Walgreens uses ‘multi-motivators’ to influence behavior

Through a special arrangement, what follows is a summary of an article from COLLOQUY, provider of loyalty-marketing publishing, education and research since 1990.

Straightforward loyalty programs can no longer be viewed as the single most powerful tool for engagement. This is where multi-motivators come in. The trick is balancing the right number of programs and maintaining the intelligence to run them all effectively and profitably.

The strategy involves employing various promotional activities, including weekly sales, exclusive benefits, seasonal promotions and contests, to run along with a loyalty program.

"We think of loyalty as an ecosystem, not just a program," said David Zychinski, senior manager of loyalty strategy and insights, Walgreens, at the NRF Big Show. "It’s about rewarding our best customers for making Walgreens their health and well-being destination."

He partnered with Caroline Papadatos, SVP of international corporate marketing at LoyaltyOne, to discuss the multi-motivator approach in a session entitled, "Motivating Behavioral Change with A Loyalty Strategy."

To reach its best customers, Walgreens employs direct and indirect methods. For example, its quarterly direct mail campaign, called Thank You, offers highly personalized sets of offers. Its Balance Rewards for Healthy Choices, a subprogram of its Balance Rewards program, rewards members for purchases and other non-transactional activities. And receipt and e-mail offers reward a broader group of customers, encouraging behavior change.

walgreens healthy choices

"What we found is it does build loyalty," Mr. Zychinski said of Walgreen’s direct offers. "Those customers just become better customers." Such efforts require a major investment, he said, which served to segue Ms. Papadatos into the topic of effective multi-motivator strategies.

She illustrated how one consumer, a student, might not appear to be a high-value customer unless the merchant looks at what she buys, which might include a category of high-margin products. Then if the merchant looks further at her category behavior, she looks like a mother. And if her redemption activity is examinied, she is a world traveler.

Such individual complexities are causing data investments to outpace loyalty investments.

Yet even the best loyalty programs may not appeal to everyone. "To get that other 50 percent of customers, you have to expand the motivator set," she said. Done well, such programs can generate 3 percent to 5 percent lift in sales over a sustained period. Promotional pricing alone could translate to a 2 percent to 5 percent increase.

Ideally, merchants will shift from running six or seven initiatives to operating an integrated platform that allows them to see the benefits of each motivator underway, Ms. Papadatos said, "Because data is not a decision tool if you have six or seven decisions and no way to prioritize."

BrainTrust

Discussion Questions

Should loyalty be looked at more as “an ecosystem, not just a program”? Can many retailers tap healthy life choices to encourage behavior change and support loyalty?

Poll

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Chris Petersen, PhD
Chris Petersen, PhD
9 years ago

If loyalty means “repeat visits” and “lifetime value” of the consumer, then loyalty management is definitely an ecosystem, not just a program.

Walgreens is in a class of trade where loyalty over time definitely creates sales, but also a more profitable mix.

However, few retailers are prepared or equipped to install and manage the Big Data systems and analytics required to both manage and measure a platform like Walgreens.

Ian Percy
Ian Percy
9 years ago

Lord help us all—now we have an “ecosystem” just to go shopping. Could we possibly make a simple experience any more convoluted and manipulative? Walgreens is employing “multi-motivators” just to get people to shop there?

So if I get it, a student walks into Walgreens who, at first, looks like, well, a student. Then she buys something expensive and Walgreens starts to drool. Suddenly someone in the store thinks she also looks like a “mother” and everything changes. Not only that but somehow Walgreens knows that this “rich” student with classes to attend and with a baby to look after also likes to travel and another “motivation” presents itself. Yup, it all makes perfect sense to me.

Honestly, I can’t wait to go there and see how crazy an ecosystem I can create for myself.

David Livingston
David Livingston
9 years ago

Walgreens has a program that you can use to log in your daily exercise activities. Pretty soon you have $5 you can spend. Now it does take a lot of logging in to get to $5. As for shopping, the above article was full of buzzwords that did not really make much sense to me. However, to put it simply, if you spend money at Walgreens they will reward you in cash credits to buy things. Motivator set, individual complexities, multi-motivator strategies, loyalty investments, ecosystem: Hmmm … big words, I’m impressed. The important thing is to impress the customer, and it appears Walgreens has done that by offering financial incentives that consumers understand.

