P&G products to wear wire

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Procter & Gamble Co. is quietly pressing on with plans to put radio frequency ID chips on products and build marketing programs around them, despite research that shows 78% of consumers worry about the potential invasion of privacy.

RFID chips are tiny transmitters that can store enough data to individually identify every product-and any person who buys it-using electronic product codes. P&G expects to have RFID chips on products in broad distribution as soon as 2008. By 2010, it could pair shopper loyalty card information with data about the products they buy, according to a presentation by P&G Co-Chairman Kerry Clark.

RFID was originally spearheaded by the Auto-ID Center, a group at the Massachusetts Institute of Technology, backed and overseen by a board made up of such global retail and package-goods heavyweights as P&G, Gillette Co., Wal-Mart Stores and Tesco. Auto-ID turned over commercialization of the technology in October to EPCGlobal, a private company formed by the Uniform Code Council and EAN, its European counterpart in product tracking standards.

P&G has not abandoned its plans despite a series of recent public-relations snafus for backers of the technology. That included discovery of a secret test P&G conducted at a Wal-Mart store in Oklahoma, reported last month by the Chicago Sun-Times, in which chips were placed in cosmetics packages on a shelf monitored via Webcam by P&G in Cincinnati.

Potential marketing applications, such as making customized in-store or in-home pitches to consumers based on their shopping or usage patterns, hinge on getting chips on packages. But because of privacy concerns, industry development of product-level uses has been shrouded in secrecy and denials. Omnicom Group's Fleishman-Hillard, St. Louis, which handles PR for Auto ID, twice last year denied such plans were being developed. Fleishman specifically denied disclosure by a consultant in April 2002 that U.K. retailer Tesco planned an RFID test on products.

The Tesco test ultimately began last year, as reported by Ad Age.

item-level push

Following controversy about a test planned for another Wal-Mart store in Massachusetts involving Gillette Co. razors, Wal-Mart said it had stopped work on item-level tests to concentrate on its warehouse-level rollout. But Mr. Clark's recent talk showed that P&G continues to push for item-level tagging.

A taped statement by P&G Global Product Supply Officer Keith Harrison to P&G's analyst conference last week explained why. "External analyses indicate [P&G is] two years ahead of the [consumer package-goods] industry in developing RFID," he said, "and we intend to capitalize on and maintain that lead."

According to documents from the Auto-ID Center, Fleishman developed a strategy for the group to "neutralize opposition" by portraying the technology as only an improved bar code, a boon to the disabled and tool for fighting terrorism, including trying to enlist support from the Department of Homeland Security. The strategy, according to the documents, is to also maintain that RFID tags would be automatically disabled at checkout, although Auto-ID officials acknowledge that technology hasn't been developed yet.

A P&G spokeswoman confirmed Mr. Clark's presentation details but said the company's focus is on supply-chain applications, including fulfilling Wal-Mart Stores' mandate that its top 100 suppliers use RFID by 2005 to track cases of product in transport or warehouses. The goal is to boost efficiency and keep store shelves stocked.

The spokeswoman insisted that pushing ahead with RFID despite consumer opposition was not inconsistent with P&G Chairman-CEO A.G. Lafley's "consumer is boss" dictum. "Consumers haven't been fully educated about the benefits of the technology yet," she said.

P&G has been among the most aggressive backers of RFID on products, said Katherine Albrecht, founder of the group Consumers Against Supermarket Privacy Invasion and Numbering, which, along with the American Civil Liberties Union and others, finds even the EPCGlobal guidelines insufficient. Her group wants all product-level testing of RFID halted.

"The PR efforts [of RFID backers] have been so bad that it's making my job easy," she said.

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