How Personalization is Driving Increased Loyalty for Walgreens

Attaining customer loyalty is an incredibly difficult, but important, task in today's hypercompetitive retail environment. It's well-documented that retaining an existing customer is much more cost effective than spending to acquire a new customer. Therefore, retailers have implemented loyalty programs to incentivize customers to come back and purchase from them again and again.

Walgreens’ Balance Rewards loyalty program is one such example. The drug store chain's loyalty program has 150 million registered members, 88 million of which are active customers, and 70 percent of its sales are generated by Balance Rewards’ members. The key to Walgreens’ successful loyalty program? Personalization.

In a session yesterday at the National Retail Federation's Big Show in New York City, Mindy Heintskill, vice president of loyalty and personalized marketing, and Lisa Zhao, senior manager, supplier direct marketing, both of Walgreens, discussed the retailer's loyalty program, specifically how personalized content and offers deliver benefits to customers, Walgreens’ product suppliers (e.g., P&G, Unilever, Pfizer, etc.) and the business itself.

Win With Customers

The Balance Rewards program is based on a common goal for Walgreens and its suppliers — to win with customers. That means using data to create personalized marketing campaigns that customers enjoy receiving, no matter their level of engagement with the retailer. Whether it be an acquisition email asking a customer to join the Balance Rewards program, a close-to-redeeming offer (e.g., you're just X points away from reaching the next level of the rewards program) or a post-purchase redemption message, all communications are personalized to the individual customer.

In addition to standard product offers, Walgreens messages its Balance Rewards members to alert them of upcoming new products, thank them for being a member (a quarterly thank-you campaign is in place), ask them for their support of the various charities that Walgreens has partnered with (e.g., Vitamin Angels), among other things.

A Culture of Improvement

Walgreens uses personalization within its loyalty program many different ways, but first and foremost is to present relevant offers based on customers’ purchase histories, said Zhou. Some other types of campaigns include updates on customers’ Balance Rewards points; how many more points a customer needs to reach the next level in the program; and to create awareness of promotional events that would be relevant to the customer — e.g., in-store events in their local store.

In order to identify the optimal mix of messaging for its Balance Rewards members, including timing, channel (email, direct mail, programmatic, coupons at the point of sale), creative, offer type, etc., Walgreens uses holdout tests to see which messages perform best. A portion of loyalty program members are designated as a control group, while other members get the test campaign. A successful test for Walgreens is one in which the test segment generates incremental sales growth or incremental engagement.

“We have a continuous culture of improvement,” Zhou said. “Scale and improve through a test-and-learn approach — channels, offer types, creative, format/vehicles, etc. Identify what works, what doesn't. This influences future campaigns.”

And don't just rely on gut instinct when it comes to making decisions. Oftentimes your gut instincts are wrong.

“Don't ever let your intuition outweigh the test-and-learn approach,” said Heintskill. “For example, we ran a test where we changed the creative. I didn't think creative would make that much of difference to response rate; it did.”

Takeaway Tips

Heintskill closed the session by offering a few tips for the audience to help them improve their loyalty programs and, more specifically, marketing to loyalty program members:

• Reward your best customers with one-to-one messaging (content and offers).
• Leverage data — you don't know your customers better than the data.
• Keep messaging relevant. Don't jeopardize a customer relationship for a marketing goal (i.e., sending a generic message to a larger audience segment just to meet a sales goal).
• Test, optimize and innovate.