(FORTUNE Magazine) – SO YOU THOUGHT you could slip into the supermarket and buy that diet-busting macaroni and cheese, and no one would know, eh? Wrong. Kraft knows. In fact Kraft USA knows quite a lot about macaroni-and-cheese eaters like you: how old they are and how often they shop, for starters. The company's marketing and research folks can figure out whether they fill the grocery cart in one trip or grab a few items several times a week. Whether they spend afternoons clipping coupons. How many children they have, whether they eat out or entertain friends at home, and if they earn their living behind a desk or on the factory floor. Has Kraft been snooping around the neighborhood again? No, the skinny on folks like you came from those supermarket scanners embedded in the grocery checkout counter. Every time a clerk whisks a purchase over the scanner, it electronically records what was bought, who makes it, the size, and the price. That information is then fortified with more telling data derived from research into what shoppers watch on television, the type of neighborhood they live in, and the kind of supermarket they shop in. The result is that manufacturers today have an even sharper picture of who their customers are than they did just five years ago. Knowing the customer better helps companies figure out which products consumers want and what influences their decisions to buy. Are shoppers motivated by cents-off coupons, splashy displays, free sampling, or product literature? A better handle on the customer also makes manufacturers more sure-footed on the bumpy road of product testing. Scanner technology tells them how much of a test item is sold initially, and how many -- and what type of -- shoppers go back to the store to buy it again and again. Last year grocery stores introduced 12,055 new items, more than double the number six years earlier. According to an industry rule of thumb, 80% of these will bomb. In a crowded marketplace, where product introductions are increasingly expensive, those repeat purchase figures can tell the manufacturer early if he's backing a potential hit or a miss. Two companies specialize in supplying and interpreting national scanner data for packaged goods outfits like Kraft USA, Frito-Lay, and Procter & Gamble. Information Resources Inc. of Chicago buys the raw scanner data from about 2,700 grocery stores in 66 markets ranging from big cities to small towns. Nielsen Marketing Research USA, part of the TV ratings giant A.C. Nielsen & Co., which is owned by Dun & Bradstreet, tracks purchases in 3,000 supermarkets in about 50 areas. Recently a third player, Arbitron, announced it was shutting down its SAMI (Selling Areas-Marketing Inc.) service, which was losing money because its method of counting inventory in a warehouse was not as speedy as scanning. SAMI agreed to assign its 300 clients with $20 million in billings to IRI. WHO'S LEADING in the scanner race between IRI and Nielsen depends on whom you talk to. Nielsen claims to have about 60% of the market, while IRI says it has 55% -- making it unlikely that both are telling the truth. IRI reported revenues of $136 million last year, but D&B refuses to break out Nielsen's revenues from market research. Three years ago D&B was so impressed with IRI's scanner know-how that it offered $600 million to buy the firm. IRI was willing, but the Federal Trade Commission said no on antitrust grounds. Smaller, privately held companies such as Market Metrics of Lancaster, Pennsylvania, and Catalina Marketing of Anaheim, California, use scanner data to help packaged-goods giants influence shoppers once they are in the store. Time-pressed homemakers are not sitting in the kitchen as they used to, writing out grocery lists or clipping coupons from the Sunday paper. They are much more likely to decide what cereal or paper towels to buy as their carts roll down the aisles. So manufacturers try to influence what makes it from shelf to shopper's cart with free samples, bigger display racks, and coupons given out at the cash register. MARKET METRICS SELLS a software program that helps companies match product promotions to the type of people who shop in a particular store. If customers respond better to free samples than to cents-off coupons, then the manufacturer knows it should start pushing those freebies. Catalina uses scanner-activated technology to issue a manufacturer's coupon at the checkout register based on what the consumer buys. Stouffers, which makes Lean Cuisine frozen dinners, has directed grocery stores to print coupons for all customers who check out with one of its competitor's meals. If a dog owner buys a small box of biscuits, Ralston Purina tells the stores to print out a coupon the shopper can use for a larger size next time. Manufacturers use scanner