Out-localizing nationals; out-nationalizing locals
The power of local times 8,000. That’s perhaps one of the most significant transformative tools possessed by Walgreens, which over the past three years has moved to empower its local operators to leverage corporate assets in a single mission to win in each of the markets it serves. It is helping transform the front-end of its stores through regionalized product assortments and full-court press around “fresh.” It also is helping expand the role of community pharmacy through unique collaborations with local healthcare systems, schools and employers that target individualized healthcare solutions, from vaccinations to smoking-cessation programs. “It’s what I call out-localizing the nationals and out-nationalizing the locals,” explained Mark Wagner, Walgreens president of operations and community management. “That’s our strength.”
The transformation toward local first began in 2009, when Wagner, a 35-year Walgreens veteran, then EVP operations, led the decentralization of Walgreens’ field management team that was marked by the company’s market VPs being relocated to their respective territories, which now number 30.
To help better identify that structure all the way to the top, Walgreens recently rebranded its corporate campus with new signs that read “Community Support Center.” “That’s what this whole [headquarters] here represents,” he said — a resource that can help support market needs from employee relations and HR capability to merchandising and marketing.
Each Walgreens market VP now is tasked with developing a “Plan to Win,” a local market playbook that helps identify nearby vendors and partners who will help drive health-and-wellness initiatives.
“What we have now is people out there. They live in the markets, they breathe the markets, they’re on the boards of organizations in a lot of these markets, whether it’s with the Rotary or business associations or whether it’s healthcare systems,” Wagner told DSN. By building stronger relationships within the community, market VPs are better able to keep a finger on the pulse of the communities they serve. “That’s all about winning in that space because everything [is local]. Politics is local, health care is local and merchandise is local,” Wagner said. And that means just about everything about retail pharmacy needs to resonate locally, too.
But what does local really mean? It means identifying unique opportunities with local healthcare practitioners on ways to help the community get, stay and live well. “I was in Appalachia, [Tenn.], and I met with the COO of the Wellmont Health System — we have an on-site pharmacy at one of their hospitals — about what we can do to leverage our pharmacy on-site,” said Wagner, who, in his role, frequently gets out into the markets to meet with local health systems, employers and other stakeholders to explore new opportunities with organizations that help reduce costs and increase access to care. “The interesting thing is it’s always the same — they want that local involvement.”
As another example of local, a Walgreens community leader recently sold an immunization program to a local summer camp operator that was affiliated with eight other camps. “So for the camps this past year, they gave out 8,000 vaccinations,” Wagner said. “In the world of retail today, the operator has to possess different talents and a different skill set in order to go in the direction this company is going in,” he said. “[And that’s] in terms of winning overall, first in health and wellness, and outright owning the strategic territory of well. … It’s got to permeate all the way down to 8,000 store managers, 1,200 community leaders, 220 district managers and 30 market VPs.”
To be sure, a key focus of Walgreens’ localization efforts is in fresh — from sourcing fresh fruit and vegetables to working with local vendors to fulfill its grab-and-go programs, and even identifying brands that resonate with local shoppers. “If you do it right, you’re adding more customers into that store. They’re buying more products,” Wagner said. “We’ve rolled out fresh in more than just Well Experience markets. It’s worked out great.”
With support from its Merchant Group, they are assisting in making the right local product selection for Walgreens stores.
As part of Walgreens’ recent restructure, the chain created an inventory strategy and localization team that works with its local operators to ensure best-in-class local products are shipped to the stores at the best price. It’s a concept Walgreens calls “Mass Customization,” and the retailer aims to use its boots-on-the-ground operating structure to better leverage local opportunity. This activity is critically informing Walgreens’ merchandising decisions and ensuring that each of its stores strikes the right balance of content relevance. “Common where possible and customize where it counts,” added Wagner.
