ID'ing Customers Should Be Easy—If Only Mobile Carriers Can Get It Together, Says JCPenney CIO

Spotting loyalty-program customers when they walk into a store should be easy. It isn't. Not all of your best customers will check in, or have an app running, or keep Wi-Fi turned on so you can spot them electronically. The only thing you can be sure of is that they'll almost certainly have a mobile phone turned on, and that should be a sure way of knowing they've arrived. Unfortunately, that depends on mobile carriers—which, ironically, seem to be the last ones figuring out mobile commerce.

Case in point: JCPenney. "If we could figure out our rewards customers, it'd be a big win," said CIO Ed Robben. "How do I detect that customer coming into the store, recognize her, get her the offer that's meant for her, because I know she's in love with Ambrielle or she's in love with Worthington or you know what, she's coming in just for the Sephora experience and I need to get her to cross-shop over into the women's department."

JCPenney Special Report: In his first interview, the CIO also discusses RFID strategy that sidesteps POS completely and a kiosk approach that all but forgot about in-store.

"If I want to be more personalized, I've got to know you're there," Robben said. "You're either checking in with us as you come in, or we're sensing you as you come into a store and are able to react to that. Most everybody's going to have GSM and 3G turned on. They may not have their Wi-Fi turned on. I just don't know that that's reliable enough for where we'd want to detect the customer."

Using geolocation from third parties like Foursquare and Yelp to spot the best customers is an idea Robben likes, but that depends on the customers taking an active role. So does Wi-Fi. GPS doesn't have enough precision to place a customer inside a store, and it often doesn't work inside malls anyway.

That leaves mobile carriers. "In that case, we're depending on the carriers to tell us that they're close," Robben said. "We've talked to them about that. We'd have to figure out what the right economic model is to get after that information."

In other words, the real challenge in getting mobile carriers to help out with spotting incoming loyalty customers is the same problem the carriers face with their ISIS coalition: They haven't worked out how they can make money from it. Until they do, retailers like JCPenney will have to keep trying to leverage check-ins, Wi-Fi and other less-reliable approaches.

But maybe mobile carriers are making this too hard. There's a way for the carriers to kick-start their relationship with retailers and make money three different ways. That's by putting mini-cell towers inside stores—lots of stores. Not just inside malls, but inside individual stores.That way, when a customer walks in the door, her phone will switch its connection to the in-store mobile tower. She'll be able to use her phone in all the ways that M-Commerce suggests she should be using her phone—and from the point of view of mobile carriers, burning minutes and megabytes on her data plan.

With a guaranteed signal inside the store, mobile carriers can get serious about mobile payments. If there's no in-store phone signal, the carriers have no advantage over anyone else who wants to jam a near field communication (NFC) chip into a phone. But with a guaranteed signal, carriers can authenticate customers, confirm transactions and even put purchases on phone bills.

And with the right technology, mobile carriers could identify the loyalty customers for a particular store's chain as soon as the customer walks in and the phone connects to the in-store mobile signal. The mobile carriers would just need a list of those customers' phone numbers to compare to the phone numbers that are connecting to the in-store signal.

Or maybe some retailers would prefer to send a text message to every phone that comes in the door, loyalty-program member or random customer. That would be even easier: Mobile carriers would just pass each phone number that comes into range along to the store, which could figure out who's a loyalty customer (and would get a targeted offer) and who just gets a generic offer.

That way, nearly every customer who walks into the store would be immediately identified by phone number. And if customers also use their phones for payment, this could provide a huge trove of new CRM data.

That's something retailers would have a reason to pay for.

Does all this represent a massive invasion of privacy? Potentially. Retailers would have to work out security issues, including where that list of loyalty customers' phone numbers will live. Trusting a retailer's customer data to the phone company isn't going to make anyone comfortable. (One workaround: As mobile users arrive in the store, pass all the phone numbers directly from the mini-cell tower to the store's systems, which could then do identification and message sending.)

There's also a risk that sending an unrequested text message will annoy customers instead of entice them. Loyalty customers might be willing to opt in; for non-loyalty customers, retailers will have to think carefully about what type of discount or coupon is likely to make the message an incentive instead of an irritant.

None of this is outside the technical capabilities of mobile carriers. The big question is whether they'll be able to work out how to bundle in-store cell signals and mobile payments.