Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.
The long awaited and much rumored loyalty program from Walgreens reportedly will launch on September 16.
Called Balanced Rewards, the loyalty card will utilize a point-based system similar to the program used by Duane Reade, which Walgreens acquired in 2010. According to reports, shoppers will earn points for buying front-end items, filling prescriptions, getting shots and even participating in a walking program. At 5,000 points, a $5.00 card can be redeemed. At 40,000, members earn a $50 card.
"This program is all about collecting points, saving up for a treat," said Graham Atkinson, chief customer experience officer, told Reuters. Mr. Atkinson led United Airlines’ Mileage Plus program before joining Walgreens in January 2011.
Competitive activity between CVS, Rite Aid, and Walgreens following the launch will be fascinating to observe. Here, a few observations:
- While Walgreens is centering Balance Rewards on a traditional points earning model, Rite Aid’s Wellness+ uses points to achieve tiers which trigger discounts. In market the longest with its ExtraCare program going national in national in 2001, CVS tracks purchases but does not explicitly award points, preferring to surprise members on a regular basis with ExtraBucks, dollars good on purchases made in the store.
- CVS uses multiple communications channels — E-mail, mobile and in-store kiosks, etc. — to engage customers with discount and reward offers as well as the "longest receipt in retail" alerting members to product offers, account status, and ExtraBucks offers. Walgreens has been trialing offers with Foursquare, but there is no hint of "social" being part of the Balance Rewards program. Let’s see if Walgreens follows the social path
- Walgreens hints that pharmacy loyalty might be the core behavior that it seeks to encourage among its customers. It seems that switching cost between pharmacies is high and the chain has its eye on the ball to achieve its most important objective. If so, they have a leg up on success.
- It seems that Register Rewards, a popular discount program for some time, will stay in place during the early phase of launch of its loyalty program. For savvy consumers, this means that some double dipping may take place. Even though it appears Walgreens is moving away from Register Rewards, should they promote it to drive attention and foot traffic to its stores in these early days?
Moving beyond couponing to introduce a meaningful customer strategy will help Walgreens keep pace with competitors. CVS has been collecting purchase data for several years and, from reading my receipts, still has a long way to go to connect the dots between what I want to buy and the deals I am offered. This underutilization of data might be the only window that Walgreens has to catch up.
BrainTrust
Discussion Questions
Which fresh approaches should Walgreens pursue with its new loyalty program? What’s the best way to differentiate the program from those of drug store competitors? What challenges does Walgreens face, being so late to the loyalty game?
Poll
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The simplest thing is to not print register receipts that are 3 feet long with the “surprise” discounts. To me, CVS’s loyalty program takes me back to the ’80s. I hope Walgreens leapfrogs and goes direct to paperless rewards.
And, of course, if it’s really collecting all this information, it really should use it to drive some relevancy into its offerings.
I want to see a loyalty program that is simple and proactive. I dont want to always have my card with me. If I am a member, make it easy to track and easy to reward. I don’t see Walgreens having a major challenge with being late to the loyalty game as long as they execute well.
Any time a smart operator like Walgreens launches a new loyalty program is the right time. There is no late.
One of their big opportunities: low purchase pattern or cycle marketing. Example: double points for photo dept purchase offered to a registered shopper who has never or seldom used that department. Or offered to all during the department’s annual low point.
Another: frequency rewards targeted to the same purchase lows. Example: double points to the top 10% most frequent photo department customers during the slow season. To do this and to keep coming up with creative offerings, they will need creatives on staff.
Given Walgreens’ late entry with Balanced Rewards, we would expect a good bit more than another points-based frequent-flyeresque program and only time will tell. The integration of wellness (i.e., recognizing healthy behavior like walking) is a good step forward but the “loyalty truth” should come from integration across channels, including social, and especially from leveraging data for relationship marketing both in-store and away from the store via other channels.
I am not sure that differentiation (per se) in the loyalty card program will win many new customers, or increase the loyalty of those who shop there. Instead, I believe that excellent execution of standard shopper card features is the best way forward.
Sure, the program should include digital couponing and mobile list-builders. Sure, it should have text-alert options. But these things (and others like them) aren’t the real inducement. A well-run, full-featured card program will retain shoppers who may have defected, and will recruit shoppers from competing stores. Just do it right and they will come.