Establishing a strong local pedigree that best serves a community is more than just good business sense. With the Internet serving as the great equalizer, trading on price or convenience is becoming less and less relevant. Retailers of the future will need to trade on experience, Wagner said. “We’ve got to get off the transactional relationship inside our stores, whether it’s in pharmacy, Take Care or the front end,” he said. “You can’t compete by just lowering your prices. Convenience is only going to get you so far. … You’ve got to evolve and change that experience.”
A major part of Walgreens’ end-game strategy is to become the first choice for health and daily living in America. It wants each of its customers to see their local store not as a Walgreens but as “My Walgreens.” The only way to get there is to go local.
CCR cleans canvas for elevated store experience
You could say that many of the front-of-store experiences that Walgreens is helping to transform today — photo and memorabilia, beauty, fresh, OTC, even pharmacy — all evolved from Walgreens Customer Centric Retailing project, which began back in 2009. “There were several benefits that we gained from CCR that helped fuel this transformation,” noted Rachel Bishop, Walgreens VP daily living strategy and business development.
First and foremost, CCR helped create a clean canvas that concentrated on delivering a better shopping experience. “It also helped us as a company really learn what it means to transform a network of stores,” Bishop added. “Before, our focus had been around new store openings. The idea of going back in and really fundamentally looking at everything that you’ve had in one place for a long time and then reconceptualizing and thinking about it differently, that was new to us,” Bishop said.
Bishop has a strong pedigree in doing just that — fundamentally breaking a business sector down and developing long-term macroeconomic perspectives. It’s what she did at McKinsey & Co., prior to joining Walgreens.
And it’s out of that experience that Bishop, and many others, helped move Walgreens’ culture down the road of change.
Bishop joined Walgreens as the CCR initiative was getting into full swing, and now her team helps inform many of the operational pieces of Walgreens’ front-of-store business: pricing and promotion, capability development, as well as overall daily living strategy and business development. “At a top level, my responsibility is to bring together our merchandising and marketing strategy across the front-of-store retail business and position us for the future, for where we aspire to be in the long term, but also lay the groundwork for us to get there,” she said. “[That] goal is to really own the strategic territory of well, to help people get, stay and live well. … As the country is really transforming what health care means to all of us, we feel that the combination of retail and health care is our place to own.”
But Walgreens has a more-than-a-century-long history of innovating in the retail pharmacy space. The company’s latest 30-second spot — titled “1901,” produced by GSD&M and debuted in August — helps encapsulate that long history of retail pharmacy innovation. “Charles Walgreen had a mission — to help people be happy and healthy,” the voiceover starts.
Walgreens has long been credited with creating the first chocolate malt (happy), but how many knew that Walgreens pioneered the use of child safety caps (healthy)?
“We can’t talk about our future and the change that we aspire to — or the change that we aspire to lead — in a context that isn’t true to our heritage and our history,” Bishop said. “What that [ad campaign] does is really help tie together our history and our heritage to where we’re going and make it a seamless story to the customer.”
And Walgreens similarly has a strong heritage of allowing its customers to serve as the lodestone that points to true north. “The reality is, our shopper shops us across multiple channels and for multiple purposes,” Bishop said. “Our customer sees us as Walgreens — not Walgreens pharmacy or Walgreens retail — and so if we discipline ourselves in that same approach … we are able to bring it all together in a seamless offer that makes sense to her.”
Based on that consumer insight, Walgreens’ current programs are built around three pillars: enabling their customers to get, stay and live well. “Those pillars really live in every part of our store and in every channel that we play in,” Bishop said. “So getting well, staying well and living well … may include doing research and shopping SkinStore.com or some of our online channels. Or it may mean coming into the store and picking up something [for an immediate] need,” she said.
The pharmacy customer as frequent flyer
The predictability of the chain store shopping experience has long been both a strength and weakness. The quality and experience may be predictably good, but can a shopper have a warm relationship with a store that treats everyone the same?
Walgreens gets that. So it is transforming its relationship with its customers by getting to know their needs more closely.
