Time is right to refresh customer retention strategy

Consumer Health and Wellness | Insights

While we don’t celebrate it, there is no question that the drug channel front of store has benefitted mightily from the pandemic. Increased traffic, new shoppers, pantry loading, digital downloads and ultimately millions of vaccinations have driven revenue and placed this channel squarely in the spotlight.
The pandemic bent the trend curve, increasing store traffic and attracting new, younger shoppers. In terms of digital usage and penetration, the increase for many operators has been staggering. As one clear example, between March and November of 2021, the MyWalgreens program grew over 64% from 56 million to 92 million users. Walmart’s digital journey across e-commerce (including pickup) and loyalty (Walmart+ has more than 50 million subscribers so far) has been an increasingly powerful business driver. In some categories, our clients saw their digital Walmart businesses grow tenfold during the pandemic’s peak.
At the same time, new rules governing third-party cookies dramatically increased the value of first-party data. Pure-play drug chains and food/drug combos, with long-standing shopper card and loyalty programs, were positioned to capitalize by expanding their advertising services to manufacturers for a fee. These programs are typically managed by third-party partners and increasingly funded out of budgets traditionally earmarked for “consumer” versus “trade” marketing.
While they have slightly different names ranging from media exchange, media network, media collective and media group, to precision marketing and performance marketing to Roundel, these media platforms promise manufacturers the ability to leverage programmatic campaigns against specific targets using digital media, retailer website messaging, search priority and a variety of other tools.
While these initiatives can be highly effective, manufacturers are asking my partners and me to help them evaluate these programs as part of a holistic go-to-market strategy. In a few cases, the manufacturers are explicit about the objective of bringing in outside counsel: They want help managing what they see as heavy-handed tactics by retailers to extract more dollars without great returns. With that in mind, here are five key considerations we recommend for retailers as they look to optimize these efforts.
Category managers and merchandising teams must understand the expanded offerings — Our clients tell us that there is wide variation across accounts’ understanding of what these expanded programs offer and cost. Beyond mechanics, some category teams are unaware of the fees paid to the outside partner, which can make ROI untenable. These fees make “over and above funding” both more complex and subject to increased scrutiny by management at the manufacturer’s HQ.
While extracting additional dollars in the short term may feel like a success, the last thing you want is for your manufacturers to look for ways to drive their business in other retailers’ channels. Moreover, if the customer-specific P+L is overburdened with sub-par programs, the likelihood of customer segmentations evolving away from less efficient accounts, no matter how large, is inevitable.

  • Create one face to your customer (the manufacturer) — It may feel like the “bizarro world.” After years of pushing your manufacturing partners to make it easier on your organization to get things done, you are now being asked to do the same. The advent of e-commerce and the addition/expansion of the media and marketing groups is putting a strain on even the most seasoned account managers as they bounce back and forth from three different groups, all looking for investments. The newer media groups are independent of the e-commerce group and the core category managers in many chains, so hours that could be spent optimizing plans get eaten up trying to get a complete picture of the account opportunity.
  • If you want to sell targeted media, act like a media agency — As incremental funding requests pile up, the brand management team needs to evaluate if, and to what degree, they should support the sales team recommendations. In most cases, the programs developed by the retailer media groups are designed without reviewing the brand’s overall media objectives and strategies or KPIs. Perhaps more importantly, many of these programs are missing the third-party verification and fraud protection that agencies make standard in many digital marketing campaigns. Given the strength of many accounts’ first-party data and the ability to identify competitive users, convincing a manufacturer’s sales and customer marketing teams to include a brand person before developing a program creates a significant opportunity to turn a potential detractor into a champion.
  • Benchmark your competitions’ media/search products vigorously — Whether you are competing for incremental funding with other chain drug accounts, including mass merchandisers, or Amazon, it’s essential to recognize that customer and brand marketing are reviewing these initiatives across all of their retailer media programs. They are looking at relative ROI as well as absolute returns. Over time, manufacturers will bring higher levels of incremental spend to those programs that payout, so understanding where your programs stand and how to strengthen them is crucial.
  • Use the big picture to optimize these programs for the consumer and the manufacturer — As the owner of the shopper data along with the in-store, online and media execution timing, each chain is in the best position to predict the total impact of all activity on your consumers. It’s the best position to be in if you can see it across your platforms. That’s a significant opportunity to build layered programs that deliver substantial incremental volume. At the same time, executed separately, it runs the risk of overwhelming the consumer and creating frustration towards your brand, not the manufacturer’s.

As the evolution towards omnichannel continues, we realize that the improvements required to address the considerations above will take significant effort for most retailers. The good news is the opportunity is massive. O-T-C health care advertising alone is projected to exceed $23 billion in 2023. That’s a pretty good incentive for change.