RFID TAG – You’re It!! Consumer Constructive Decision Making Process and RFID

1. RFID TAG – You’re It!! Consumer Constructive Decision Making Process and RFID That’s Not Me!! Technology and Consumer Presentation By – Atul Todi CSR 631 – Consumer Behavior

2. OUTLINE • What is RFID? • RFID vs. Barcode • RFID Functions and Applications • RFID and Consumer Benefits in a Retail Store • Constructive Consumer Choice Process • Factors affecting CCCP and its implications on RFID • Consumer Perceived Risk and Future Implications • Conclusion

3. Introduction: Radio Frequency Identification (RFID), a tiny device with huge potential that uses radio waves to automatically identify people or objects. It consists of an RFID Tag, which sends information to an RFID reader. The reader converts the radio waves reflected back from the tag into digital information that can then be passed on to computers Databases that can make use of it. RFID tag (transponder) RFID Reader Database Receives and stores data about a product or consumer. It has a Chip for data storage and an Antenna to transmit radio waves. It reads and converts data from tag and send to the computer. The data stored in the databases can track, identify, analyze both products and consumers. Thus, it offers a plethora of interesting potential application.

4. RFID vs. BARCODE (In the simplest of form, it has been proposed that RFID would replace Barcodes. Therefore, every product we buy or use would have an RFID) RFID can uniquely identify every item through an Electronic Product Code (EPC) while a Barcode can only identify a product category RFID can identify, count, trace and analyze items on a individual bases, but a barcode cannot. RFID can be read from a distance but a Barcode needs to be physically scanned. http://RFID TAG - What if the Consumer was Tagged??

5. Unique identification Increased automation Enhanced product (consumer) information RFID Perceived Advantages Post-sales services (product recall, product upgrades) Real-time information Improved efficiency /cost savings

6. Transportation Payment – Allows consumers to pay toll automatically (Ezpass) Better Customer Service – e.g. At Banks Theft Reduction – RFID prevents people from stealing in store RFID Applications Monitoring Food Quality Monitoring Health and Medication • Amusement Park • Tracking Kids movement • Payment Method Understanding Consumer Choice, Preference and Behavior Child Safety AD

7. RFID in Retail Stores: Future Stores Profiling according to interests and shopping behavior In-aisle companion for product suggestions Instant recognition of preferences Marketing methods – more targeted and instant marketing, based on predictions Address consumer demands for improved and more correct service Removing check-out lines. Consumers equipped with RFID in mobile devices. Consumers can leave the store and a reader will scan all the items and bill the customer’s account IBM Grocery Store AD

8. RFID and Consumer Decision RFID can assist consumers in their decision making process by: Reduce Cognitive Effort Educate the Consumer Inform (offers and promotions) Convenience

9. Constructive Consumer Choice Process Consumers are not always rational decision maker Consumers has multiple alternatives - Decisions are marred with limitations like limited working memory and limited computational capabilities. - Consumer often has multiple options but their processing ability is limited, therefore they use methods to reduce cognitive effort and maximize accuracy BOUNDED RATIONALITY Socially Acceptable -Proposed by Simon (1955) -Its the notion that decision makers have limitations on their capacity for processing information such as limited working memory and limited computational capabilities. - Consumer has a need to make their decisions to be socially acceptable

10. Time Pressure Completeness of Information Information Format CONSTRUCTIVE CONSUMER CHOICE: Problem Size Negative Emotions • These are some of the factors affecting Constructive Consumer Choice. • I am going to discuss Proposition made regarding these factors by Bettman, Luce and Payne (1998) in the article Constructive Consumer Choice Processes. • I would further analyze how the factors relate with RFID as an emerging technology (application of Active RFID in Retail Environment) and its effect on Consumers Choice.

