Walgreen to Launch Loyalty Card

Chain playing catchup with CVS, Rite Aid in drug store channel

DEERFIELD, Ill. -- Walgreen Co. will join the loyalty card game next month, reported Reuters, as it tries to win back millions of pharmacy patrons as rivals CVS Caremark Corp. and Rite Aid Corp. already have well-established programs.

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, said the report.

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," Atkinson told the news agency. "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 September 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," Ben Sprecher, co-founder of Incentive Targeting, a software company that helps retailers and brands understand and change shopper behavior, told Reuters. "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, said the report. 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 online.

"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," CVS Chief marketing officer Rob Price told the news agency. "We feel a little bit that way about loyalty. A genuine relationship takes time to develop."

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 months. CVS said its quarterly ExtraBucks rewards had a redemption rate of about 55%.

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.

Drugstores already have an edge in keeping customers loyal since many return to a store to pick up regular prescriptions, the report said. 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 September 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 said.

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% of general merchandise sales, up from 67% a year earlier, and 69% of prescriptions filled, up from 62%.

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," Rite Aid chief operating officer Ken Martindale told Reuters. "They are by far our most profitable customers."