NRF: Walgreens exec advises retailers to invest heavily in loyalty schemes

Speaking at the National Retail Federation’s Big Show in New York, Walgreens senior manager of loyalty and insights David Zychinski argued the company’s loyalty programme has been worth the investment.

He said: “You need to be prepared for fairly major investments to get the right tools and technology in place. These transformations will require big break downs of traditional silos – we are in the process of that at Walgreens now.”

The pharmacy retailer is investing heavily in its Balance Rewards loyalty programme as it seeks to expand revenues after its stores estate reached saturation point in the US market.

Zychinski said that between 2000 and 2010 Walgreens opened 5,000 new locations and as result is now focusing on increasing the amount the retailer’s existing customers spend.

Walgreens is pouring its energy predominantly into its most loyal customers rather than acquiring new customers because 15% of its customers generate about two thirds of its value in terms of revenue and profits.

Zychinski said: “There is a really large effort to better retain those customers and keep those dollars at Walgreens, we have a big opportunity to grow that share of wallet.”

Walgreens is attempting to build an “ecosystem” around the programme by using the data from it to take new approaches to merchandising, adapt pricings and promotions and improve store formats.

The scheme’s innovations include allowing consumers with connected devices to sync them to their loyalty cards to allow them to earn points for their “healthy choices”.

Walgreens loyalty scheme has grown to have over 80m active members, which makes it the largest loyalty programme in the US.