Shoppers Optimizes loyalty possibilities

The rewards are nice, but the real value Shoppers Drug Mart hopes customers reap from its newly launched Optimum loyalty program will stem from a full range of customized features that will be added to the program in the coming months...

The rewards are nice, but the real value Shoppers Drug Mart hopes customers reap from its newly launched Optimum loyalty program will stem from a full range of customized features that will be added to the program in the coming months and years.

Last month’s launch of Optimum (see ‘Shoppers unveils loyalty program,’ Sept. 25, ’00), which is being backed with a huge advertising and promotional campaign, marks the largest single marketing initiative in Shoppers’ history – and one it believes will grow to become Canada’s predominant loyalty program.

According to Neil Everett, senior vice-president of marketing and communications at Toronto-based Shoppers Drug Mart, the extensive database management activity underlying the program will be a key factor in helping the drugstore chain develop a number of innovative partnership arrangements that will continually deliver added value to Optimum members.

Ultimately, he says, partner arrangements that are currently in the works will lead to new Optimum program benefits being introduced that will ‘exceed the value of the actual rewards.’

Currently, with 10 Optimum points awarded for every dollar spent in-store, including prescription purchases in most provinces, program members can begin to redeem their points for discounts – which start at 20% and range up to 100% – once they’ve accumulated over 3,000 points.

Program members can, however, reach the redemption threshold more quickly by purchasing products that have been designated to deliver bonus Optimum points. In addition to allowing program members to attain loyalty rewards more quickly, the Optimum bonus point plan is designed to drive incremental sales of specific products, including those of outside suppliers, who can purchase blocks of bonus points for promotional purposes.

Citing the example of a soft drink company that may want to offer a 100-point bonus as a way of spurring the sale of cases of pop versus individual bottles or cans, Everett says the tactic has already demonstrated its effectiveness in pre-launch tests in Calgary, Kingston, Ont. and Halifax.

‘We’ve proven that if you promote a product (with bonus points), sales will come,’ he says.

Although Everett declines to name any of the potential partners Shoppers is talking to, he indicates that a financial services provider will almost certainly be included in the Optimum program in the near future. He says Shoppers is also talking to a number of its current packaged goods suppliers to see how they might be able to gain some brand leverage from the Optimum program.

‘If we believe there’s a category that we want to develop a program around – say, a program targeting teen cosmetic customers – then we would look at working with some of our key vendors in that area,’ he says, explaining that the nature of such arrangements could be as much about providing informational content as it is about specific product offers.

Everett points out that while such arrangements could benefit consumers greatly, there would be little value to either Shoppers or its partners if there was no extended strategy in place to utilize the massive volume of customer data generated by the program.

‘Anybody who is going to launch a retail program of this magnitude, if they’re not committed to using the data, then don’t bother doing it,’ he says. ‘Sure, you get a bit of sales increase in the first year, but unless you’re utilizing the data you collect, you’re not going to see any more growth…You’ve got to be committed to using the data to drive your business forward.’

To help prepare itself for the impending onslaught of new customer data from the Optimum program, Shoppers has already used traditional demographic research techniques to develop roughly six key customer segments as a baseline for future growth.

Declining to elaborate on the exact nature of those segments, Everett says that ‘depending on the activities we want to drive out of our data, those segmentations could end up looking quite different.’

In the end, Everett says, ‘Customer intelligence is really a competitive advantage. Really, that’s why we’re investing all this money.’

Sidebar: Optimum reflects extensive research: Cosmetics Club program acted as trial balloon for wider initiative

The Optimum loyalty program may be the largest single marketing initiative Shoppers Drug Mart has ever undertaken, but it is not its first foray into the sphere of relationship marketing.

It was, in fact, its Cosmetics Club, which launched in 1996, that acted as a trial balloon to the larger and more extensive Optimum program.

‘When we started to look at the success of the Cosmetics Club and what we were doing on the pharmacy side, we decided that there was a real opportunity to expand into the total store,’ says Neil Everett, senior vice-president of marketing and communications at Shoppers.

But to do that, the pharmacy chain had to follow a detailed research protocol that, even at its earliest stages of development, was nothing less than overwhelming.

Those efforts included a quantitative population study to see whether there was even a market in Canada for a loyalty initiative like Optimum, followed by months of research and travel to monitor successful loyalty programs across Europe and the U.S.

With several solid models in hand, the company launched an extensive round of conjoint analysis, a process that saw it present as many as 700 loyalty program variations to customer focus groups.

Once a model was developed for the best possible program for Shoppers’ Canadian customer base, the next step was to calculate the technology costs associated with launching and maintaining such a program.

From there – 18 months after the initial research began – Shoppers was ready to head into pilot markets.

At that point, the company set up three such test markets in Kingston, Ont., Halifax and Calgary, each with different value propositions and strategies, which allowed Shoppers to test various scenarios.

Finally, after another 18 months of testing, the Optimum program was launched across Canada, Sept. 8.