How the Rx factor in retail loyalty is evolving
In a world dominated by generic white coats and amber-colored pill bottles, it can be difficult for pharmacies to stand out. But by enhancing pharmacy loyalty programs with perks that emphasize convenience, special services and specific shoppers’ needs, retailers can make loyalty initiatives more unique, targeted and flexible.
Traditional loyalty offerings, such as points, monetary rewards and personalized discounts for general merchandise, are not disappearing. But they are being complemented by amenities like same-day prescription delivery, digital reference and record-keeping tools, and subscription programs. Store-branded credit cards with pharmacy benefits are another focus, as are added healthcare perks, gaming platforms and ties to outside prescription discounts. Some endeavors target specific, high-spending demographics.
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“Loyalty is evolving in many ways,” said Bill Hanifin, CEO of Wise Marketer Group and Hanifin Loyalty by Impact 21. “Loyalty has always relied on rewards and recognition. Add-on services can drive loyalty, like automatic prescription renewals, senior perks or helping consumers find information, so they don’t have to search online. You need points in programs. But the importance of time savings is hard to argue with.”
Many newer pharmacy perks drive additional pharmacy traffic and help retain valuable pharmacy patients. “But how do you get them in stores to begin with?” Hanifin said. “Make them pharmacy customers. But what kind of pharmacy experience are we creating? People want to be recognized as good customers beyond earning points.”
Pharmacy customers embody the term “loyalty.” They repeatedly visit a store for prescriptions. They have ongoing relationships with pharmacists, who are specific humans with trusted knowledge. In food and general merchandise, in contrast, many shopping choices revolve around price, product and brand, prompting consumers to shop multiple outlets and switch allegiances.
“The pharmacy team can be a consumer advocate,” said Jerry Janis, director of Clarkston Consulting. “Some people visit pharmacies more often than [they visit] doctors. Pharmacy loyalty becomes key in building retailer loyalty.”
Price versus convenience
Successful pharmacy loyalty programs emphasize price-driven offers or convenience. Some favor pharmacy, others drive traffic between pharmacy and general merchandise. CVS and other big chains have multiple programs to meet myriad retailer and shopper needs.
“No customer is the same,” said Michele Driscoll, vice president of customer engagement, loyalty, personalization and promotions at CVS Health. “Our loyalty and subscription programs offer personalization and flexibility so we can deliver value to different people, depending on needs, goals and lifestyle. Industry and consumer habits are changing more rapidly. We’re meeting customers where they are and helping them navigate the healthcare journey. We continue expanding services and bringing new customers.”
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Pharmacy has played a key role since CVS launched its first loyalty program, Extra Care Rewards, in 2001, Driscoll said. CVS has since expanded and enhanced its programs.
Introduced in 2013, ExtraCare Pharmacy & Health Rewards focuses on savings and driving general merchandise sales. The free program awards shoppers up to $50 of ExtraBucks annually for prescription purchases (including pet meds). Credits can be used for purchasing any general merchandise. Family members can enroll under one account.
In 2019, CVS added CarePass, a loyalty subscription program. Emphasizing convenience, the program’s offerings include same-day prescription delivery and 20% off CVS’ Live Better private label supplements and other health-oriented items.
CVS’ loyalty platforms have been overwhelmingly successful. “CVS is focusing on accessibility, which drives the CarePass proposition,” said Brian Owens, senior vice president of commerce strategy, VMLY&R Commerce. “People like the bigger network of value.”
Amazon Prime’s influence
Driven by Amazon Prime’s success and digital technology’s growth, retailers have launched subscription programs for everything from coffee to car washes. Pharmacy is no exception, with Walgreens and Kroger also offering subscriptions. Since consumers pay a fee, retailers are guaranteed a profit.
“Amazon Prime has become the gold standard,” said Laura Kennedy, senior lead analyst of consumer and retail at CB Insights. “Subscriptions are revenue in hand. While Amazon wasn’t first, they popularized subscriptions.” Launched in 2005, Prime has an estimated 147 million U.S. members.
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Consumers remain loyal because they have made an investment. “If you’re paying into something, you’re more likely to consolidate spending at that retailer,” said Noor Abdel-Samed, managing director at L.E.K. Consulting.
While CarePass embodies convenience, Walgreens’ and Kroger’s subscription plans are attractive to uninsured individuals. According to the IQVIA Institute, out-of-pocket costs rose $4 billion in 2021 to a total of $79 billion. For retailers, uninsured folks are golden. “Cash patients have typically been profitable,” said Bobby Stephens, principal of Deloitte Services. “Having a way to attract them is important.”
