* Walgreen to start Balance Rewards program in September
* CVS and Rite Aid already have millions in their loyalty
* Loyalty entry comes just as Express Scripts deal begins
By Jessica Wohl
Aug 24 Walgreen Co will join the loyalty
card game next month as it tries to win back millions of
pharmacy patrons, a daunting task as rivals CVS Caremark Corp
and Rite Aid Corp already have well-established
For years Walgreen, the largest U.S. drugstore chain, said
it was just fine without a loyalty card that rewards holders for
spending more. Now, after testing formats for a year and a half,
and after losing shoppers who had to fill Express Scripts
prescriptions elsewhere for most of 2012, the chain is embarking
on one of the biggest marketing pushes in its 111-year history.
Heading the introduction of the Balance Rewards card is
Graham Atkinson, who led United Airlines' Mileage Plus
program before he joined Walgreen as chief customer experience
officer in January 2011.
Walgreen's new program blends aspects of airlines' frequent
flyer plans and loyalty cards from drugstore rivals and Duane
Reade, which the company acquired in 2010.
"This program is all about collecting points, saving up for
a treat," said Atkinson. "If we get a more engaged customer, and
ultimately a more loyal customer, they will give us a larger
share of their shopping wallet."
Walgreen will bring out its loyalty card on Sept. 16,
although patrons can sign up starting early next month with a
chance to win 10 million points.
"Today, it's kind of table stakes in most retail to have
some program for rewarding, incenting, personalizing
communications to your shoppers," said Ben Sprecher, co-founder
of Incentive Targeting, a software company that helps retailers
and brands understand and change shopper behavior. "It
absolutely needs to be done, and better late than never."
Walgreen shoppers will earn points for buying certain items,
filling prescriptions, getting shots and even participating in a
walking program. Those points are worth more as users accrue
them. For example 5,000 points nets a shopper a $5 reward. But
it only takes 40,000 points to get $50 to use in the store or
"We're looking for tens of millions of sign-ups before the
end of the year, and we do believe this can be as big, if not
bigger, than the CVS program," said Atkinson.
But CVS and Rite Aid, which continue to add features to
their programs, say they think they have a head start.
"You can't make a 12-year scotch in 12 months," said CVS
Chief Marketing Officer Rob Price. "We feel a little bit that
way about loyalty. A genuine relationship takes time to
CVS's ExtraCare card began with a pilot program in 1997 and
went national in 2001. More than 70 million households and more
than 100 million individuals use it at least once every six
Rite Aid said that as of early June, it had 25 million
wellness+ members who had used their cards at least twice in the
past six months.
FOLLOW THE LEADER
Any retail loyalty program is often measured against the one
at Kroger Co. The grocer partnered with British loyalty
firm dunnhumby in 2003 to better personalize discounts after
starting its own program in the mid-1990s.
Nearly 60 million households have signed up for Kroger's
card, and redemption rates for its personalized offers can be as
high as 70 percent, well above the average rate of 5 percent or
less for coupons.
CVS, the leader in drugstore loyalty, said its quarterly
ExtraBucks rewards had a redemption rate of about 55 percent.
Drugstores already have an edge in keeping customers loyal
since many return to a store to pick up regular prescriptions.
But Walgreen lost many patrons this year during its now-resolved
rift with pharmacy benefits manager Express Scripts Holding Co
Walgreen can start filling Express Scripts prescriptions
again on Sept. 15, the day before Balance Rewards begins.
CVS, meanwhile, is trying to strengthen the connection
between pharmacy sales and loyalty. It is conducting a
five-market pilot program in which users get $5 in ExtraBucks
for every five prescriptions filled, up from $1 for every two
prescriptions. CVS said it was thinking about whether to enhance
pharmacy-related ExtraCare rewards nationally in 2013.
While Walgreen has not divulged costs, introducing its plan
included a "significant technological investment," Atkinson
Implementing a loyalty card program at a large retailer can
cost millions of dollars, Sprecher said.
The payoff can be even greater, as chains' most loyal
patrons become their most profitable ones.
In the first quarter, Rite Aid's wellness+ users accounted
for 75 percent of general merchandise sales, up from 67 percent
a year earlier, and 69 percent of prescriptions filled, up from
Shoppers who reach Rite Aid's "silver" and "gold" levels get
discounts across most of the store, which then spur them to
visit the chain more often.
"We see pretty dramatically increased frequency and spending
from those customers," said Rite Aid Chief Operating Officer Ken
Martindale. "They are by far our most profitable customers."