Drugstores Innovate to Increase Loyalty

Recent conversations with senior executives highlight a huge range of interpretations of customer loyalty and how to get and keep it. For some, it’s about offering discounts or rewarding customers with points toward discounts. For others, it’s about offering free stuff customers may or may not want.

The airlines popularized the the discount version of loyalty programs. American Airlines launched its AAdvantage loyalty program in 1981 and cards and points became the status symbols of the new loyalty. I know people who jump through hoops to fly enough segments to qualify for specific airline bonus programs.

While the programs arguably generate incremental bookings, building positive feelings toward the brand is a big part of the point. So, to see how well these programs have worked, regard for airline brands has to be considered.

Turns out the airline industry as a whole scored the lowest of all 43 industries tracked by the American Customer Satisfaction Index for 2008. In contrast, cigarette companies, wireless service providers, and banks -- not exactly topping anyone's list of favorite industries -- ranked higher than airlines, and were not even in the bottom 3! And airline tickets are a commodity, as the ever-growing number of web tools for finding the best fare demonstrate. So, overall, it's hard to say these programs have worked as intended.

Making it easy to join, and offering discounts for “members” like the airlines and grocery stores do, is one approach to loyalty. Recently, two drug store chains took a different approach by strategically selecting which relationships to invest in. Both have launched new programs that will help promote customer loyalty, even though they aren’t officially “loyalty programs.”

Walgreens just announced that it is offering free visits to its TakeCare in-store clinics for the rest of the year for workers who are laid off and have no health insurance. The assumption is that these workers will find new jobs, and when they do, they will continue shopping (and start paying) Walgreens.

CVS is also investing in a strategic group of customers. Though its partnership with Google, CVS pharmacy customers can now download their prescription and medication histories to Google Health accounts. Like downloads into Quickbooks, the ability to download into Google Health accounts may become standard. Google certainly hopes so. For now, CVS is the only drugstore to offer these downloads, and is betting the early adopters it appeals to are upscale customers who value the opportunity to manage their health-related information themselves, and will consolidate their prescriptions (and other purchases) at the drugstore that enables them to do so.

The urgency surrounding health care cost management and health insurance coverage is becoming a potent source of innovation and potentially of loyalty for retailers. Hopefully, health care providers and insurers will be similarly inspired!