MAKE A GOOD COST/BENEFIT CASE TO ALLAY PRIVACY FEARS

Privacy is one of those abstract entities that can be hard to define, but you know it when you see it -- or when you see it violated.In the supermarket industry, privacy became an "issue" with the rise of loyalty cards in the late 1980s and the accompanying gathering of personal shopping information about each loyalty card customer. The issue has gained further scrutiny now with the advent of the

Privacy is one of those abstract entities that can be hard to define, but you know it when you see it -- or when you see it violated.

In the supermarket industry, privacy became an "issue" with the rise of loyalty cards in the late 1980s and the accompanying gathering of personal shopping information about each loyalty card customer. The issue has gained further scrutiny now with the advent of the Electronic Product Code, the new digital identification system empowered by radio frequency identification technology (RFID).

Food retailers are sometimes too caught up in the practicalities surrounding technology -- how it helps the business, return on investment -- to pay much attention to privacy considerations. Yet this issue can be one that sneaks up on you at the end of the day and sabotages everything else you've done unless it is properly addressed. Privacy will be covered in detail next week in the Technology & Logistics section.

Many retailers do have readily available privacy policies regarding the handling of shopper data, and this is the first step toward allaying consumers' concerns. What I think retailers also need to do is make a better cost/benefit case for the technology or program that is impinging on privacy. That is, consumers should have a better understanding of what they are getting in return for sharing data about themselves.

Most people are willing to trade a little privacy for a real benefit. For example, millions of people who use RFID-based automatic toll-paying devices are willing to allow their whereabouts be known in exchange for bypassing toll lines at bridges and tunnels.

Similarly, retailers that are creatively leveraging loyalty data to offer rewards should do a better job of explaining that when shoppers apply for cards. This, by the way, could be an incentive to do more with the cards than just offer electronic discounts at the checkout.

Some examples of innovative loyalty programs are detailed this week on Page 43 in a feature article by Associate Editor Julie Gallagher, who last month heard them described at the Global Electronic Marketing Conference in Naples, Fla.

RFID is still in its infancy. Because of the power of the technology, however, it has already raised serious hackles in the privacy community. Retailers like Wal-Mart Stores and Metro Group in Germany have had to tread carefully in using RFID tags at the store level.

I think Wal-Mart is going about the privacy issue in the right way. The retailer, which is mostly having RFID tags attached to pallets and cases in the supply chain, is starting to sell consumers large items like printers and lawn mowers whose containers are tagged. Wal-Mart has gone to great lengths to alert consumers to the presence of the tags and explain they can be removed after the item is purchased. It is also explaining to consumers what the technology is about, and pointing out that it will benefit them by enabling Wal-Mart to ensure that shelves are fully stocked. The net result is that few consumers have raised any red flags about the technology, Wal-Mart says.

An honest recitation of what a technology can do, and how it's supposed to benefit the consumer as well as the retailer, will satisfy most shoppers.