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Part 8: Turbo-Charged Marketing

RFID technology will give retailers a rich new vein of data to mine and create opportunities to do one-to-one marketing in the store. But building the IT systems needed to make it happen won't be easy.
Tags: Retail
Feb 23, 2003—Feb. 24, 2003 - You stand in line at the supermarket checkout counter, flipping through a tabloid newspaper, waiting for the checkout person to find out how much the plum tomatoes are per pound. When cashier finally rings you up, he hands you a receipt with a coupon printed on the back. You toss the coupon in one of the bags and forget about it.

The problem with marketing in general and in-store marketing in particular is that it tends to be scattershot before consumers buy and targeted only after they make purchases, which makes it grossly inefficient. Radio frequency identification has the potential to radically change the equation and enable retailers and manufacturers to market to customers while they are shopping, when decisions can still be influenced. RFID may also provide unique insights into consumer behavior at the shelf. And eventually, it may take consumer marketing into the home.
Reaching them one-to-one will be a challenge

In this Special Report Low-Cost RFID: The Way Forward, we have focused on the short-, medium-, and long-term changes that RFID will force upon companies. Although the first tagged products will begin to appear in stores next year, the real impact of RFID on the marketing department won't begin to be felt for several years, when most of the items in stores have RFID tags.

Nevertheless, the potential benefits of RFID-driven marketing are so great that we believe smart retailers will begin exploring the potential today. The challenges are also great. They involve not just deploying infrastructure in stores and managing complex databases, but also linking marketing and supply chain functions. In effect, companies will not only have to link IT systems back through the supply chain to suppliers, but forward to the shelf, the customer in the store and even the customer's home.

The earliest marketing benefits of RFID, in fact, will relate to the supply chain visibility that RFID tagging will create. A study by the Grocery Manufacturers of America (GMA) finds that supermarkets are out of stock on promotional items 20 percent of the time. One in five customers responding to a promotion doesn't get the product. That results in lost sales and unhappy customers.

Within a year or two, some large manufacturers like Procter & Gamble and The Gillette Co. will coordinate RFID tracking of pallets and cases with large retailers like Wal-Mart, Target and Tesco. Both the retailer and the manufacturer will have visibility back through the supply chain. If a promotion leads to greater than expected sales, the partners can add extra shipments or redirect shipments from other areas to ensure product is available. The retailer might curtail the promotion if it sees its partners can't deliver enough stock to meet the demand.
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