I just had the pleasure of presenting at Forrester's Executive Strategy Forum on the topic of extending the Internet to consumer devices. Forums are great because I get to catch up with some of my favorite CPG clients and hear how industry experts are pushing the envelope. At the top of my list: Neil Gershenfeld, director of MIT's Center for Bits and Atoms, who painted a picture of how tiny chips implanted in everyday things like a tennis shoe will change how we relate to our environment (for a real mind-bender, check out his book "When Things Start To Think"). Sounds familiar given all of the recent talk about RFID in CPG and retail.

With companies like Proctor & Gamble and Kraft getting serious, it's a good idea for you to look into these new X Internet technologies. It's also risky. So what's a CPG company to do?

Dance with Wal-Mart -- carefully. You don't want to ignore RFID and anger the company that can drive 30% of your sales. In a recent Forrester survey, nearly half of all manufacturers told us that they were implementing, testing, or considering RFID. That's a good first step. But your real job is to figure out what you will gain from RFID -- beyond compliance with Wal-Mart's deadline. On the cost side, an evaluation of hosted RFID solutions from supply chain vendors like TrenStar and DHL will make the near-term business case look a lot more attainable.

Don't forget consumers. Like most folks at the Forum, I was fascinated by the panel discussion on consumer privacy and the X Internet. One thing came across loud and clear: Privacy is not a black and white thing. We just published research that analyzes consumers' willingness to trade data for value. The bottom line: The more sensitive the information is that you want, the more value your consumers expect you to provide.

One of my favorite examples of this value exchange is Metro Group's Future Store, which I toured in September (I loved the smart scale, a.k.a. "Veggie Vision"). Metro recognized that German grocery shoppers, like their North American counterparts, are choosing price over brand more and more. So the retailer offers rewards and discounts to consumers who share their shopping history and identify themselves when they come into the store. So far, more than 7,000 people have decided that it's worth it.

Do good with the data you have. While new X Internet technologies hold a lot of promise, most of you already collect data that helps you stay close to your consumers. Now's the time to beef up your database marketing skills, because broadband and cheap online communication tools like email make targeted marketing the norm. Lynne Greene, president of Origins Natural Resources, shared with me that Origins' customer database is a great tool for building consumer loyalty. They use the database to identify and send a personalized promotion to consumers who haven't bought Origins products in the past four months. With offer in hand, these consumers are four times more likely to purchase again -- and spend more. Now that's what I call making the most out of consumer data!

Whether your upcoming projects focus on new or existing technologies, we wish you the best of luck in 2004.

Have a happy and safe holiday season!


Christine Overby
Senior Analyst, Consumer Packaged Goods

P.S. Throughout 2004, Forrester will dive deep into RFID in CPG -- because you're asking for it. But we're also interested in other technologies that help you improve profits and customer relationships. We're working on the 2004 content plan, and we'd like to hear what you want us to research. Send your ideas to christineoverby@forrester.com.

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