Encoding spreads, giving scanners more insight into customer profiles.

Several Los Angeles companies are quietly pioneering a new data-reading technology that retailers could use to build sophisticated computer files on millions of California shoppers with the flick of a cashier's hand.

Proponents of the cutting-edge technology say they aim to identify only the juciest prospects for promotions and advertising, with razor-sharp precision, while not violating the privacy of shoppers.

Thrifty Corp., for instance, is experimenting with the checkout-stand technology for possible use in its 600 Thrifty Drug Stores outlets in the West, according to two sources close to the company who asked not to be named.

"We've been doing a little bit of testing, so at the appropriate time (to debut it) we'll be ready," said a Thrifty source. Giant supermarket chain Ralphs Grocery Co. has already equipped its stores with the technology, but a company official said it is used merely to clear checks.

The technology harvests personal information from the new-format California driver's license. Demographic data is encoded on a magnetic stripe on the license's reverse side.

When a customer hands over a license for check-clearing, cashiers will pull it through a special data-reader -- just as they swipe credit cards today to gain credit approval -- and the personal data will be fed into a computer.

There, it can be linked to bar-code data scanned from the packaging on immediate purchases. That provides a hard-as-nails buyer profile.

Marketing and technology professionals say there is tremendous potential: The system could unlock a treasure chest of ultra-specific marketing information, because an individual's name, address, age and gender could be linked to specific products purchased on specific dates.

But the technology also augurs ticklish privacy questions: Buyers of sleeping pills or tampons, for instance, might not want their names and purchase habits relayed to strangers without permission.

Of course, customers could stop paying by check at retail outlets with the new marketing technology. But many customers don't own credit cards and would have to carry more cash.

"You really can't go through life anonymously, unless you want to pay for everything in cash," noted David Collins, author of a book called "Using Bar Code: Why It's Taking Over."

The so-called universal product codes are so crucial for checkout speed and accuracy that big operators like K mart commonly refuse to carry uncoded products.

Further, the California driver's license and the sister California ID (also with magnetic stripe) have become universal aids to creditworthiness.

Some 10 million of the new licenses have been issued in California, the first state to innovate the encoded format. New York State plans to begin issuing such licenses this winter.

"California and New York are guinea pigs, and everybody else is watching to see how it goes," said Michael Hackney, a manager of international sales with American Magnetics Corp. That Carson-based company supplied readers to the California Highway Patrol in Ventura County, where a pilot program is under way to automate ticket-writing.

American Magnetics, along with Chatsworth-based Xico Corp., is one of the few manufacturers nationwide of readers that can understand the non-standard coding used by the California and New York motor vehicle departments.

"We're ready to go," said Joseph Sheppard, Xico chief executive. He sold New York the encoding equipment and is waiting for his first sale of readers. "That's on the horizon," he said.

Unlike the stripes on the backs of credit cards, driver's license stripes contain plentiful personal information. They amount to a marketing gold mine, said some sources.

"This begins a whole new era of marketing, and it will sweep across all retail operations," predicted William H. Davidson, USC marketing professor and author of a book entitled "2020 Vision" on how businesses can leverage information technology.

Others are less convinced.

The technology won't catch on if retailers consider it unmanageable, or if customers are annoyed at the promos, said Chet Dalzell, spokesman for the New York-based Direct Marketing Association.

That 3,600-member group would favor letting customers opt out of the databases, because that's in the stores' interest, said Dalzell. Unhappy clientele will shop elsewhere, he predicted.

"Or, it may be too expensive to set up and use," suggested Fred Milman, a consultant with David Shepard & Associates in New York, which advises J.C. Penney and other retailers on direct marketing.

Officials from Xico and American Magnetics said hardware and software changes would be needed at the checkout stand, costing hundreds or several thousand dollars per stand.

Ralphs has retooled its readers to pick up much, but not all, of the information on the licence, said Ralphs Executive Vice President for Retail Al Marasca. "There are some issues we feel uncomfortable with, regarding invasion of privacy," said Marasca, explaining why Ralphs will stop short of building a marketing database.

Still, a majority of marketing executives seem gung-ho. It could give a needed twist to direct-mail advertising, already a $25 billion-a-year industry, they said.

"Sophisticated vendors that embrace these new technologies will turbocharge their marketing," predicted Davidson.

"Modern manufacturers want to 'micromarket' using a rifle-shot, rather than a shotgun," said David J. Collins, president of the Data Capture Institute consulting firm in Duxbury, Mass. "The better information they have on where their products will be well received, the less money they waste on advertising to unreceptive consumers."

"It takes the junk out of junk mail," conceded Milman. "A buyer of tennis balls would want information about new tennis products."

Several retailers nationwide already tie customer identities to buying habits. They use store ID cards to reward customers with discounts, coupons or freebies.

Von's supermarkets offers them through a check-cashing card.

Six Safeway stores in Northern California have offered their customers "smart cards," containing a computer chip that records buying "points" in a program resembling airlines' frequent-flyer promotions.

The company behind this is American Promotion Technologies of Deerfield Beach, Fla. Spokeswoman Cathy Amann said her company has issued 100,000 smart cards nationwide, and 65 percent of a store's customers accept them, on average. Her clients, whose products are promoted, include Procter & Gamble Co. and Ralston Purina Co.