6 Personalization Practices from Walgreens' Balance Rewards Program

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How the retail pharmacy chain uses customer data to make its marketing messages relevant

Personalization is no longer just a buzzword. For many organizations, it's becoming table stakes.

A 2016 survey of 250 professionals from companies ranging in size found that 85% of respondents are implementing some form of personalization. And while 74% of respondents say personalization is “very” or “extremely” important, the study—conducted by personalization platform provider Evergage and research company Researchscape International—found that more than half (55%) of respondents give their personalization efforts a grade of C or lower.

Walgreens is one brand that seems to rise above these rankings. The retail pharmacy chain personalizes its direct mail and digital marketing efforts to more effectively communicate with its Balance Rewards members and retain their business.

Growing a personalized program

Walgreens launched its rewards program Balance Rewards in 2012. In just five years, it's grown that program to more than 150 million registered members and more than 85 million active members, offering both its marketers and its CPG partners a wealth of data. 

Of course, some of Walgreens' reward members are more valuable than others. By using customer data analysis solution emnos, Walgreens can identify these high-value customers and then leverage personalization to communicate with them in a relevant way, ultimately driving loyalty. Indeed, Walgreens targets members at each stage of their customer journey, such as through its acquisition, win-back, and loyalty and retention campaigns.

“[Personalization is] really the future of Balanced Rewards,” Mindy Heintskill, VP of loyalty and personalized marketing at Walgreens, said during a panel discussion moderated by emnos' managing director Ron Orgiefsky at Retail's Big Show in New York.

Lisa Zhao, Walgreens' director of supplier direct marketing, shared the stage with Heintskill and acknowledged that the level of personalization can vary per communication. One way Walgreens personalizes its communications is by purchase data. For instance, Zhao said customers might receive direct mail offers for products they've already bought or are likely to buy based on purchases in similar categories. A blog post by emnos also states that Walgreens can target members based on points earned, time spent in program, nearest store location, and more.

Walgreens' "Thank You" program is one example of how the brand leverages personalization effectively. For the program, Walgreens segments its shoppers into three groups based on their propensity to purchase.

The retail pharmacy chain invests the most resources into its highest-propensity-to-buy segment. These customers receive targeted communications, including a new product sample, a direct mail piece, and an email. If they don't buy, Walgreens sends them a follow-up direct mail piece. Heintskill said the company doesn't send a follow-up email because it doesn't want to drive unsubscribes.

Customers with the second highest likelihood to purchase are exposed to placement ads and are given register coupons to help drive awareness.

Finally, the customers who are the least likely to purchase are exposed to paid search and digital display ads. These ads direct them to a page on Walgreens.com where customers can learn more about the brand. Heintskill said this targeting technique is also effective for reaching customers for whom Walgreens doesn't have an email address.

“Being able to find them anywhere they are on the internet is amazing,” she said.

But do these personalization efforts actually pay off? Zhao seems to think so. She said that customers who respond to a targeted campaign have a “much higher” Net Promoter Score than customers who have never seen one or are new to a targeted campaign. She also said customers actually notice the targeted offers and even ask for more.

“Once you respond to one campaign, you become a believer,” she said.

Plus, the aforementioned emnos blog post states that, according to a longitudinal study of the "Thank You" program, targeted customers drive more incremental sales and higher long-term value than a control group.

Following best practices

So, how can other marketers learn from Walgreens and replicate the company's success? Here are six pieces of personalization advice Heintskill shared during her session.

1. Focus on long-term goals, not short-term gains. Heintskill acknowledged that it can be easy for marketers to get overly excited about short-term sales lifts. However, she encouraged them to stay focused on the long-term objectives of learning and optimizing. Instead of measuring success based on the performance of each campaign, she said, marketers should “start with the end in mind” and establish long-term KPIs.

“The more we learn, the more we can optimize,” she said.

2. Run tests often and keep them simple. Testing plays a major role in Walgreens' personalization strategy. In fact, Zhao said that Walgreens tweaks its campaigns every quarter to see which elements are performing well and which ones aren't. These experiments can range from testing offers and targeting methods to channels and creative.

Heintskill's belief in testing was reaffirmed when Walgreens ran a test comparing two different types of creative. The company was in the process of hiring a new agency and, as part of the evaluation, it ran a campaign that featured creative from two potential candidates. Half of Walgreens' Balance Rewards members saw creative from agency A and half of them saw creative from agency B. The redemption rates from one agency's creative far outperformed the redemption rates from the other, emphasizing the importance of doing simple testing to derive big learnings.

“Always minimize your tests,” Heintskill said. “Don't maximize them until you know they work.”

3. Follow the data. It's important to have a good gut, but Heintskill says it's far better to follow the data's lead—as the aforementioned example shows.

“Leverage the data,” she said. “Intuition is just not good enough.”

4. Reward the best customers. Not all customers hold equal value. That's why Heintskill encouraged marketers to “reward their best customers” and to take care of their existing patrons.

“It costs you far less to retain a customer than it does to win them back,” she said.

5. Focus on quality, not quantity. It can be tempting for marketers to send batch-and-blast emails to their entire customer base. However, Heintskill urged marketers to focus on the relevancy of their messages—even if that means marketing to a smaller group.

“Don't risk [losing] a customer relationship for a marketing agenda,” she said.

6. Measure everything. Marketers want to know the fruits of their labor, and Heintskill encouraged them to track everything they can. As she put it, “If you can't measure it, don't bother.”

Photo credit: Walgreens 

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