By Dave Williams

In an increasingly competitive marketplace, many pharmacies are looking to cultivate greater customer affinity with a branded loyalty program. One misconception among many retailers is that these programs have to be complicated. Nothing could be further from the truth. By simply instituting a loyalty program where customers perceive some added value, store visit frequency and average basket size should increase by at least 1% to 2%. Such a sales increase generally pays for the cost of a loyalty program many times over, and it has the added benefit of reducing customer attrition.

Get Started

The first step in the process is for retailers to set up a database of customer information. Generally, customers are not willing to provide personal data unless there is a perceived valued for them. A loyalty program can provide such value in a variety of ways, such as:

• Issuing customers with a "VIP Club" card.
• Allowing customers to accumulate points based on their purchases, and issuing rewards based on meeting certain point thresholds - e.g.,
  • Discounts (or even better, rebates, because they force an incremental visit to your pharmacy).
  • Gifts.
• Treating members "specially" - e.g.,
  • Sending them targeted promotions.
  • Inviting them to special events.
  • Donating a percentage of their purchases to charity.

There's no need to do the substantial amount of work necessary to develop and maintain a program in-house, since there are advanced loyalty programs available that can be easily configured to provide such capabilities in an "auto-pilot" mode of operation. Customer data, points, and rewards can be tracked automatically by such a system.

Once you have a customer database that is tied to purchases, you have an incredible amount of power to drive customers into your pharmacy and get them to spend more. Here are some examples of how this be achieved.

Cultivate Greater Customer Loyalty

Sending customers a birthday card is a good way to increase customer loyalty, and it often can lead to an incremental visit. For example, you can give them a gift on a product or line that they may not ordinarily purchase. This may lead the customer to become a regular consumer of this product, or of products within that brand.

Retain More of Your Customers

The average retailer loses 25% of its customers each year - this is particularly true in the independent pharmacy marketplace, where big-box and chain pharmacy retailers are investing billions of dollars to gain customers.

By identifying customers who stop shopping at your store (aka M.I.A., or missing in action, customers), you can make them a compelling offer to bring them back into your pharmacy - before they become regular shoppers of a competitor.

As it costs five times more to acquire a new customer than it does to retain an existing customer, it is far more cost-effective to keep customer attrition to a minimum.

Up-Sell Your Front-Store Customers

Another source of hidden profit in your pharmacy is associated with opportunity gaps - i.e., products that your customers would likely purchase based on items or products that they already purchasing. Your customer database can help you find opportunities to market these items to customers likely to buy them. For example, you might generate a list of customers who are purchasing vitamins but not supplements, and send them a special supplement promotion, such as "Buy one, get one free." This type of marketing makes total financing sense, because the vitamin buyer is much more likely to become a supplement buyer. Consequently, your marketing is much more targeted and cost-effective.

Another way to up-sell customers is to sell them within a brand - e.g., find customers who are buying products within a brand, and up-sell them on other products within the brand that they are not purchasing. This is a particularly good technique for high-margin items, or items that have been purchased on a deal at a deep discount.

Rapid Improvement

Once again, advanced loyalty programs can provide a simple interface to perform these functions and provide you with numerous benefits:

• A stronger competitive position.
• Reduced customer attrition.
• Greater customer affinity.
• Higher sales per customer.
• More cost-effective and powerful marketing capabilities.
• An enhanced ability to grow your business with new customer referrals and up-sell opportunities with existing customers.

In my experience of helping retailers implement loyalty programs over the past 15 years, I can say confidently that a well-implemented loyalty program cannot only provide you with an almost immediate 1% to 2% increase in sales - as I mentioned earlier - but can also offer a potential increase of more than 5% in sales annually, if you employ the tactics outlined in this article. Moreover, advanced loyalty programs have become extremely easy to implement, so that you can continue to focus on your core business while still reaping all the benefits that a loyalty program can bring.

About the author
Dave Williams has developed a national reputation for helping retailers increase their sales and profits by intelligently leveraging their own retail point-of-sale data. Over his career, his retail clients have included many prominent national retailers such as CVS/Pharmacy, Walgreens, L.L. Bean, and Costco, and manufacturer clients such as Unilever, Revlon, and American Greetings. Dave has founded, grown, and sold several retail consulting businesses and currently serves as Pharmacists Online's vice president for loyalty services, where he is responsible for all aspects of the company's Loyalty Genius product, including R&D, sales, and marketing.