11. Future Store Video (1:20/3:20) Problem Size Can Consumers be given too much information? Propositions Increase in alternatives leads to greater use of non-compensatory (e.g. EBA) strategies that eliminates alternatives. Some say accuracy decrease with increase in the number of alternative but it increases if more information is provided per alternative. Others have shown that accuracy goes down in both situation (Keller and Staelin 1987; Malhotra, 1982) In a shopping mall or grocery store there are multiple options (alternatives). RFID can track consumer’s preference and help make decision. Increase in the number of attributes increases selectivity (which information to select for examination) Information load will not be harmful to accuracy if consumers select a subset of the information that reflects their values Products today are marketed with multiple features. RFID can help the consumer be more selective by helping the consumer focus on more dominant features of the product tailored to the consumer. RFID could increase a consumer information load by providing excess information, however, it is consumer centric in its approach and thus, reflects consumer values.

12. Time Pressure How does time affect Consumer? Propositions Under moderate time pressure, consumers process more rapidly and become more selective. With increasing pace of life, consumer is being subjected to increased time pressure. Time pressure has clear effects on choice processes. It has been shown that within-alternative search has high uncertainty (until all options are examined) and within-attribute has lower uncertainty. In a shopping mall or grocery store there are multiple options (alternatives). RFID can track consumer’s preference and make suggestion for similar options. Under more severe time pressure, individuals switch to more attribute-based heuristics. Consumers weight negative information more heavily under time pressure. Consumer has a need to avoid bad options, for example buying an old technology or product or paying a higher price. RFID can inform consumer about offers and coupons and also educate consumer about product options. RFID enables a consumer to make a quick decision under high time pressure by providing previous transaction data and detailed information on specific attributes. Future Grocery Store Ad

13. Completeness of Information How does the Consumer fill in the blanks? Propositions Complete Information about a brand or a product and its attributes are not always available. Consumer has to fill in the blanks based on the information available. Consumers may infer values for a missing attribute using heuristics based on other-brand information (other values for that attribute in the set of options) or same-brand information (values for other attributes of the same brand with the missing value). RFID can make the process more smooth for the consumer by proving additional information about the products attribute and also other alternatives. RFID could provide alternatives based on other products purchased by a consumer.

14. Can the information display affect consumers choice? Information Format Propositions Different information formats can make some forms of processing easier and less effortful than others. The processing encouraged by the format will be more likely unless the format leads to accuracy loss. Some information formats makes processing easier and less effortful and hence more likely. Concreteness Principle - Decision Makers will tend use only that information that is explicitly displayed, and will use it in the displayed form, without transforming it (thus, reducing cognitive format) RFID provides consumer with data in more innovative ways which were previously not possible. See this digital presentation for future formatting potential: Digital Future Shopping Ad

15. Negative Emotions Consumer has a need to minimize negative information. Propositions Luce, Payne, and Bettman (1998) showed that consumers more often chose an option that was better on a quality attribute rather than an option better on price when that quality attribute was rated as inherently more emotion laden or involved losses rather than gains. Emotion-laden choices are characterized by more extensive, more selective, and more attribute- based processing. RFID can help consumer make a decision for products high on emotional involvement. It can track how consumer makes his decision, their preference and previous buying behavior (similar to Amazon) and suggest products that might help them make a decision without too much negative emotions. For example, buying jewelry at Macys. Luce (1998) showed that increases in negative emotion led to increased avoidance of choice and a greater tendency to prolong search.

16. CONSUMER PERCEIVED RISK OF RFID AND ITS FUTURE: • There is extensive criticism regarding the use of RFID. • Groups and Organizations have been made to protest against its Privacy issues. • People are scared that someone would steal their identity, even though there is technology to prevent that. • Some have linked it with Doomsday scenario and revelation in the Bible – The Rise of the Mark of the Beast. • Such negative feelings and association might undermine the consumer acceptance of RFID as a viable technology. • However, RFID could have great potential for Future Consumer Research – RFID can give us great insight into Consumer Behavior. It can help us run experiments in actual market and substantiate data from the labs. It can give was quantitative data which is not confounded by many factors and can help compare predicted consumer behavior with actual behavior.

17. CONCLUSION: I believe RFID is here to stay. It’s a tiny device with huge potential. Countries have made it mandatory for its citizens to carry e-passport or identity cards with RFID, companies are incorporating it in their products. In the future, RFID is going to track how, why, when and what consumers buy. And, if you don’t think so…THINK AGAIN!!