A chip over your shoulder?

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The idea of someone using tiny radio transmitters to influence consumer purchase behavior was once only the stuff of paranoid delusions. But in the not-so-distant future, it could become the basis of a new generation of marketing.

The Auto ID Center at the Massachusetts Institute of Technology-backed by such marketing heavyweights as Procter & Gamble Co., Unilever and Wal-Mart Stores-is working to test radio frequency identification chips in consumer product packages. The center already has tested using the chips to track pallets and cases of products shipped to Wal-Mart and other retailers. Putting the chips in packages, however, could open up new marketing frontiers such as in-store promotions and ads targeted at a consumer based on his individual shopping history or what's currently in the shopper's cart. Another potential usage: In-home programs to encourage consumers to re-order branded products they've just consumed.

Kathryn Gramling, a consultant with PriceWaterhouseCoopers, which is part of the consortium overseeing the Auto-ID Center, said during a presentation at an Information Resources Inc. conference in Orlando last week that the center is planning to launch a test of the chips in consumer packages this fall with British grocery chain Tesco. But a spokeswoman for Fleishman-Hillard, a public relations firm hired by the Auto-ID Center, denied such a test is in the works; a spokeswoman for Tesco could not reach executives for comment at press time.

Unlike bar codes, the radio frequency chips can be individualized with Electronic Product Codes that can conceivably track every individual object in the world, according to the Auto-ID Center. The chips, small enough for several to sit on the head of a pin, are also rewritable, theoretically allowing the Auto ID reader to determine where a product was purchased and who bought it.

By even the most optimistic estimates, radio frequency ID chips are years away from broad use. They cost more than a $1 apiece today, but PricewaterhouseCoopers projects costs could fall to as little as 5 cents by 2005. The radio frequency ID chip readers are also expected to fall in price from more than $1,000 today to under $100 within the same time frame.

Some marketers already have been girding for the day when the chips and electronic product codes could become a new marketing tool. P&G and Unilever, for instance, both have centers devoted to testing smart appliances that could read the codes in homes, with Unilever making such development part of its alliance with AOL Time Warner announced earlier this year.

between hype and fear

But backers of the technology appear torn between the urge to hype its huge potential and fear that consumers will get spooked. Ms. Gramling said the Auto-ID Center had hired Omnicom Group's Fleishman-Hillard, St. Louis, primarily to manage consumer media inquiries because of privacy concerns.

"It's not Orwellian," she said. "That is absolutely, positively not the vision of Auto-ID. The vision is for ... branded manufacturers and retailers to be able to have right-time, right-promotion, real-time eye-to-eye [contact] with the consumer." Indeed, the 1-7 meter range of the chips' broadcasts likely would preclude Big Brother watching from very far away.

The technology could also permit in-store scans of items already in a shopper's cart, allowing brands to make complementary offers, much like Amazon.com does today with online shoppers. "You could see that [a shopper] was shopping for a dinner party or for a kids' birthday party and be able to have a real-time promotion around that," Ms. Gramling said.

`smart appliances'

Marketers could also use the chips to capitalize on future homes equipped with "smart appliances." ID chips could be programmed to establish an electronic shopping list whenever a product is used up, complete with offers from participating brands. IRI President-North America Ed Kuehnle even showed a film clip featuring Arnold Schwarzenegger in a futuristic kitchen automatically re-ordering milk based on such technology. The chips could be programmed with cooking instructions to be read by smart ovens or microwaves or with other serving suggestions.

But privacy concerns appear to be putting the kibosh on some such fantasies. The Auto-ID spokeswoman said the center plans to implement technology that disables the ID chips once products leave stores. And while the chips are rewritable, she said the center and participating companies have decided not to use that technology so that information that would link individual consumers with products couldn't be used.

Still, conspiracy theorists aren't likely to be comforted by the fact that the Grocery Manufacturers Association has arranged a meeting today with Tom Ridge, director of the Office of Homeland Security, to discuss using the Auto-ID Center to aid in the security of the food-supply chain. Pam Stegeman, VP-industry affairs with the GMA, said the discussion is most likely to center on ways of tracking shipments to defend against terrorist tampering, not with tracking individual products in consumers' homes.

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