The IT department has recommended that Otto use data mining to build c

QUESTION

The IT department has recommended that Otto use data mining to build customer profiles and prepare business models to predict future purchasing behavior.

Otto’s CEO is not in favor of data mining and argues that it shouldn’t be used. Which of the following statements, if true, supports the CEO’s argument for NOT using data mining?
A) Data mining can build profiles of Otto’s best customers and then use behavioral characteristics to identify new customers.
B) Data mining is helpful to salespeople as it can identify customers who would benefit from an individual sales call or buying reminders for particular products.
C) Data mining can be used to track online behavior of customers by the use of cookies to identify customer interests and business needs.
D) A privacy paradox exists whereby mining personal information is intrusive but also leads to better targeting.
E) Data mining can help spot trends and patterns in customer purchases and enable the marketing department to shape advertising around these trends.

ANSWER

Answer: D
Explanation: D) Privacy concerns due to data mining, as indicated by Choice D, remain an ethical issue. Choice D points out a concern about data mining, in that in can reduce unnecessary advertising by more personally targeting the advertising but also involves an invasion of privacy that many individuals abhor and that many other individuals are not aware of. Choices A, B, C, and E are all benefits of data mining and support the argument made by the IT department. Data mining can be used to create profiles of current customers and help in the identification of new customers (Choice A). Data mining information can be helpful to in-store sales personnel as well as out-of-store salespeople (Choice B). Choice C notes the use of cookies to track online behavior to help identify customer interests and needs, while Choice E focuses on the use of data mining to spot trends and patterns in the business.