Microsoft Uses Sensormatic Source Tagging on Office 97

Microsoft Corporation's Office suite of integrated productivity programs is widely used in both the business and home markets. However, the Redmond, Washington, company was faced with a perplexing dilemma. Because of Microsoft Office's price point and compact packaging, it was a tempting target for theft. This resulted in the Office packages being placed in lockup and made it difficult for customers to locate and purchase.

The root of the software shrinkage problem began a few years ago with the combination of a shift in product delivery technology and the integration of programs into suites. The increasing popularity of CD-ROM drives on personal computers meant a quantum leap in storage medium capability. What once took a stack of floppies can now be shipped on a single disk. Correspondingly, packaging was reduced in size. When more programs were combined into suites, increasing the SKU value and stoking customer demand, it was hard for thieves to resist.

"We were approached by one of our key retail partners to consider source tagging as a solution to shrinkage," according to Microsoft Marketing Manager Ed McCahill. "We investigated and determined that it was an effective way for us to support retail efforts to combat theft. When we presented it to other customers, their response was enthusiastic."

Microsoft is the first major software company to employ source tagging with Ultra•Max®. Source tagged products were introduced with the launch of Office 97 in January 1997. "We started investigating source tagging in late summer 1996 and made it a top priority because we believed the ideal time to begin implementing a program was when we changed SKU numbers to the newest version," McCahill explained. "We felt we could not slipstream the tags because retailers would never know which packages were protected and which were not."

The result of source tagging the Office 97 product, which includes six SKUs, was immediately positive. "We conducted a three-month open merchandising test using source tagged Office 95 packages with one of our top retail partners. Unit sales increased significantly because customers could easily find the product, while shrink declined," McCahill said. "In a price range of $250 to $600 per unit, a significant sales increase at one of your biggest customers is a tremendous win for both the manufacturer and the retailer."

McCahill expects source tagging to increase impulse sales by having the product accessible to consumers. Plans are to expand source tagging to other products soon, based on retailer feedback and early successes. McCahill anticipates it will be extended to additional high ticket items as well as some of the lower ticket products with high sales volumes.

"We continue to approach source tagging as a way to strengthen our relationships with retailers. If they are experiencing shrinkage on our SKUs, we want to do our best to help them solve the problem. They appreciate our support and our industry leadership in implementing source tagging," he said.

McCahill also mentioned that Microsoft is looking into source tagging the CD jewel box rather than the package. This will further protect the product from thieves who open the box and steal its contents.

As a result of the Office 97 source tagging experience, Microsoft is strongly encouraging software retailers to adopt electronic article surveillance technology. "It's not inexpensive to put the tags in the boxes, but we feel it's part of Microsoft's ongoing investment in the retail business," McCahill pointed out. "We are absorbing the cost as an investment in our relationships and because we want to see our marketing programs be effective. We want to see our retailers make a profit on our products, too," he added. "And the way to do that is to find as many ways to support them as possible. Source tagging is one of those ways."

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