Nikki Baird
Nikki Baird
9 years ago

If by “program” you mean a one-dimensional interaction focused only on promotions or discounts, and by “ecosystem” you mean a multi-dimensional approach that focuses on other elements of engagement beyond just price, then heck yeah! Loyalty should definitely be looked at in the broader sense. And I strongly believe that ANY retailer can benefit by looking at their loyalty strategy that way.

Loyalty programs devolve into discounts and a focus on price because that is easy compared to other things you could do. But if retailers really want “loyal” customers, then they need to focus on solving their problems or helping them achieve their objectives. And I say again, this is something ANY retailer can do.

Perfect example: I once got into a discussion about this with a retailer who operates airport convenience stores/news stands. He said “There is no loyalty in my business. One store is as good as another and most consumers aren’t even aware of a ‘brand’ associated with my type of retail. How can a loyalty program possibly help me?”

And my response was: What problem do your customers have? They forgot something they needed, or, like me, they’re a regular business traveler with a regular regimen of what they want to bring on the plane with them (that they can’t take through security). In my case, that is a bottle of water and a bottle (screw-off cap required) of Diet Coke. If I could pre-order that on a mobile app and have it waiting for pickup in front of the store, no line, no dragging my bag in the store? That would solve a problem I had and definitely make me pay attention to brand. There’s no discount involved, no promotion. Just making my life easier. If an airport c-store can figure that out, anyone can.

Problem is, those programs are a lot harder to figure out (requires that Big Data investment and probably also some on-the-ground intelligence), and they’re a lot harder to sustain over time. In the end, discounts are just easier. Which is why loyalty programs are what they are today.

Ed Rosenbaum
Ed Rosenbaum
9 years ago

There are certainly many chains that need to promote loyalty programs in order to sustain their sales and ensure customers return. Walgreens has to be one of them. There is hardly a corner in America where there is not either a Walgreens or CVS. Unless you are going to pick up a prescription, it does not matter which one you go to. The merchandise is the same and the pricing is close enough that it does not matter. There has to be a draw—a magnet to pull you to one or the other. That is where the loyalty kicks in. Be it a program giving you a discount or whatever. But again, there has to be a draw.

Ryan Mathews
Ryan Mathews
9 years ago

Like my friend Ian Percy, I cringe when I see “ecosystem” applied to everything, especially in light of the fact that it was the buzzword du jour 15 years ago.

That said, if what Walgreens is trying to do is build a better customer mousetrap based on the fact that loyalty is a complicated notion, then I’m on board.

Very early and very successful loyalty programs (think Dick’s Supermarkets) were based on the premise that all purchases are not created equal. You don’t, for example, want to reward “big spenders” if all they ever buy is loss leaders.

And effective rewards come in all shapes and sizes. Some people like coupons, others “free” goods like Starbucks offers, while still others like cash accumulation like the old Borders Rewards program.

Maybe though, the right question is how do some businesses thrive without persistent attempted economic seduction of the customer. Oh, I remember, they provide customers with goods and services so highly-valued they don’t need to be discounted.

So get with the program and drop the cliched descriptors. You want to build loyalty, how about trying the old-fashioned way? Earn it!

Phil Rubin
Phil Rubin
9 years ago

Loyalty, and especially loyalty marketing, has never been about a program any more than wellness has been about a vitamin. Loyalty marketing is a business and marketing strategy that aligns resources and investments to customers in a way that creates mutually-beneficial value.

Nikki’s comments below reflect this idea. Loyalty isn’t simple and programs are generally stood up by themselves, which is why so many are ineffective and devolve into discount programs.

Li McClelland
Li McClelland
9 years ago

Memo to Walgreens: Loyalty programs (or g*d help us, “ecosystems”) , that require work and extra thinking and participation on my part as a customer are not loyalty programs.

Lee Kent
Lee Kent
9 years ago

Loyalty is a result. Not a program. Retailers must start by creating an experience that the customer wants and needs. It doesn’t have to be discounts or cash-based in any way in order to be effective.

It simply starts with experience or service-design thinking. Let’s start journey mapping retailers!

And that’s my two cents.

Mark Price
Mark Price
9 years ago

Loyalty, as opposed to retention, is ultimately a function of perceived value plus customer experience. This ecosystem discussion seems to focus more on the perceived value, with the goal of stringing together discounts and offers to gain familiarity and lead the customer to remain a consistent Walgreens customer.

The question is—what factors actually drive LOYALTY as opposed to retaining a customer through promotions. That is where customer experience, delivered in a multi-channel approach, can make the difference. How does the company relay to the customer that they care about them and make their shopping experience (and their health information needs) easier?

