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.
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,
- 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).
- Treating members "specially" - e.g.,
- Sending them targeted promotions.
- Inviting them to special events.
- Donating a percentage of their purchases to charity.
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
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
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
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.
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.
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.
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
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.