What you should know about RFID and CRM

Vendors like SAP are touting the potential benefits of integrating RFID with CRM initiatives. But are any visionaries turning that talk into action?

Radio frequency identification (RFID) tags have garnered plenty of press over the past year, particularly following the announcement by discount superstore Wal-Mart that its top 100 suppliers must supply RFID tags in their shipment pallets by January 2005.

The tags, which use radio waves to track products, are viewed as an alternative to bar codes. So, what reason do CRM professionals have to be interested?

"Right now, there is none, to be perfectly honest," said Raymond Blanchard, director of business applications for SAP Auto-ID solutions. "Customers haven't been looking at RFID as a use case."

That doesn't mean there aren't plenty of areas where RFID may eventually benefit CRM, Blanchard said. Channel management, campaign effectiveness and customer service are just a few of the areas where organizations might be able to leverage information from RFID, he said.

Retail, consumer goods and pharmaceuticals are the main private-sector industries that are taking a long look at RFID right now, said Christine Overby, senior analyst with Cambridge, Mass.-based Forrester Research.

"Consumers are going to see [RFID] in fits and spurts in the next couple of years," Overby said. "For apparel, jewelry and higher-end goods, where the cost of the tag can be absorbed, I think you're going to see a few instances of RFID [tagging] in the next year to three years. But I think it's silly to expect any mainstream RFID tagging at the item level within the next decade."

The most obvious way RFID can affect CRM is by letting customers know whether the products they want are on store shelves.

For example, a customer may find an item online, and the RFID technology, along with a store locator, will say whether it's available and, if so, where. Customers can then have the store put the item on hold and ask to be notified by e-mail when the product is ready, Blanchard suggested.

"How many times have you been looking for something at a mall and thought 'where can I buy this right now?'" Blanchard said. "With RFID, a company could make that [product] information available as a service with interactive voice response."

RFID also holds the potential benefit of improving customer service and helping identify maintenance contracts for particular products. RFID can offer a clearer picture of inventory -- giving marketers a better idea of how much is sold, for example, how much is in stock and how quickly it can be replenished, Blanchard said.

From a B2B perspective, customer management often means getting the right shipment to a customer at the right time in the right quantity, information that RFID tags can easily track, Blanchard added. For customer field service, RFID can monitor the location of spare parts and how quickly they can be delivered.

The manufacturing industry, where CRM and supply chain management are most closely linked, has also seen much of the early RFID adoption, Overby said.

"Manufacturers think about getting stock to a warehouse or a store on time as part of CRM," Overby said. "They usually will call it customer service. RFID is really being used in those activities, which are, to be fair, supply chain activities. In more classic CRM, RFID has not had much impact beyond a couple of pilots."

Other types of sensors are already being used effectively in CRM. For instance, Michelin North America Inc. has used a different type of tag on its tires for proactive customer service. It measures air pressure and the temperature control of tires, allowing truck fleet operators to maximize assets and speeding the recall process. JM Lexus, a Florida Lexus dealership, equips more than 70% of its vehicles with sensors that monitor car performance and send diagnostic data to the dealership. This increases the likelihood that customers will come back to the dealership for high-margin repairs and tune-ups.

Also, Norwich Union, a U.K. car insurance company, has piloted a program known as "Pay as you drive," which bases premiums on how often and where a customer drives. Customers have embraced this model because it gives them premiums that more accurately reflect their driving habits, Overby said.

These sensors -- and RFID tags -- might raise some red flags with customers concerned about privacy. Plus, it's unclear whether businesses will pass along to customers the estimated 20-cent cost of each RFID tag.

For now, CRM executives do not need to dive head first into RFID, Overby said.

"Stay abreast, but be looking -- not just at RFID but [the] whole gamut of technology providing information about people," she said. "If I was at a company, I'd be looking less at RFID and more at cell phone, handhelds, home networking technology."

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