Walgreens (NYSE:WAG) may have missed Wall Street's profit expectations on Tuesday (June 25), but the pharmacy chain is just now beginning to use marketing insights it has gained from its year-old loyalty program, the pharmacy chain's CEO said.
"With 75 million people signed up, we're turning our focus from enrollment to redemption and rewards," Walgreens CEO Greg Wasson told financial analysts on an earnings call. That enrollment effort—and getting the rate of loyalty use up to 60 percent of purchases—may have reduced the chain's conventional promotional efforts, which in turn might have contributed to the earnings miss. Earnings were 85 cents a share instead of Wall Street's forecast of 91 cents.
That shortfall wasn't due to the cost of the actual IT systems for the loyalty program, dubbed Balance Rewards, though Walgreens won't detail the actual outlay. "We haven't called out what we did in terms of investing in systems for Balance Rewards and also for people," said Walgreens CFO Wade Miquelon. "I would say it wasn't not meaningful, but it wasn't unusually meaningful either."
But with so much of the chain's marketing effort aimed at signing up loyalty members, "we probably got a little less promotional " in areas like newspaper circulars, Wasson admitted. That advertising drives front-of-store purchases, which is where sales weren't up enough to satisfy analysts.
That should start changing now, with loyalty-program data being used to decide what gets heaviest promotion in the circulars, as well as to localize some of them. "We've now got critical mass of people enrolled, critical mass of points. We also have critical mass of what I would call data analytics and insights. So I think as we move forward here, we just get progressively better," said Mark Wagner, president of store operations. "I think the real heart of it kind of starts about now."
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