Walgreens initially launched its Prescription Savings Club in 2008. It relaunched it in 2012. The first week, 125,000 people joined. It offers discounts on 8,000 human and pet medications, diabetes supplies, nebulizers and compounded medications. Subscribers get three refills for the price of two, a 10% bonus on retail purchases and 20% off immunizations. Annual membership is $20 (individuals) and $35 (families).
MyWalgreens, a free loyalty program, includes rewards and discounts involving pharmacy and other merchandise. Consumers can even earn points for meeting fitness challenge goals. A myWalgreens-branded Mastercard also has loyalty benefits.
Kroger’s Rx Savings Club offers thousands of common medications for free or at significant discounts. Annual cost is $36 (individuals) and $72 (families). Introduced in 2018 under a partnership with GoodRx, it is part of Kroger’s broader Wellness Your Way program.
Wellness Your Way’s other health perks include dietitian services, healthy cooking demos, recipes and celebrity fitness challenges, Owens said. This, and the fact that Kroger sells food, enhances the value of all healthcare offerings. “Grocery has a unique platform to engage consumers in diet and prescription services.”
Saving money also appeals strongly to seniors, families and recovering patients. “They’re a prime audience, and they’re more value conscious,” said Attila Kecsmar, CEO and co-founder of Antavo Enterprise Loyalty Cloud.
Seniors are the biggest spenders. AgingCare.com said 39% take five-plus prescriptions daily and often have limited incomes. “If a pharmacy can save you $400 and you take home less than $2,000 monthly from Social Security, that’s a big lift in your capability to spend on other merchandise,” Janis said.
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Targeted demographic programs work best under broader initiatives. “If a program favors a certain demographic, it could alienate others,” Kecsmar said. “The general rule is to create the program for a wider audience but establish bonus perks for certain demographics.”
This is the strategy at Rite Aid. In addition to its general Rewards loyalty program, it offers Rewards 65-plus. Seniors receive additional points for purchases, educational information, and free pharmacist consultations to review medications, answer Medicare Part D questions and other services.
Apps, POS and Big Data
Pharmacy’s growing role in loyalty programs has been fueled by several factors: Apple’s 2008 launch of the App Store, POS advancements, advent of Big Data, and overall digital and e-commerce growth.
Proprietary apps let retailers collect, process and inter- and cross-connect myriad types of customer data and loyalty perks. They handle secure digital checkout options and can host a plethora of other functions. “The branded mobile app is the No. 1 way to experience loyalty,” Stephens said. “It’s extremely trackable. Easy visibility and accessibility to loyalty programs are key drivers of app use.”
Apps make loyalty programs less costly to launch, maintain and monitor, which is why they have become fairly important, Abdel-Samed said. “You can’t incentivize everyone and be profitable. Apps make loyalty programs cheaper to deliver. It’s easier to see how people engage and how long they look at offers.”
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Prior to apps’ debut, retailers often had disparate loyalty programs emphasizing different categories or shoppers. “It wasn’t cohesive,” Stephens said. “Retailers initially launched programs because competitors did. Then they’d start a new one because a category or group was underserved. Now they’re looking to relaunch or bring them together, and are looking at ties to online ordering, store credit cards, etc.”
Apps’ benefits have prompted retailers to expand loyalty functions. “Apps let you conduct more transactions specific to pharmacy like tracking prescriptions, understanding your deductible and learning how to save money shipping 90-day prescriptions,” said George van Antwerp, managing director at Deloitte.
The CVS app’s Rewards Tracker tallies rewards and savings. ExtraCare text messaging highlights deals and savings. A health dashboard lets customers access COVID-19 vaccination cards and vaccine history. The app offers myriad other capabilities.
“There’s a host of benefits to our digital-forward tools,” Driscoll said. “Taking advantage of them helps keep track of family health needs, manage and pay for prescriptions, avoid lines in stores, and save time and money from the ease of a phone.”
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Text alerts regarding automatic prescription refills help pharmacies avoid missed sales. “You want to make sure they come in monthly for their script,” Abdel-Samed said. “That’s why they pre-fill and text you repeatedly. If you miss one fill annually, that’s 10% lost revenue multiplied by many customers.”
For most retailers, enhancing loyalty programs is an ongoing priority. Elina Tunyan, consumer and retail analyst at CB Insights, said investments in loyalty/rewards tech start-ups doubled in 2021 to $1.8 billion versus 2020. “Customer acquisition costs have increased; more people are online and data privacy rules make targeting customers harder. Loyalty lets retailers personalize offers while consumers share information.”
CVS, for one, is clearly not done innovating. “We’re always listening to customers and conducting research to see how we can evolve ExtraCare Rewards in the future,” Driscoll said. “We’re investing in digital across the board to deliver innovative health solutions and create a simpler, more accessible experience.”