Is The Best Use Of NFC Just To Connect Customers With CRM?

Maybe mobile payments are literally the last thing we should be using NFC-enabled phones for. At this week's IFA 2012 tradeshow in Berlin, Sony and Nokia are separately showing TVs and speakers that consumers can use to play music and videos from their smartphones. Their neat trick is that they use the phone's NFC to negotiate a Bluetooth connection with the AV gear.

Now imagine the same idea used in-store: A customer walks in, taps her phone against a pedestal-style kiosk and is automatically connected to the chain's CRM system via a secure Wi-Fi network. After that, everything she does in-store is CRM gravy.

She can get targeted offers and coupons immediately, or when she walks into an appropriate department. She's already logged into the loyalty system, so that's one less thing to do at the POS. And if the store wants to offer in-aisle self-checkout, she already has a secure connection to the system.

That could solve several problems at once. Retailers have been looking for ways to automatically spot loyalty (and, especially, known high-value) customers when they walk in the door, not just when they arrive at the POS. Chains are also trying to figure out how to make good use of in-store Wi-Fi—yes, customers will use it to compare prices. But if they're checked in, at least they can receive pitches from the store they're in, too.

But right now, spotting loyalty customers is a technical nightmare. There's no simple way to do it using the mobile network, especially without the active cooperation of mobile operators. That means unless the phone's Wi-Fi is turned on and the chain's app is running, the customer won't be detected. It also means the in-store Wi-Fi has to be open, which means it's fine for beaming coupons but not secure enough for in-aisle POS.

Using Wi-Fi for CRM-heavy activities would make blanketing stores with customer-facing wireless a lot more appealing to chains that are still trying to figure out how to get a return on that investment. For example, U.K. grocer Sainsbury's just ended its Wi-Fi pilot in several big stores, deciding not to offer Wi-Fi anywhere in the chain. Sainsbury's won't say why the pilot was killed, but chances are the chain just couldn't see a store advantage that justified the cost.

We haven't seen an NFC-to-Wi-Fi-to-CRM approach from any big chain, but it seems like a logical way to make it work.

Let's go back to the walk-in scenario: The customer walks in and taps the kiosk with the phone. (Actually, like a contactless card, it's probably more like touching phone to kiosk for a couple of seconds.) If the chain's app is running, it could react to the NFC signal, turn on the phone's Wi-Fi, receive a password via NFC to log onto the secure wireless network and then log into the CRM system.

At that point, NFC's part is done. The rest is all Wi-Fi and CRM.

The store knows the customer is there. The customer gets free Wi-Fi. And none of this requires a mobile signal.The store knows the customer is there. The customer gets free Wi-Fi. Customers who aren't in the loyalty program can't use the Wi-Fi, so it's an inducement for them to sign up. It also makes it possible to spot Wi-Fi freeloaders—if a loyalty customer uses lots of bandwidth but doesn't buy anything, you know what kind of "customer" this is.

And none of this requires a mobile signal, so mobile dead spots aren't an issue (and customers won't have reason to complain about you burning through their data plan).

In addition, touching phone to kiosk is an opt-in, so customers won't feel like they're being spied on or deluged with unwanted offers. Don't want to be bothered today? Just don't tap.

On the other hand, there's a privacy quagmire waiting to happen. Even though a federal appeals court recently ruled that tracking customers in public places is legal, you'd have the ability not just to follow customers around the store but to eavesdrop on everything they do through that network connection. You'll need a clear, tight privacy policy that you really adhere to. Eavesdropping on people's comparison shopping or e-mail could put you in an unpleasantly Google-like position, especially if you're scooping it all up as CRM data.

Connecting in-aisle self-checkout to your CRM system has multiple advantages. Not only can you track what they're buying, but you can also use that CRM history to decide whether they should be waved past the Loss Prevention people at the door—which would give do-it-yourself checkout the advantage of being faster for customers.

For chains, the advantage to hooking up with customers this way is that it doesn't require inventing any new technology. And it doesn't need mobile operators, Google, PayPal, Apple or card brands. You'd get to keep all the CRM data yourself. Plus, it would start getting customers comfortable using their phones for something more than looking for cheaper prices.

It would also turn in-store Wi-Fi into a clear CRM advantage instead of the current hope that maybe someday someone will figure out a good reason for offering it.

And, just maybe, retailers would actually get some benefit out of all the NFC-enabled phones and tablets that are supposed to be pouring from carriers over the next few years. Getting customers to pay that way is still looking as far off as ever; there's just not enough benefit to them to quit swiping.

But free Wi-Fi? That might do it.