Following Grocers' Lead, Drug Chains try loyalty cards

Card-based loyalty programs, which got their start in the supermarket industry in 1987 at Richmond, Va.-based Ukrop's Super Market's, have been adopted by several major drug store chains, including CVS, Duane Reade and Shoppers Drug Mart.

Now that they have established in-store loyalty programs, some drug store chains are looking to expand the programs to include online purchases. Tracking consumer loyalty on the Web is key as drug stores, along with other multichannel retailers, look for ways to learn more about customer spending habits across all sales channels.

The objectives of shopper loyalty programs, according to drug store officials, include gathering customer information for targeted promotions, increasing spending among current customers, and reaching new customers.

"Drug stores operate in a much different environment than supermarkets because consumers visit their stores less frequently and purchase fewer items per transaction," says Betsy Tucker, senior consultant, Retail Systems Consulting, Naples, Fla.

Historically, drug chains only discounted a limited number of items compared to the large assortment of weekly specials featured by supermarkets. "Therefore, drug chains leaping into card programs need to design programs differently," she adds.

Without card-based loyalty programs, drug store retailers have had a difficult time tracking customer purchases and preferences.

Adding to the shopping cart: Shoppers Drug Mart, Toronto, which sees 80% of Canadian households visit its stores once every eight days, launched a loyalty program to increase the spending of existing shoppers.

"We do not have a problem getting people into our stores, but we do want them to put at least one more item in their shopping basket during each trip," David Holland, vice president of corporate systems, Shoppers Drug Mart, said at the Retail Systems 2001 show in late June.

The Shoppers Optimum program, which launched across the chain's 800 stores last September, entitles customers to 10 points for every dollar they spend on goods, including over-the-counter prescriptions. They are also entitled to bonus points for specific promoted items, and point balances are printed on the customer's receipt.

Shoppers Drug Mart transmits all purchase data from the point-of-sale system to a central database, which is used to create targeted promotions. Shoppers Drug Mart uses a loyalty management system from ACI Worldwide, Omaha, Neb.

Shoppers Drug Mart, which hit its one-year enrollment goal of 4.1 million cardholders in the first 11 weeks of the program, currently collects data on 5.6 million cardholders. The company sees an average of 285,000 to 300,000 Shoppers Optimum transactions daily, and cardholder sales are 45% higher than non-card sales.

Shoppers Drug Mart is only one of many drug chains jumping on the loyalty program bandwagon. CVS, Woonsocket, R.I., launched its Extra Care loyalty program chainwide in more than 4,100 stores in February. Prior to the chainwide roll out, CVS had been offering frequent shopper cards in six test markets since 1996, according to Mike DeAngelis, spokesman for CVS. However, he declined to discuss the reasons for the long test period.

"Since the February launch at all of our stores, we have attracted 17 million cardholders, and 43% of all front-end purchases are Extra Care transactions," he told RETAILTECH. "Retail is extremely competitive and we need a way to differentiate ourselves. This is a great way to do that, as well as reward our loyal customers and entice other shoppers to become loyal."

Duane Reade, New York, introduced its Dollar Rewards Club in November 1999. The 172-store chain currently has 1.6 million members in its program, up from 750,000 in 1999. Duane Reade collects data during each card transaction to determine which promotions will generate the most favorable consumer response, and mails targeted promotions to card members.

Taking loyalty online: Drug chains are also offering frequent shopper discounts to their online customers.

Duane Reade, which launched its Web site, www.duanereade.com, in 1999, offers discounts to loyalty card users who make online purchases.

CVS is also in the early stages of connecting the Extra Care card to its Web site, www.cvs.com. "Customers can enter their card number online and it is stored as part of their account information when they make purchases online, and we track those purchases for our Extra Bucks portion of the program," DeAngelis says. "We will be expanding the Extra Care presence on CVS.com in the near future."

Web access is the next priority on Shoppers Drug Mart's agenda. "Once we start analyzing customer data and work on segmentation, we will integrate our program onto the Internet," Holland said at the show.

"We plan to use the Web as a communication vehicle to filter customers back into our stores."