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RFID chips have been controversial in consumer applications, with opponents referring to them as "spy chips" and contending the technology could be used by marketers, stalkers or the government to spy on consumers. But the Walgreens installation is for store and supply-chain use only and would not involve placing chips on packages used by consumers.
The system, touted by one retail expert as potentially the biggest advance in store promotion in decades, uses RFID to electronically track when, how long and where displays are placed in stores. That allows marketers to track results of promotions by store or demographic cluster. It also lets participating manufacturers time local, regional or national advertising according to when displays are in place and send representatives to stores that haven’t put up displays, said Robert Michelson, CEO of privately held Goliath Solutions, the system’s creator.
Mr. Michelson declined to identify the marketers involved, but they’re believed by industry executives to include the heaviest hitters, including Procter & Gamble Co. and Altria Group’s Kraft Foods.
Goliath’s system will let the retailer “customize merchandising on a store-by-store basis and ultimately increase sales and profit per square foot,” said George Riedl, senior VP-marketing for Walgreens, the nation’s top drug-store retailer by revenue. “It also will help both our own purchasing department and our vendors evaluate past promotions and plans for future programs,” Mr. Riedl said.
'Most important new development'
“This could be perhaps one of the most important new developments in promotion materials in the last 20 years if it works,” said Ken Harris, managing director of WPP Group’s Cannondale Associates. “It provides real-time feedback on what’s working and what’s not and could be an exceptional tool for manufacturers to use.”
But as with other RFID applications, the sticking point is cost. One person familiar with the system said the RFID tags needed cost $6 each, which could dramatically run up costs of retail displays and limit early use.
Mr. Michelson, however, said the cost of chips for the Goliath system is "substantially and materially less than $6," but declined to specify a price or price range for the chips or the total incremental cost per display of using the system.
The tags needed for the Goliath system are “semi-active,” with limited battery power, rather than the passive tags that cost well under $1 being used currently in supply-chain applications, such as Wal-Mart Stores’ now 500-store pilot in Texas, he said.
RFID holds the promise of making in-store marketing not only a measurable medium, but one that can be measured more reliably and precisely than such mass media as TV and radio, Mr. Michelson said. Adding to its potential is Walgreens’ adoption earlier this year of a new, more sophisticated point-of-sale tracking system from Information Resources Inc. that promises real-time, store-by-store data capability on par with Wal-Mart’s vaunted Retail Link.
Being able to get data store-by-store in real time puts package-goods marketing on a similar footing with the customer-relationship-management processes used by direct marketers, Mr. Michelson said. “You find out on a store-by-store basis what displays and promotions work best and on an ongoing basis send the right displays to the right stores.”
Getting and tracking compliance of individual stores with national promotions long has been the biggest challenge for in-store marketing. Up to now, marketers have relied on field forces making store audits to monitor compliance, but data was rarely complete, took days or weeks to gather and wasn’t precise enough to match broadly with scanner data for analysis, Mr. Michelson said.