact that it had a billion-bit database recording $1bn of hamburger sales but little ability to handle it usefully.

In walked Mr Saylor and developed a datamining tool, now the product of MicroStrategy. It can not only handle the sales data, volume and place, it can also link it into the even more valuable information concerning time of sale, promotions running upon sale and even local weather conditions when sold. But this is only the beginning. Mr Saylor believes that a whole new industry is waiting to be born: the data refinery.

He has a vision of a handful of super-massive stores of syndicated data. In each will be a detailed economic profile of all individuals active in the local economy. This can be cheaply analysed profile, and accessed - over the Internet or its successors. Hence the vision of the "mass market of one": it will be possible to market products, financial or otherwise, virtually to one person at a time.

There are 600 million credit cards in the world today. In the US alone, 100 billion transactions are made every day. All this information is stored - indeed, credit-card companies are waking up to the money that may be made from selling syndicated data.

"Advances in current database technology, hardware scalability, and most importantly, the advent of the Web, are enabling corporations to treat the data warehouse as a business asset with revenue-generating capabilities," says Mr Saylor, with understatement. At least one US company already claims to have details of every living American on its databases.

But what kind of world will be created when information technology can anticipate our every consumer choice and then market it to us before we have even considered it?