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Thursday, May 9, 2002
McDonald's joins stampede toward personalized marketing
By TOMOKO OTAKE
Second of two parts on personal information and business transactions Staff writer In February, McDonald's Co. (Japan) Ltd. revealed its plans to launch a new e-shopping venture targeting users of cellular phones and personal computers.
While the e-business entry by the fast-food giant underscores the huge potential of the sector, some experts believe consumers need to be aware that greater convenience carries with it privacy risks.
Tying up with an online venture, McDonald's Japan plans to turn its 3,800 outlets into places where you can not only eat but also buy, among other things, bikes and book theater tickets.
The joint venture, named EveryD Mc, will put out a free magazine featuring articles related to entertainment and leisure, each of which has a bar code at the bottom.
Customers can find out more about featured goods and services by reading the bar codes with a scanner connected to their Internet-capable cell phones or PCs, immediately linking their browsers to relevant Web sites. But the ambitions of EveryD Mc reach way beyond the distribution of information among consumers. The venture seeks to have its customers settle their purchases via cell phone and collect their "footprints," or the history of goods purchased and Web sites visited.
Such data will help the company locate demand for new products and send "personalized" promotional messages to customers.
McDonald's is joining the corporate stampede to embrace a more personalized, customized style of marketing.
"The days of mass marketing are fading," said Shin Kohri, senior director of corporate planning at EveryD Mc. "From now on, there will be more customized marketing. We would like to provide information beneficial to customers, with their permission."
New technologies invariably make it easier for customers to access various new services.
But with every click of the mouse and every scan of a bar code, customers are sending information about themselves to strangers -- the kind of movies they have seen, or their bar preferences, for example.
All in all, the data provide pretty accurate character profiles.
According to various experts, companies engaged in this type of marketing must bear in mind that they are doomed if they err in their handling of personal data -- either by failing to secure consumers' approval to use the data for personalized marketing purposes, or by letting rogue employees secretly release the data to outside parties.
Kohri said EveryD Mc will make it clear to its customers that their personal data might be used for promotional purposes and will leave them the option of exclusion in this regard. "We understand that privacy issues are our top priority."
In general, however, awareness of these risks is low among firms seeking to personalize their marketing, according to Masataka Morita, an assistant professor of business administration at Rissho University.
Likewise, individuals are still naive about these potential hazards, he said.
"Fifty years ago, especially in rural Japan, most people left their houses unlocked, and neighbors were free to drop by and chat," Morita said.
"Today, as people's awareness of security has increased, leaving the house open is unheard of, even in the countryside. When it comes to personal data (on the Internet), however, they still keep everything open."
Some experts have cited the potential privacy risks of a new service started by East Japan Railway Co.
A Super Urban Intelligent Card can be used as a prepaid card or can be combined with a commuter pass. The Suica system allows a passenger to pass through a ticket gate just by touching a sensor panel on the gate with the card.
The use of rechargeable Suica cards also means passengers do not have to line up at fare adjustment machines when they disembark at stations outside the areas covered by their passes. The service is hugely popular, with the number of users having reached 3.7 million in the 5 1/2 months since its debut.
JR East is urging other railway companies to adopt the system.
It also plans to merge its in-house View credit card with Suica by the end of the current business year. This would allow users to transfer funds from their credit card accounts to their prepaid card accounts.
The company ultimately wants to integrate the View card and Suica functions with IC-equipped cell phones so passengers would be able to use their portable phones to pass through ticket gates, according to JR East spokesman Masahiko Horiuchi.
"Suica does not have to be a card," Horiuchi said. "Tickets are not necessary either as long as the (financial) data are written on the IC chip."
Horiuchi went on to say that the Suica system could in the future be used for personalized marketing purposes.
A passenger who gets off at JR Harajuku Station every Wednesday, for example, could be sent a message on their mobile phones every Wednesday informing them of a sale or new business in the area.
The integration of all these services in a single cell phone worries some observers, who fear that the card might be used to track people's activities.
"Suica leaves the footprints of people on record," warned Takao Saito, a freelance journalist and author of the 1999 book "Privacy Crisis."
He added that the system could grant authorities a means of calling up the traveling history and purchasing records of people whom they regard as antiestablishment.
Horiuchi of JR East flatly denies these charges, stating that the company has not used personal data collected via the Suica system for purposes other than to reissue cards.
"If we are to use the data for another purpose, we will revise our statute and make it clear," he said. "We have not used -- and have no plans to use -- the information surreptitiously."
He added that the company has privacy guidelines, and it grants just a limited group of employees with confidentiality requirements access to computer networks containing personal data.
Horiuchi acknowledged, however, that the company has not yet decided how it would respond to a request from police seeking Suica information for criminal investigations.
Morita of Rissho University said that privacy guidelines offer individuals little relief.
"We have seen so many employees of NTT Corp. and police officers, who are supposed to be the most rigorous guardians of privacy, breach their contract and leak information outside so they can earn pocket money," he said. "We never know what kind of information is circulating out there."
Morita added that companies will be forced to review their strategies.
Sooner or later, people will have second thoughts about dishing out personal data to the corporate world, he said.
"Like the recent outbreak of computer trouble at the Mizuho Financial Group, there will probably be an incident that makes people suddenly aware of risks, such as their money evaporating, or something else that incurs serious damage," he said.
"Once people realize the danger, their mind-set will change . . . and we will never go back to the era when we used to keep the house unlocked."