data in conjunction with focus groups and other research tools to tailor the product ever more snugly to the customer. Frito- Lay, PepsiCo's $4.2-billion-a-year snack-food division, has been testing a new multigrain snack called Sun Chips for ten months around Minneapolis. Before the test Frito-Lay spent a year talking to 10,000 consumers across the nation to find out what they liked and disliked about different versions of the chip. The company also solicited their opinions of competing brands already on the market. Says Dwight Riskey, vice president of new business and marketing research: ''We experimented with about 50 different shapes, hundreds of names, and all kinds of flavors before we developed this product.'' The focus group favorite: a thin, rectangular chip with ridges and a salty, nutty flavor. Then, to find out how Sun Chips would fare in the real world of the supermarket shelf where a seven-ounce bag sells for $1.69, Frito-Lay turned to IRI. Using the scanning data that IRI collected and analyzed, the company discovered how many shoppers actually carted home their first bag of Sun Chips ^ in a given week and who went back a second and third time. This ''depth of repeat,'' as Riskey calls it, gives the snackmeister a much clearer sense of the product's potential. To get information on consumers in the Minneapolis area IRI recruited 1,500 ''households'' -- in scannerspeak, households do the shopping, not individuals -- to sign up for a scanner panel. Some 60,000 households participate in IRI's panels in different markets nationwide. Panel members provide information about the size of their families, their income, their marital status, how many TVs they own, what types of newspapers and magazines they read, and who does most of the shopping. IRI then gives these households a special bar-coded identification card that shoppers present to the supermarket cashier when they pay for the groceries. By passing the card over the scanner or entering the digits manually into the register, the cashier records everything each shopper has bought. The reward for being part of a scanner panel? It's largely psychic: the opportunity to be among the first to try something new, and thereby influence a national product launch. Frito-Lay is so pleased with the results of the Minneapolis test that Sun Chips will hit the shelves in the rest of the country early next year. For competitive reasons, manufacturers don't talk about what constitutes a successful test, but if Frito-Lay had gotten 15% to 20% of the households in its test market to try Sun Chips during the course of the year and to go back for more four times, that would indicate the potential for ''a massive business,'' says Riskey. He claims that Sun Chips went ''way beyond'' those numbers. ''The beauty of scanner data,'' he says, ''is that we get a complete description of a household from the panel and can match it with purchasing patterns. We know exactly who's out there buying our product and that helps us design marketing and advertising plans accordingly.'' Nielsen's Scantrack service uses panels to determine the patterns of 41,000 households across the country. In addition to using cards, the company gives hand-held scanning devices to some shoppers. When they get home with their parcels, they pass the scanners over the bar code on each item to record the purchase. Once a week the panelists call a toll-free number and hold up the scanner to the phone so that a series of electronic beeps can transmit the purchasing information to Nielsen. THOUGH THE SYSTEM seems cumbersome, Nielsen says the in-home scanner allows / the company to monitor purchases no matter where they are made -- in a grocery store, drugstore, or warehouse club. IRI, by contrast, can track only items bought in supermarkets. For that reason Nielsen's system is particularly well suited to companies that make soap, deodorants, and other personal-care products. Greg Starzynski, marketing manager of household services at Nielsen, says that 29% of the people who buy shampoo, for example, don't pick it up in a supermarket. But scanners are not yet widely used in drugstores, and though warehouse clubs have the equipment, they have not started releasing the data. In the next five years advances in scanner technology will make it easier for manufacturers and retailers to know their customers even better than they do today. But the challenge for marketers is not simply to assemble the most precise consumer profiles. Says John Costello, president of Nielsen Marketing Research USA: ''Customers are getting smarter and consumer trends are coming and going much more quickly.'' The real winners will be those companies that can put their knowledge of the market to work fast to produce whatever the increasingly sophisticated shopper wants to buy.