December 29, 2004

Force-feeding Commercials To Trapped Customers

By Evan Schuman, eWEEK

Imagine the following scenario playing out at your favorite retail store.

You have been running all around town trying to prepare for an important formal banquet on January 11, 2005. After having worked with a sales associate at a major department store for an hour to select seven possible outfits, you lug them into a dressing room to see what might work.

You're so preoccupied with juggling your possible purchases that you barely noticed the sales rep furiously clicking away on her PDA. To your surprise, the dressing room is three times larger than the ones you have become accustomed to.

As you start to try on the outfits, you're startled to see a commercial for formal banquet accessories. "A coincidence," you think. The next couple of commercials all show products that are just in your top three favorite colors, which you had mentioned to the floor associate.

You conclude that this is not a coincidence when the next spot promises that alterations can be completed by "your special day, January 11." Before you leave, the commercial is telling you that, as a valued customer for five years with ideal credit, you are eligible for a special discount.

Key retailers say they may be able to have such technology in stores by the end of 2005.

"We're talking customized video streaming into very elegant dressing rooms," said Mike Green, global vice president of retail at Sun Microsystems Inc. "These will be a really high-class sort, a very non-sales-oriented backdrop based on what the consumer is looking at or the customer's history."

As Sun moves more aggressively into the retail segment, it is trying to help retailers use technology to move to the next level of customization. A key trend that Sun—and others, including Fujitsu Ltd.—want to focus on is attention span.

As more ads and messages are being thrust at consumers from cell phones, PDAs, billboards, watches, store public address systems and Web sites, consumers have become quite adept at tuning out. This is especially true as overly busy multi-tasking customers try to focus on their primary goal.

But those "don't bother me now" attitudes completely reverse when a consumer can't do anything else. When stuck in a traffic jam, getting dressed in a changing room or waiting on a checkout line, the theory holds, consumers are much more receptive to advertising, especially if it's a little entertaining.

The technological foundation for all of this is the database. "You need to have a very well-laid-out database and customer loyalty program" with "everything that can possibly be known about that customer," Green said.

Retailers can deploy the technology in many ways, most likely choosing from a set of videos based on the associate's knowledge of the customer. Ultimately, the system could make automatic choices based on either a loyalty card swipe or detection of certain kinds of clothes that would trigger certain videos.

Others are discussing customizing retail digital signage and enabling it to detect various kinds of customers approaching.

Piping more customized content directly into shopping carts is going to be a major trend for 2005, said Keith McNamara, a senior vice president for general merchandise and software operations at Fujitsu Transaction Solutions Inc.

The video advertisers will initially be almost exclusively consumer goods manufacturers, but that could be expanded over time. In theory, there's no reason why a car manufacturer or a bank may not want to target consumers making certain types of grocery purchases.

Stopping by the tofu display? Show an ad for a local vegetarian restaurant. Pausing for two minutes in front of the caviar? Roll the Mercedes clip. Picking up some Hamburger Helper? Activate a commercial for a discount merchant.

The ability to have a captive prospect—they can't change the channel or walk away—and to be able to message them in a contextually appropriate environment is extremely attractive. "Advertisers need to get to the consumers at the point of purchase, not the point of sale," McNamara said.

Fujitsu's approach relies on an elaborate storewide wireless LAN, which accesses a library of video stored at central regional server. The intelligence about what the customer is likely looking at comes from pings from a network of strategically placed beacons. The beacons tell the cart where the consumer is and the number of beacon pings indicates cart speed/movement.

For example, if the cart receives one ping from Beacon 9 (frozen foods) and then receives one ping from Beacon 10 (breads) five seconds later, it concludes the customer is quickly pushing the cart. If the cart receives four or five consecutive pings from Beacon 9, it concludes the customer has stopped at frozen foods. The more beacons in the store, the more precisely the cart can know the consumer's location.

Fujitsu's system—called U-Scan Shopper—is likely to be ready for retailers "in the April/May timeframe," McNamara said.

With the options available and volume discounts involved, prices will range sharply, but he estimated that a typical store might have to spend between $100,000 and $150,000, which would include the carts, servers, a headquarters system to download data and beacons. A big additional expense, McNamara said, would be paying to have huge numbers of tailored videos created, in a format appropriate for a shopping cart.

Whether those costs will be handled by retailers or advertisers is "an open question," McNamara said. Retailers may insist that advertisers foot the entire bill, making the system risk-free for the retailer. But some retailers may want to pay for the systems and then charge advertisers for access, which raises the possibility of turning the carts into ongoing profit centers.

Sun's Green said he sees more immediate prospects for retailers pushing videos in checkout lanes, although he conceded those videos would likely have to be more generic and less targeted.

That's because it's much harder to identify the consumer until they get to the cashier or the self-checkout unit, at which point the main opportunity—marketing to them while they are waiting in line—is lost. Future technologies such as a scan that could detect a chip embedded into a loyalty card, in much the same way that a reader detects an E-ZPass-equipped car, could change that.

In one trial that he worked on, Green said, consumers standing in a typical checkout line were exposed to the same amount of commercials that they would likely have seen while watching a major hour-long television program. They factored in that many commercials are not seen because of snack breaks and the like, he said, which is not an issue with the checkout line videos. It's a commercial that TiVo can't zap.

Green said retail IT and marketing execs today are in a bit of quandary when it comes to these videos to the cart or the checkout line. On the one hand, consumer surveys are absolutely consistent that the most dreaded part of the typical grocery trip is waiting in the checkout lane. That would suggest pushing self-checkout and self-scan at the cart level. But an efficient cart system removes an attractive marketing opportunity.

Retail IT execs "have conflicting objectives," Green said. "It's hard to support keeping them standing in line to be able to sell them something. If you don't have a queue, there's no endgame."

For the moment, though, the debate is academic. Workable and practical cart-based self-scan systems are "at least two years away," Green said, and other retail IT vendor executives have suggested it could be more than twice that long. Even if it's merely a stopgap, videos to the checkout line is a viable business for several years, Green said.

He sees it selling such things as cruise packages. But unlike typical commercials, these would have interactive elements. Green painted a scenario where a customer could agree to the discounted cruise package while standing in line, use a touch-screen display to select dates and then be able to pick up the customized cruise package at customer service after checkout.