Monday, September 8, 2008

Case Study: Walgreens and Behavioral Targeting


It's pretty tough right now to be a retailer. The economy is limping along. The Walmarts of the world are bringing prices down and changing customer expectations every day.

Smart retailers need to use all of the tools at their disposal to get more customers and sell more stuff. This article about Walgreen's coupon strategies, brought to us by DM News caught my eye: Walgreens' in-store BT strategy hits the mark.

Background
Walgreens is using behavioral tar­geting to engage customers in its stores.

The nation's largest drugstore chain has partnered with Catalina Marketing to print targeted coupons in its 6,000 stores, which are given to customers based on their purchasing behaviors, as they receive their receipts. Catalina runs in-store pro­motions in about 25,000 grocery stores and 14,000 pharmacies nationwide.

Strategy
Walgreens' overall strategy is to lever­age consumer data more effectively, which Doug Egan, VP of marketing services and research for the company, said has ramped up in the last six months.

“[It's] part of a larger understanding that purchasing behavior can be changed in-store,” he said. “Truly, the trackability of it is great. We can track purchases by store, time of day and even register.”

Walgreens' marketing spend is still dominated by its circular — 60 million per week — and by direct mail.

Results
Egan said that in-store promotions, cur­rently accounting for 10% of Walgreens' marketing spend, are growing, thanks to the success of the Catalina promotions.

“What we've heard from customers is that they are useful,” he said.

Average Walgreens stores see between 800 and 1,000 customers per day and print Catalina coupons for about 10% to 12% of them. About 6% of those printed are redeemed at a future date, said Egan.

The goal of using Catalina coupons or behavior targeting overall is to expand the consumer's shopping basket, said Egan.

“The average purchase, not counting pharmacy, is three to four items per store visit, and two store visits a month. We want to add a trip a month,” he said. “It's great to see data of what a customer is purchasing in real-time. You can then offer related programs. If they purchase two twelve-packs of Pepsi, we can target them with a coupon for a dollar off of three twelve-packs. You can see what customers purchase consistently.”

Interesting case study, no?

Back in June, I blogged about couponning and put forth this challenge to direct marketers: How do you track exactly who is redeeming your coupon, without making this cumbersome to the consumer? In Walgreen's case, they know what products people are purchasing, but I still can't see where they have a handle on the make-up of what buyers look like.

It would be so much more powerful if you could flesh out purchase behavior with other things known about the consumer, wouldn't it?

Then, you could begin true database marketing and really start to delight your customers--with offers tailored specifically to a customers' specific needs and situation. You'd not only have the knowledge that a specific customer enjoys Pepsi over Coke, but if you knew, for example, that that customer has a large family and likes to go camping, you could customize the Pepsi offer to include a propane tank or other camping gear. Now, we're talking about a much larger shopping cart (more revenue), and a satisfied customer who leaves the store happy that they've gotten a great deal, not only on Pepsi but on gear for an activity they love.

I would love to see retailing move in this direction, wouldn't you?

1 comment:

Den said...

Hello, like your blog. I see you are talking about Walgreens here. I learned about the company on this great site www.pissedconsumer.com. The reason I paid attention to it is that it is a pharmaceutical company and it has so many negative feedbacks from the clients. I think is is shameful. They are supposed to cure people and they in fact make it worse for them causing inconveniences.