How retailers study and test us to maximize profit

— -- Shoppers are like laboratory rats these days.

From the time shoppers walk into stores, their footsteps, eye movements, choices and reactions to discounts are often closely monitored. With this analysis, stores can determine with startling accuracy whether changes such as remodeled stores, specific deals and more salespeople will make people spend more.

Just as some lab rats get only a placebo, retailers typically test new strategies by giving shoppers in certain areas a promotion — or fixed-up store — while others are the control group. Growing pressure to improve profit margins means retailers' decisions must get results. People can't just buy something they wouldn't have otherwise, they need to spend more.

Author Charles Duhigg's revelation that Target had developed a model to predict whether female customers were pregnant ignited a firestorm after an excerpt from his book, The Power of Habit: Why We do What We Do in Life and Business, was published in TheNew York Times. According to Duhigg, Target sent baby-related promotions to a teenage girl before her father even knew she was pregnant.

While people may expect retailers to track their online shopping, "They don't expect that same science to be used to peer into their bedroom," says Duhigg, a New York Times business reporter. People wonder, "If they know what's going on in my bedroom, what else do they know about me?"

But retail consultant Kevin Sterneckert says that's "exactly what so many retailers are doing today" so they can market to people in the different "life stages."

Target said in a statement that it analyzes customers' preferences so it provides promotions that are relevant. And it says customers can opt out of the marketing programs.

Analysis of shoppers ranges from mundane methods, such as counting the number of teens who walk in after school, to the high-tech, such as digital signs with cameras that can detect where people's eyes move and direct promotions to that part of the screen. By calculating who is shopping when and which demographic groups are buying, stores can target them with the promotions that are more likely to resonate. They do this with their own analytics departments, bolstered with some of the consultants and technology suppliers that made up more than 3 acres of exhibit space at the National Retail Federation's annual conference in January.

Stores and their suppliers are constantly analyzing sales data, which is linked to shoppers through store loyalty cards. Much of the information retailers know about shoppers is based on information they provide when they sign up for loyalty cards or even e-mail lists. Stores don't want to celebrate your birthday — though they may send a gift: They want to know how old you are so they can better understand how to market to people your age.

Even when people don't buy, stores know who is browsing their aisles — and the routes they take around stores — by reviewing their security cameras. Then they can place products and promotions at strategic locations visible to the largest number of shoppers.

"When there was a single store in town in the 1920s, that shopkeeper knew everything about his customers," says Sterneckert, VP of retail research at business advisory firm Gartner Group. "Now, you have mega chains where it's impossible for the store manager or buyer to know individual preferences. But they can analyze transactions and determine patterns."