We all get a positive feeling when our customer loyalty card fills up and we receive a free coffee or when we reach our air miles goal to qualify for a free flight. Customer loyalty schemes enable you to build a clearer picture of what interests your shoppers while giving you the opportunity to build a relationship based on their behaviour.
For an independent pharmacy, offering discounts is seen as an important way to retain customers and incentivise the community. “We know that people are members of multiple loyalty schemes, but we were keen to deliver a more communityfocused offering, encouraging new and existing customers through the door,” says Joanna Mills, who led the Warman-Freed customer project. “Whether it’s for a prescription, an OTC need or simply a top-up shop, we found that a loyalty offering that includes personalised rewards as well as a discount was a strong proposition.”
This is supported by evidence from Ipsos MORI (see table), which suggests that the key factors for success are linked to good customer service and decent rewards that can be easily redeemed.
Where discounts are involved, you must be clear that the financial impact is manageable and that the selection criteria being applied are consistent across the board. “Our approach to date had been rather ad hoc, so we looked at our sales data to understand two key areas,” says Ms Mills.
“First, the total amount of discount we had given customers in a full year. Second, our average profit margin on products across our range to understand whether these could support the discount we give. It’s not only about loyalty; we could have been significantly eroding our profit.
“The data revealed that the discount scheme had given away one per cent of total sales in the previous year,” says Ms Mills. “While one per cent may sound low, this is a lot of money, particularlywhen the pharmacy had lost some key beauty accounts, leaving a deficit in the P&L.”
To ensure financial sustainability there needs to be clear guidance on who does and does not qualify, to ensure that the scheme is both incentivising and rewarding repeat custom. It is important to log discount redemption. Staff keep an extra copy of the receipt in a loyalty folder with the customer’s name and discount for future analysis.
The Warman-Freed Friends of the Pharmacy scheme has now been finalised and staff trained to ensure the team is clear on the benefits and the sign-up process. “At the moment, we are in a trial phase with customers who already receive discount to get their help in shaping the rewards,” says Warman-Freed pharmacy manager Farah Ali.
“Customers will be asked to present a loyalty business card to get their discount, negating the need for investment in expensive plastic cards at this point. We are promoting the scheme through in-store posters and are aiming to get our first 50 members signed up by August. Once we’re confident we’ve got the right approach, we will organise a Friends of the Pharmacy launch event to drive sales and engagement.”
The loyalty scheme includes experiences, offers and events for beauty, but also health services and products (where relevant to the customer) as well as a financial discount of 10 per cent.
This investment will give Warman-Freed a greater understanding of shopper behaviour to help with future link selling ideas, and identify customers to invite to a health promotion event.
When done correctly, a loyalty scheme can be a key driver of repeat custom, both in terms of frequency and value of spend in-store. The more knowledge you have about your shopper base, the more you can do to customise the experience so that each customer is genuinely satisfied with their in-store experience.
“As an independent pharmacy, we’re aware that we’re competing with national reward schemes, which is why tailoring our offers to suit the individual is so important for driving repeat custom,” says Ms Mills. “Our next step is working smarter to segment customers and use transaction data to identify new ways to develop the business.”