RFID Tracks an Unexpected Asset: Customers

Customer Experience
Customer Experience
Will the supply chain technology be a new path to customer loyalty?

Imagine walking into a store and being greeted by a clerk who not only knows your name, but also knows what you've spent in the store over the past year and which of the store's departments you visit most frequently.
The clerk, by the way, has never met you before.

Instead, his employer has collected all this data through RFID (radio frequency identification) technology. An RFID tag can be implanted into a product or an item like a credit or loyalty card (or even an animal or person) for the purpose of identification using radio waves. Scanners can read the tags from a variety of distances, sometimes beyond the line of sight of the person being scanned.
While long used as a means of tracking companies' supply chains and freight deliveries, some organizations are now examining how to use RFID tags and scanners to improve both customer service and loyalty.

"Typically with a transaction, the customer experience is limited," says Suni Munshani, CEO of Novitaz, which manufactures RFID software. "You're approached by a clerk who may have no idea that you've spent $10,000 in their store over the past year or two. It's poor customer support.

"But we are now in an environment where merchants can collect so much information beyond mere transactional data," Munshani continues. "Instead of knowing nothing about how often you come to the store, we can track through which door you came, how long you spent in each department, what items you purchased, and when you left. We can track affinity, and marketing can then be pinpoint-driven by price point and transaction history."

Though not that extensive, Novitaz recently completed a pilot RFID program for the 120-store Cos?estaurant chain. Chicago customers who opted in to the myCos?oyalty card program were issued a card that, when waved in front of a touch-screen kiosk, would welcome them back by name, and then ask if they wanted to order their favorite items or try something else. Once customers made their selection, printouts were sent to each Cos?tation (sandwich, salad, drink, etc.), the total due debited from the myCos?ccount, and the meal delivered to them-all in less time than if they had stood in line.

Cos?eported that the average wait time for food by myCos?iosk users was four minutes, compared with the standard 12 to 14 minutes. (A change in upper management at Cos?esulted in suspension of the program; additional results have not been made available.)

Despite the obvious benefits to companies, some consumers and activists react with an Orwellian revulsion to such technologies. "Consumers become bothered about giving access to personal details, what they're doing and where they're doing it," says John Davison, a managing vice president and research director at Gartner. But, he points out, "with Cos?they were giving the customer some value, and there was no threat to personal information."

Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), a U.S.-based grassroots organization founded by consumer-privacy activist Katherine Albrecht, has tirelessly fought against implementation of what it considers "spy chips" anywhere beyond the backroom supply chain, and in 2003 called for a moratorium on item-level tagging until the public becomes better educated about RFID.

Albrecht says the use of RFID scanners constitutes "an invisible frisk," one that can not only determine when and where a consumer stands in a store, "but also the contents of your purse, your wallet, or even the color of your underwear if it's been RFID tagged."

Davison opines that such issues, as well as the cost and the concept of consumers having to carry around "dozens" of RFID-tagged cards, will keep the technology from being widely used for "probably 10 to 15 years." But as "digital natives"-those born around and after 1980 who are more used to technology being a part of their lives-become more familiar with it, he says, concerns about privacy will probably go by the wayside.

"People are giving out data all the time; they're getting used to it," Munshani says. "When they start to see the benefits, whether it's less time being spent or receiving points or discounts, they don't care as much."

There are other options for companies interested in RFID that may not want to "tag" customers' loyalty cards, but do want to offer the more relevant experience RFID data can provide. One is the magicmirror, created by retail design firm thebigspace in partnership with Infosys and Avery Dennison. The mirror uses RFID technology to gather data from tagged items that customers hold up to it on the display floor or bring into the dressing room. The mirror gives full details on the item, makes recommendations for related products, and can send requests to a sales associate's PDA for one of the suggested items or a new size or color of the originally selected item.

"Often a retailer's first interaction with a customer is at checkout, which is too late," says Infosys principal Devon Ferreira. "The magicmirror offers 'positive intervention' during the shopping experience." It can also capture trends in what people are trying on but not buying, as well as track data on how many shoppers are purchasing recommended products.

It's these types of benefits that are spurring companies' interest in using RFID technology to upgrade the customer experience, and to enhance both customer loyalty and companies' bottom lines.