New programs spell loyalty with silent ‘you’
In 2006, Time magazine added a twist to its annual “Person of the Year” cover story, replacing the usual picture of some prominent individual with a picture of a glossy computer screen to show that social networking had made “you” the person of the year. Now, the idea that it’s all about “you” has percolated into retail.
It appears that 2012 has become the year of the loyalty card. And while loyalty cards are nothing new in this industry — CVS introduced ExtraCare in 2001 — there appears to be a growing interest among retailers eager to understand how their best shoppers use their stores, what they buy and how often, and how to use that information to get them to shop more often and spend more when they do.
Rite Aid’s Wellness+ program has been a lifesaver for the Camp Hill, Pa.-based chain, with its 52 million members consistently showing greater basket rings than nonmembers. ExtraCare now boasts more than 69 million members, with about 67% of all transactions coming through the program — and importantly, according to company research, ExtraCare members buy 85% more items per trip than nonmembers.
“While pharmacy retailers have a tremendous understanding of their customer’s Rx regimen, many are realizing the value of understanding their customers’ front-end purchase behavior as it relates to their total health and wellness,” Catalina Marketing SVP brand development Sharon Glass told Drug Store News. “There is also increased competitive pressure in the market to capture more of a consumer’s trips.”
Safeway in July made its Just For U program available across all divisions. “Registration is on track,” Steve Burd, Safeway chairman and CEO, told analysts during a July 19 conference call. So far, Safeway has managed to enroll about 70% of its customers into the program in markets where it has been available. “The conversion to regular use is running 20% greater to what we initially anticipated,” Burd said. “The incremental spend for that casual user is more than 50% more than anticipated.”
Safeway expects 35% of its business will come from Just for U members this year, growing to 65% to 70% over the next three years. Just for U includes a mobile app that significantly enhances participation, Burd said, with the program’s mobile users engaging 50% more often than desktop users.
Burd told analysts he expects more of his competitors will launch programs of their own in the months ahead. One of them will be Walgreens, as anticipation continues to build in advance of the launch of its program, expected sometime this fall. While it has been in the works long before the June announcement of the Alliance Boots deal, the Walgreens program will benefit from the learnings of Boots’ loyalty program, the largest in the United Kingdom.
So why are retailers suddenly embracing the programs? Again, it’s all about “you.” “They’re enabling shoppers to interact with retailers on a more personal level, in a sense that they receive communications from a retailer based on their shopping and buying behavior,” Nielsen SVP consumer and shopper insights Todd Hale told DSN. Retailers can use the data they collect to create segments, such as top spenders versus light spenders and people who spend on different categories of products, engaging customers in a “micro” fashion.
It also creates the potential for personalized pricing, as Safeway’s program is doing. This, Kantar Retail chief knowledge officer Bryan Gildenberg told DSN, can help curb competitors who might try to one-up a retailer on pricing by looking at the prices on the shelves. “Over the next few years, more of the best shoppers at the retailers … that have loyalty cards will be getting a menu of prices that are outside the public domain, and that pricing may become a private conversation between retailers and their best shoppers,” Gildenberg said.
But it’s not just about “price messaging,” Gildenberg explained. “There’s a whole host of personalized marketing that you can do. You can communicate to shoppers around particular seasons; you can remind shoppers that they bought 90 days worth of vitamins 89 days ago, and they’re about to run out.”
Notwithstanding possible concerns about privacy, Gildenberg said that pharmacy retailers also could create special opt-in programs for customers with special health needs, like diabetics. Last September, Rite Aid rolled out the first major expansion of its Wellness+ program, Wellness+ for Diabetes.
Loyalty programs aren’t limited to just the big chains. Pharmaca Integrative Pharmacy, the Boulder, Colo.-based chain that operates 24 stores in the West, has found success with its Feel Better Rewards program, including a 50% increase in the percentage of customers cross-shopping between pharmacy and the rest of the store and an increase of 10% to 15% in per-member spending. Pharmaca president and CEO Mark Panzer attributes this to its ability to approach on a customer-by-customer basis instead of simply putting out a circular that tries to grab for anyone the chain can. “It allows you to be more micro than macro in your approach to setting marketing goals,” Panzer told DSN.