Walgreens will take advantage of their unique strength in local store marketing/merchandising and in-store clinics plus personalized customer experience to create preference, grow satisfaction, and ultimately capture greater share of wallet from the competition.
The competition, by the way, is not just CVS and Rite Aid. The traditional drug store no longer exists. The size of the store footprint allows for greater depth of merchandise and new categories, including hard liquor (which I can’t get over seeing a bottle of gin, vodka, or rum in this environment). In many ways it is a C-Store without the emphasis on fountain drinks and hot prepared foods, that just so happens to have an Rx.
The team in place at HQ along with the platform selected to run the “back-end” will most assuredly give CVS, Rite Aid, Kmart, Walmart, Target and others a run for their money — all of them will be stepping it up in the months to come. What I anticipate is a greater use of personalized communication, improved relevancy in offers made, localized promotions/events, and content matched to your interests borne out of data insight.
This is an important move for Walgreens. It comes close to the same time that they will again be serving Express Scripts customers. In any case everyone that conducts business with chain drug needs to have a complete understanding of each of the loyalty programs used by each company because at the end of the day it’s the vendors and manufactures that will be paying for each of the programs.
I just realized, after reading this, we are members of PetSupermarket’s loyalty program. It gets us absolutely nothing. So what benefit do we get from joining such groups? Certainly not the ability to carry additional card on my key chain. I am finding them to be more about talk, and less about action and actually benefitting frequent shoppers.
They are late and need to answer the question: why is a consumer to care? Along the way they need to tie the card into their promotion system and make the promotion relevant to the customer. They also need to bring the rewards awarded to the attention of the customer. They need to cut through the clutter of the loyalty program/card jungle. And I agree on the paperless route — who has time to read to the end of the journal-like receipt?
Do drug stores really have the traffic and product velocity to justify loyalty/rewards programs? I don’t see it. I began using the CVS program, but the infrequency of my trips and the duplication of products and services with the Safeway a few doors down made it not worthwhile. And Safeway awards gasoline discounts!
I would have hoped that Walgreens would chart out the key attributes of the CVS and Rite Aid programs and labeled them “what not to do.” Only in doing so will Walgreens establish new ground and find a competitive advantage.
Since they are last to the game, that approach might require some compromise as there are features of each competitive program that are worth considering.
In the end, I would go mobile, social, and add a game based feature to differentiate Walgreens. Why? Not to incorporate every current buzzword in their program design, but to meet customers where they are and attempt to stake out some new turf.
Then again, if the key to business success is locking in the Rx business from a vast group of Seniors, maybe Walgreens should just be pushing out coupons on a mobile app and offering a perk for every “x” number of prescriptions filled. That would be simple but effective.
The answers are always connected back to objectives and only Walgreens really knows what they are after.
I am not sure how Walgreens can differentiate their loyalty program, being the fourth entry into the market in the pharmacy category. The opportunity that makes the most sense would be to leverage the greatest strength of Walgreens, the sheer number of stores that the chain has in most cities. If Walgreens can drive additional visits into Walgreens, whether the customer’s usual one or another in the chain, the company will strongly benefit.
The timing is very good in conjunction with the Express Scripts.
Based on my observations at CVS and Rite Aid, the loyalty cards are a hassle for the front-end customers who don’t come in as often. I have watched both try to add them to stores.
CVS has been most interesting in my market since they came in two transactions.
First they purchased Sav-On Stores which had a loyalty card, but there was a conversion period gap where no card was required between when they took control of the stores and when they got all of the stores onto their registers, but they did start to issue cards as each individual store was converted and printed out a lot of random Extra Bucks to people. My observation is they have been fairly successful with the loyalty card in the former Sav-On Stores.
Next, they purchased Longs. I don’t think I’ve ever seen stores that scan a “courtesy card” as often as the CVS Stores that used to be Longs. Employees don’t ask for the card half of the time and automatically will scan a courtesy card. I have seen this as some former Longs hundreds of miles away too, so I don’t think it is just a local issue.
Personally I am growing tired of these loyalty cards. Data is great if you know how to use it and I feel like a lot of retailers are collecting data but not using it too well.