But what about making money through radio-tag tracking? Don’t retailers like Tesco-with business models and investor expectations geared to higher margins than Wal-Mart’s-also have a big incentive to go beyond internal supply chain efficiencies? Yes, but the barrier is obvious: the economics of the tags are inherently different when they’re employed to increase customer value rather than cut internal costs. Whether the tags cost a penny, a nickel, or a dollar is irrelevant to the essential business question: how are they used to add value-genuine or perceived-for customers?Apparently, neither retailers nor manufacturers have yet figured out an economically intelligent answer. Even worse, RFID champions appear unable to design real-world business experiments that potential customers find more exciting than offensive. In effect, radio tags have everything to do with cost reduction and nothing to do with value creation. The issue isn’t RFID technology; it’s determining how to persuade customers that an innovation’s benefits unambiguously outweigh its costs.
Indeed, the loudly debated privacy issue is a red herring. The RFID community could take its cue from the credit card companies who monitor customer purchases in real time. Visa, MasterCard, and American Express have convinced millions of their customers that real-time monitoring cuts back on fraud and the risk of identity theft. In other words, the costs of privacy invasion are outweighed by the benefits of increased security.
The problem with radio frequency ID is that it’s clear how retailers and manufacturers might benefit from attaching smart tags to their products, but it’s utterly unclear how this helps consumers.
The moral of this ongoing tagging tale is simple: everyone understands “everyday low prices.” But if customers can’t see how they’ll get value from your proposed innovation, the problem is not their ignorance but your own.