Section: RETAIL TECHNOLOGY

STANDARDS

Technology vendors are developing an XML-based data model standard they say would allow retailers to share sensitive customer-specific information with one another and with manufacturers with relative ease.

Such functionality, proffered by 30 technology vendors that have banded together in a group called the Customer Profile Exchange (CPEX), would be welcomed by airlines, hotels and rental-car companies looking to bundle their services into promotions targeting specific individuals. Observers, however, question just how relevant the nascent CPEX standard would be to retailers. Many chains are decidedly edgy both about the idea of sharing any customer information with other retailers and about infringing on consumers' privacy.

"Customer-specific information is sacrosanct, and I can see very few instances where we'd be likely to let it leave our company," one retail executive says.

"One wonders if the CPEX initiative is just more marketing hype by the technology vendors," adds Norman Shaw, VP of MIS at The Wet Seal, Foothill Ranch, Calif. "Many standards have emerged that seem to deliver far less benefit than they promised. I don't see why this standard would be any different."

A CPEX standard--were it actually developed--could, however, prove very useful to retailers who've grown by acquisition or who've maintained disparate IT systems at the various chains sheltered under their corporate umbrellas. A company such as Federated Department Stores, CPEX proponents contend, would be able to leverage the standard to draw good customers to flagging concepts that need a shot in the arm.

The technology companies working on CPEX say they are laying the groundwork for joint promotions should retailers decide to take the plunge. Standardizing how customer data is represented in databases and making it easier to move such data between disparate databases via the Internet would make joint promotions a possibility for retail companies that have barely entertained the idea in the past. One reason they haven't is that targeting joint promotions at specific customers and clusters of customers has been difficult because software programs and databases retailers deploy often handle customer data in different formats. There is no common language for customer intelligence.

That's the problem the CPEX proponents want to solve. The initiative is being hosted by International Digital Enterprise Alliance (IDEAlliance), an Alexandria, Va.-based non-profit industry applications standards organization which is already host to a number of XML working groups. Chairing the CPEX team are Siebel Systems, net. Genesis, Vignette Corp. and Andromedia/Macromedia. Other high-profile members include Compaq Computer, Harte-Hanks, IBM and Sun/Netscape Alliance.

The development group says CPEX will support both the real-time and batch exchange of consumer information. The data model will also be equipped with privacy controls to block transfer of restricted data elements--a provision, they say, that will allow retailers to control just how much information leaves their walls. The team plans to release the first CPEX specifications for public review in the first half of this year. The first interoperability demos are scheduled to begin in the second half.

The working group plans to leverage existing data model and privacy standards into CPEX. Among the proposals and standards under examination are Information and Content Exchange (ICE, also hosted by IDEAlliance), Electronic Commerce Marketing Language (ECML) and the Platform for Privacy Preferences (P3P). CPEX will also be designed for compliance with the strict European Union privacy laws.

Ill communication: Although the fluid exchange of data between partner companies is the ultimate goal of CPEX, the standard might have more immediate applications internally.

"Simply moving data around within an organization can be a challenge," says Brad Husek, VP of standards for Vignette.

Few retailers, according to Husek, can easily move customer information in and out of the many applications they currently have in place. To support that view, he points to a recent Forrester Research survey which found that only 2% of responding companies have consolidated their customer information into a single integrated view. This is in spite of the fact that 90% of companies believe that it's critical to have such a view.

"Most retailers' IT infrastructures are complicated enough as it is without having to translate data every time it's trafficked between departments," Husek says. "A standard customer-profiling language would go a long way toward streamlining the movement of such information within a company."

Philip Russom, director of business intelligence for Framingham, Mass.-based consultancy Hurwitz Group, agrees that a standard data model could help retailers simplify the internal trafficking of customer information.

"Companies have to make it easier for their internal departments to share CRM data with one another," he says. "Probably the greatest benefit something like CPEX could provide would be the elimination of some of the clunky interfaces different business applications rely on to communicate with one another today."

The greater availability of customer dam also has inherent marketing benefits. Since the advent of modern CRM and data-harvesting solutions has made more consumer information available, retailers prize that data as a tool to aid in targeting promotions. A common consumer-profiling data model such as CPEX would mean more of that information would become available, enabling companies to make better decisions as to how to spend their advertising dollars.

Spread the word: But while retailers worry about infringing on consumer privacy, Husek argues that they would actually be doing customers a favor by sharing some data about those customers with other providers of goods and services. It's an argument that will be a hard sell with retailers, but could fly with airlines.

Travel and hospitality providers would be more obvious beneficiaries of standardized communication of customer profiles.

"Imagine that the customer could give her preferences to the airline when purchasing her ticket," Husek says. "The airline could then share her room preferences with the hotel, and her auto preferences with the car-rental agency, and they can all have her preferred products waiting for her when she lands, without having to fill out a separate form for each company. Those companies could then remember and respond to her preferences every time she traveled."

But that's just the tip of the iceberg, Husek stresses. Car dealers could share specification and maintenance information with auto-repair shops; supermarkets could share dietary preferences with partner restaurants.

CPEX will put personal data back into the hands of the consumer, according to Brad Husek, VP of standards for Vignette Corp. That, he says, will make life easier for retailers who worry about violating customer privacy.

"CPEX is to be a privacy-enabled model," Husek says. "Privacy has become a top concern of consumers and the government, and it's one of our responsibilities to make sure that in building any customer profiling-standard we include functionality that protects the privacy of the consumer."

CPEX would do this by integrating privacy controls into the data itself, so that every time the data is transmitted, the privacy controls travel with it. Control over these profiles would be placed in the hands of the consumer, so that, for example, a consumer could specify that it's permissible for grocers to share her breakfast-cereal preferences, but that her prescription information goes no further than the pharmacy counter. In this way, each consumer could choose her own balance between convenience and privacy.

Although CPEX is still in the embryonic stages of development, Husek envisions that consumers would ultimately access their profiles through a central credit-bureau-like organization, so that a customer needn't specify privacy preferences each time she shops with a different retailer.

Whether this will be enough to soothe consumer fears remains to be seen, but few deny that giving the consumer greater control over her personal information is a step in the right direction.

"As more customer information becomes available, privacy becomes a bigger issue by the day," says Donovan Gow, senior analyst with the Aberdeen Group, Boston. "The industry needs to reconcile its CRM efforts with the customer's expectations of privacy, and CPEX is a part of that."

He adds that CPEX is also part of an effort among CRM solution providers to police themselves before the government gets around to it. As consumer-data harvesting has grown into a favorite retail marketing tool, it has attracted increasing attention from the government. The Federal Trade Commission is already reviewing the practice, and it seems only a matter of time before the government decides to regulate.

Husek acknowledges the strong possibility that the government will institute laws to limit companies' ability to collect consumer information, but says that it's unlikely the government will seek to become involved with the development CPEX.

"The government will be busy making regulations" he says. "It's our responsibility to make CPEX compliant with the laws the government creates, and that's a responsibility we take very seriously."

And while these laws have yet to be written, Husek insists it's not too early to start work on CPEX. "We know enough about the general nature of privacy laws to form a good idea of what will be required of CPEX under future US law."

Husek says that the new U.S. laws will likely resemble the strict consumer privacy protection standards that have been in place in the European Union and its predecessor the Common Market for more than 20 years, and which will form part of CPEX's basis.

PHOTO (COLOR): Brad Husick, VP of standards, Vignette Corp.

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By Dan Scheraga