Walgreens Engages Suppliers with 'Thank You' Approach to Personalized Marketing

Walgreens launched its Balance Rewards loyalty program for two purposes: to build customer knowledge and differentially engage customers. Some of that engagement comes through the rewards points and programs such as the newly launched "beauty club," but the shopper data that the retailer obtains from the program also enables a deeper layer of personalized promotion as well as the opportunity to engage suppliers."We knew the program had enabled fundamentally more strategic relationships with our supplier partners," said vice president of loyalty and personalized marketing Mindy Heintskill, who joined Walgreens a year prior to the program's launch. She was presenting at the National Retail Federation's Big Show in January with Ron Orgiefsky, U.S. managing director of emnos.Walgreens partners with the company — a subsidiary of Loyalty Partners, which is a subsidiary of American Express — to exploit Balance Rewards data from an insights and personalization perspective. The retailer also established an internal team that plays an ongoing consulting and training role, enabling supplier partners to reap the benefits of the data and line up objectives internally."It's really the future of Balance Rewards," Heintskill said. "It solidifies that customer knowledge that we use to make all of our decisions, so we have kind of a discount program and that traditional loyalty program and the next step on that is really the personalized marketing that you can add."Quarterly Thank YouThe drugstore chain's longest-running and largest personalization effort is the "Quarterly Thank You" program. Launched just months after Balance Rewards, the quarterly communication delivers individually tailored offers, products and messages based on past purchase behavior, with the goal of increasing retention and loyalty among the retailer's very best shoppers."We took what traditionally, from a loyalty program perspective, would have just been a statement communication [of a member's account balance] and added a huge component of personalized value," Heintskill said. "We knew that this was a perfect opportunity to partner with our suppliers because we have a mutual objective. When we add that personalized value component it's all about driving increased basket size, increased trips and brand dollars."There are multiple fronts for personalizing the quarterly communications, said co-presenter Lisa Zhao, who manages supplier direct marketing for Walgreens, working with CPG manufacturers such as Procter & Gamble and Johnson & Johnson to help them reach their best customers at the chain. The retailer's strategies include:Relevant offers: 99% of recipients get a different communication.Tailored messaging and content: telling members about the specific promotional events that they have not yet opted in to, for example.Preferred channel: Walgreens continues to take advantage of the traditional print route but also employs email, Catalina prints at checkout, and the digital programmatic channel.With the goals of incremental sales and higher engagement, Walgreens makes little tweaks to its strategy every quarter. The retailer has experimented with the offer mix, for example, to balance reward and acquisition whenever they reach out to a member."We want to reward customers for continuing to buy the same thing by giving them an incentive, while our CPG partners want to acquire new customers," Zhao said.She indicated that Walgreens looks for a ratio that both increases sales uplift and delivers benefits to supplier partners.Another area Walgreens has adjusted is creative, over time going from simplistic to overly artistic to gauge response. The retailer settled on a straightforward and very clean look as eliciting the highest response rates.The tweaks are executed through a strict due diligence process to see which changes will eventually help drive more sales and a higher response rate, which ideas are repeatable in the future, and which are scalable. Ongoing measurement of the incremental sales response is crucial."In the short term, it's about the incremental trip that a customer wasn't going to make but then, after receiving the campaign, they made that trip," Zhao said. "Or, in order to meet their spend threshold on a coupon they'll end up increasing their basket size by picking up more on the same trip, so in the end we see a lot of the halo benefits from them picking up some cosmetics when they receive a vitamins offer. The benefit coming from the halo actually far exceeds the benefit from the offers themselves."For long-term measurement, the retailer maintains a control group that do not receive the Quarterly Thank You communications. During a two-year extensive study tracking millions of shoppers the retailer found that a larger percentage left Walgreens or dropped down from being best customers when they did not receive the communications. Those that did were more likely to stay with the retailer and maintain their frequency of trips and amount of spend, affirming the retailer's efforts to protect long-term loyalty.Internally, some people wanted to stop the control group once they knew the program worked, but the measurement plan continues to be critical to drive long-term success and has even helped to instill more of a measurement culture overall within Walgreens' marketing department."The goal of personalized marketing isn't to drive lift and stop there, it's to optimize over time," Heintskill said. "If I gave up my control group, two years from now, I could never say that it's still working or that, even more importantly, it's working better than ever before. So the more we learn the more we can optimize the more data we collect – the better and better we should be getting."New Product LaunchWalgreens also applies learnings from the Quarterly Thank You program to smaller projects. One such effort was a multi-channel program for a new product launch that segmented members into three groups based on their likelihood to convert and allowed the retailer and brand to invest at individual levels that maximize ROI:Laser-targeted: The first group got the biggest investment on a per customer basis, receiving a sample of the new product, a direct mail, and then a direct email. Once the campaign lapsed, Walgreens further targeted members who didn't respond to the first campaign and followed up with other direct mail. "We didn't do that in the email channel because, from past experience, that increases our unsubscription rate which will have a lasting effect on other campaigns," Zhao said.Targeted awareness: The second group got a smaller investment per customer but reached more of them during a longer time period via the Catalina coupon program whenever they were in the store. They also received some sort of placement ad within Walgreens' email program.Enhancement: Requiring the smallest investment per customer, this group was targeted with digital display programmatically as well as paid search. "Some of our best customers we don’t have an email for or [they] don't respond to direct email," Heintskill said. "Targeted digital advertising has been a game changer in terms of extending the reach of all of our campaigns."The retailer has seen significant ROI improvement when they reach out to members that really care about a particular message."We've also found that traditionally mass advertised campaigns like cause marketing or brand building do even better when you have personalization," Heintskill said.That personalization extends to the Balance Rewards lifecycle email series: new members receive a "welcome to the program" email; members that are close to redeeming receive a reminder alert; and after they have redeemed, they receive a "good job, you earned $5 back" missive. Instead of sending mass emails, Walgreens can find the member in the channel that's most relevant to her — maybe that's a digital ad while she's on the internet or maybe it's an offer at the register — and can suggest products that are relevant to that specific member."All of those things work harder when they're more relevant," Heintskill said. "Taking a generic message and turning it into something more personalized increases the response rate every time."Vitamin AngelsTo wit, the retailer recently added a personalized element to complement its ongoing support for Vitamin Angels. Around Thanksgiving, Walgreens ran a national "Happy Thanks for Giving" campaign with a personalized element that reengaged the customers that had supported the charity."We had a marketing message that goes to everybody — we knew it would resonate with everyone — but there was a select universe that we knew would need even more of it, so we went after vitamins customers with a direct mail piece, email piece, digital programming to really emphasize that 'thanks for giving' and hone the message a little bit more around vitamins," Heintskill said. The personalized outreach also included relevant vitamin offers targeted for each customer."We don't have to convince these suppliers to participate," Zhao said. "For CPG companies, it's always about acquiring new customers so from the Quarterly Thank You personalization they actually see the value of doing that, they're not afraid of extending these really high-value offers for these customers that are already purchasing their brands."TakeawaysAs shared by the presenters:Leverage the data — intuition is just not good enough; you don't know your customers better than you do when you look at the data.Reward your best customers — it costs you far less to retain your customers than it does to win them back.Stay relevant — especially in email, where costs don't hold you back but where recipients may unsubscribe.Test, optimize and innovate — you can't get ahead of this. Customers are constantly evolving, so you continuously have to be innovating and testing over time.If you can't measure it, don't bother.

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