Walgreens’ new Balance Rewards shopper loyalty program, which launched Sept. 16, is all about transforming the shopper relationship to the place they shop, noted Graham Atkinson, Walgreens chief customer experience officer and architect of the program. “The dynamics of the last five or 10 years have really brought [loyalty] into a whole new focus,” Atkinson said. “If you put all that together, that collectively says that retailing and health care — like most other segments of the consumer market — are being increasingly driven by one’s core ability to understand the customer better, know what they want and be able to serve up those needs, products [and] services how they want them, when they want them and in the way they want them.”
Atkinson came to Walgreens in January 2011 with plenty of loyalty experience under his belt. Prior to Walgreens, he was president of United Airlines’ Mileage Plus program. Because of that experience, Atkinson has a different take on customer loyalty, both in terms of how it is defined and how it’s engendered, versus the typical retail- centric view. “The way we thought about [the Mileage Plus] program was in terms of being able to identify, segment and design programs around different customers depending upon their value. … It’s a long way away from a [typical supermarket] card that you swipe and you just get the lowest price,” Atkinson said. “Customers have varying levels of value to a business, and it’s absolutely essential that you understand the value of each customer to the business now. We found in the airline model that the customer who values the benefits and services that you get from being an elite member of United … is very different from the customer who’s just collecting points.” The road warrior just wants a hassle-free experience, he said.
The pharmacy customer has many similarities to that frequent flyer, Atkinson said. “Our ability to know that customer and influence that customer and ultimately give them a better experience, a differentiated experience … is just a huge opportunity,” he said. “How we actually segment our customers into much more meaningful universes and groups so that we can actually understand what’s really important to them is going to be as much of a game changer as the actual store experience that we’re designing and developing.”
The loyalty program is being launched with a focus on three customer-friendly tenets: It’s easy to sign up; it’s easy to accrue points; and it’s easy to redeem those points. And Walgreens’ Balance Rewards can be accessed and used through any mobile device, maintaining the seamless, multichannel shopping proposition that Walgreens is bringing to market.
How is Walgreens’ program different? For one thing, the points accrued through Balance Rewards almost never expire and can be combined with points earned by others in the same household. For every 5,000 points collected, Balance Rewards will award $5 good for almost any purchase at Walgreens or any of the chain’s online properties. And awards accelerate as points accumulate; for instance, 40,000 points net a $50 award.
Another way Balance Rewards differs from existing programs is that it will be used to help drive healthier behavior among program members. For instance, Balance Rewards will be tied into Walgreens’ Walk with Walgreens program, so users who log a certain number of steps are awarded points. “This program we want very much to focus as a health-and-wellness program rather than just a retail program on the front end,” Atkinson said.
The data that will come out of the program also will help transform how Walgreens goes to market. “We will learn a lot more about our best customers and what they shop and how they shop the entire store,” Atkinson said. “And that will enable us to send them direct offers if they want to, or otherwise at least amend, update and adjust the store selection to make sure that we’re actually providing the health and daily living services that they really want.”
In fact, Atkinson suggested that the consumer insights derived from the loyalty program would affect how Walgreens goes to market across several departments. “We’re just going to be better informed about our business on every dimension,” he said, including who’s buying, what’s selling, where stores should go and optimal labor commitments. “It runs right across the whole business,” Atkinson said. And better understanding that customer equation will ultimately lead “to better product development, store assortment selection, store location and many things besides.”
The loyalty data component that will be shared with vendor partners will better define the difference between “price takers” from “value seekers,” Atkinson added. “The other thing that has really excited [the vendor community] is the knowledge that we’re going to be able to give them, from all the promotions that we can test with them and the data and the customer knowledge, [insight] around what works and what doesn’t work.”
There is a cost associated with points, Atkinson said, and to realize a return on that investment, the Balance Rewards program is designed in such a way that it changes behavior. “The program that simply issues points or discounts for every dollar you pay doesn’t influence buying choice. Balance Rewards encourages people to either cross-shop or persuades them to actually select a particular product from a range of products. That’s where this program is different, and therein is the value for vendor partners.”