That is where real loyalty emerges.

Camille P. Schuster, Ph.D.
Camille P. Schuster, Ph.D.
9 years ago

Creating new names for good business practices is not helpful. Of course, analyzing data from different sources and integrating that information regarding specific consumers and using that insight to create personalized offers and communication with consumers is good, basic business practice. The implementation is difficult. However, doing it does not need a new name. Any company using one tactic or analysis of one source of data or not examining a variety of of perspectives of individual consumers will lose to the competition.

Vahe Katros
Vahe Katros
9 years ago

Humans are the greatest threat to ecosystems and threaten biodiversity enough where they have caused mass extinctions. In this article, let’s replace the word humans with companies, especially those who sell things we ingest.

But I don’t say that to be a downer, because there is a way to save the rainforest (the health and beauty segment,) and that way is to look and learn from thriving ecosystems where pockets of healthy, smart, and happy people can be found. What are those people eating, how do they live? What can we learn so we can move away from cigarettes, over priced junk/convenience goods, and medications that lock customers into negative habits and behaviors?

Next year’s headline: “I will forever be loyal to Walgreens because they turned me on to the benefits of Dead Sea baths and Chia seeds, but more important, they helped me maintain habits that have changed my life.”

Next year’s headline: “Walgreens totally understood the challenges to adopting healthy lifestyles for someone like me, a person who lived unconsciously until my cancer diagnosis. When I came in for my medications, they understood the deal and assigned someone to change all the things that matter, removed all the friction by creating shopping lists that included seasonal food I could have home delivered from the local farmers market. I am forever loyal to that, I owe them my life.”

Said a Walgreen spokesperson: “In the beginning we sold less of the traditional over-the-counter medications, but we’ve more than made that up with new categories like our private line of mattresses that we developed with the help of our customer-ecosystem partners who reminded us of the healing power of sleep.”

FYI: I no longer shop the category, unless it’s to pick up things I forgot. And when I do come in, I actively try to eliminate the future need. But this is a great opportunity for Walgreens to help the human ecosystem! I totally support your use of the word.

James Tenser
James Tenser
9 years ago

Glad to hear that Walgreens has moved far beyond RFM analysis in refining its customer relationship programs. Detecting lifestage “signals” and then using them to routinely tailor offers is an impressive feat straight out of the “Power of Habit” book by Charles Duhigg.

But “ecosystem” implies multiple touch points for the shopper, and that makes me cringe a little. At what point does the total experience require too much effort? What’s the creepiness threshold for each individual?

Walgreens entices its shoppers to become incrementally more committed with each interaction. I expect it learns a huge amount about them. Speaking as a sometime customer, I find the program a bit tiresome, though.

Graeme McVie
Graeme McVie
9 years ago

Loyalty should certainly be looked at as more of an ecosystem than simply a program. If done correctly, data from loyalty initiatives has the potential to positively shape how customers and segments respond to price, promotion and assortment decisions. As Caroline Papadatos notes in the discussion article, “promotional pricing alone could translate to a 2 percent to 5 percent increase.” From a pricing perspective, retailers should be strategically using data from a loyalty program to understand which items are most important to their most loyal customers — and then make investments to lower prices on those specific items.

For example, your more loyal customers may be very price sensitive to some products as they are primarily making the purchase decision based upon value or price, but for other items they may be making the purchase decision based upon quality, convenience or availability and so perceive the item to have a higher value. Data from loyalty initiatives arm the retailer with insights to make these decisions in a more precise and more intelligent manner.

The same is true from a promotion and assortment perspective. Retailers should use their data to understand which promotions are most valued by loyal customers and they can design and deploy promotions tailored to the specific needs of their loyal customer. From an assortment perspective retailers can identify low productivity items that have high transferable demand and are of less importance to valuable and loyal customers. They can then have greater confidence and lower risk when deciding whether to de-list an item and replace it with a potentially more valuable item.

Kenneth Leung
Kenneth Leung
9 years ago

Loyalty is always an ecosystem, there is no single program that can push all the cognitive and emotional buttons to drive loyalty. Whether it is healthy lifestyle choices, price, or a number of factors, to create repeat purchases requires multiple activities.

John Karolefski
John Karolefski
9 years ago

Not every retailer has the resources and scale of a Walgreens. So don’t expect most retailers to be looking at loyalty as an “ecosystem.”

But more retailers are using loyalty data for personalization and targeting. That is where the focus should be with these “programs.”