Walgreen to launch loyalty program

Customers will earn points through purchases, and electronic health records will help stores give them personalized advice.

By Trefis Aug 29, 2012 9:46AM
Trefis LogoTara Moore Getty ImagesWalgreen (WAG) lost a large number of customers to competitors last year as it tried to resolve its dispute with pharmacy benefits manager Express Scripts. Now the company has announced a new opportunity to reward its most loyal customers and attract new ones, including those with Express Scripts.

CVS Caremark
(CVS) and Rite Aid (RAD) have had programs for several years.

Walgreen's program will blend the elements of loyalty plans offered by its competitors and other elements reminiscent of frequent-flyer programs.

The company will roll out a countrywide electronic health record service in collaboration with Greenway Medical Technologies in an effort to provide better service. The EHR will help Walgreen give personalized advice to customers.

Loyal customers can boost revenue with repeat purchase

The loyalty program is set for launch on Sept. 16. Customers will earn points by purchasing certain items, filling prescriptions, getting shots and even participating in a walking program.

Points will be worth more as users accrue them. For example, 5,000 points will net a $5 reward, while 40,000 points will net $50. Points can then be redeemed online or at a store. Walgreen is targeting tens of millions of people to sign up before the end of the year as it aims to become as big as CVS in loyalty programs.

Walgreen Stock Break-UpThe market for loyalty cards is big and brings in more revenue as shopping frequency and customer spending increase. CVS' ExtraCare card debuted in 2001 and has more than 70 million households and 100 million individuals who use the card at least once every six months. The company claims a redemption rate of 55% for its quarterly ExtraBucks program.

Rite Aid has 25 million Wellness+ members who use its card at least twice every six months. Rite Aid reported that Wellness+ users accounted for 75% of its general merchandise sales and 69% of its filled prescriptions in the first quarter.

While Walgreen has not divulged the costs, a loyalty plan entails millions of dollars in capital investments. The payoffs can be even greater, as the most loyal patrons are also the most profitable. We expect the program to boost the company's revenue per customer.

Personalized service will attract new customers

Walgreen plans to introduce the Greenway Electronic Health Record across its 8,000 locations by next summer. Currently, it is available at about 200 stores. The service would give pharmacy staffers access to customer records for prescriptions, immunizations, health testing and pharmacy information. Based on those records, staffers can provide additional recommendations, such as when a customer is due for a specific immunization. We expect the service to help the company win over additional customers from local and national rivals.

We currently have a $39 price estimate for Walgreen, 10% more than the current market price.

Aug 29, 2012 12:01PM

I wonder if this will replace the Prescription Savings Club (WCARD) that costs $20/year.  If they would have offered that program for FREE and promoted it more it would have worked. I go to Walgreens all over between IN and FL and most of the stores do not know about the WCARD until I explain it to them.... You get 10% off Walgreen brand items plus RX discounts.

I worked for WAG in FL for 20 years and it was promoted heavy there but nowhere else.

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