OMNICHANNEL RETAIL IS FINALLY

TAKING SHAPEPerfect timing too, consumers aren’t waiting around.

PAGE 4 IT’S NOT JUST OMNICHANNEL, IT’S OMNIBRAND.It’s going to take an indivisible organization to implement a truly optimal customer-centric strategy.

PAGE 5 IF ONLY ENGENDERING LOYALTY WAS AS EASY AS CLICKING YOUR HEELSRack Room Shoes combines data, research, and mobile email to deliver a high-heeled digital loyalty program.

PAGE 6 VOICE OF THE CUSTOMER IS FAR MORE THAN SURVEYSLinking what’s learned from direct and indirect customer input creates a more holistic view of customers’ expectations, needs, and perceptions.

PAGE 7 FEEDING THE MOBILE SHARKS [INFOGRAPHIC]Mobile shoppers are out there. Dun dun, dun dun, dun dun dun dun...

PAGE 8 ARE CUSTOMERS SATISFIED WITH YOUR MULTICHANNEL EXPERIENCE?If one channel fails a customer, the whole cross-channel experience fails.

PAGE 9 MOBILE TRENDS THAT MAKE REGISTERS RINGM-commerce is changing the game for marketers by building a bridge between brick-and-mortar stores and online shopping.

PAGE 10 RETAILERS NEED TO REVIVE THE REBATEDirect price matching with e-tailers is folly, but smartphone penetration and showrooming necessitate action from retailers. Could rebates be the answer?

PAGE 11 CVS/PHARMACY DEVOTES “EXTRACARE” TO ITS LOYALTY PROGRAM7 ways the retailer keeps its program relevant and engaging enough to scores points with its customers.

PAGE 15 TWEETSSnark and substance from around the twittersphere.

TABLE OF CONTENTS

Customers are the driving force behind today’s most disruptive marketing changes. A successful omnichan-nel strategy can help any business succeed, but none more so than retailers. Engaging shoppers on multiple channels, and integrating those channels into their overall journeys, has proven instrumental in many re-tailers’ success. Be it through content, email, or loyalty, retailers are stepping it up—and why wouldn’t they? Consumers aren’t leaving them much of a choice.

The last thing marketers need now is yet an-other technology solution. Not because these technologies are superfluous or ineffective.

There’s simply too many of them. If marketers hope to realize the truly customer-centric approach of the Amazons and Googles of the world in their own organization, they must conquer the principal bar-rier to customer centricity: fragmentation.

“Organizations should be figuring out how to rationalize consumer sets across brand and then across channels,” says David Williams, CEO at CRM agency Merkle Inc. and author of Connect-ed CRM: Implementing a Data-Driven, Custom-er-Centric Business Strategy.

Here, Williams explains the rationale for cus-tomers as the primary business strategy, what’s holding companies back from achieve such a strat-egy, and what needs to happen to fix the issue.

What does it mean to set the customer strategy as the business strategy?There really isn’t a consumer-facing brand in America that isn’t trying to figure out what this means for them. They’re all trying to put the cus-tomer at the center of the business strategy. The world isn’t all about having a product and trying to get people to buy it anymore. It’s about find-ing that group of people that love your brand and figuring out how to engage them properly. Equal-ly important, business today is about finding new sets of customers and finding a new value propo-sition that will engage them appropriately.

What role does today’s digital mandate play in customer and brand interactions?If we look at the big trends in the marketplace, dig-ital is a massive disruptor to the way brands and consumers engage each other. The driving force of

that disruption is the creation of digital assets and how consumers engage with those assets. There are three dimensions to this disruption. The first is the idea that these digital assets are becoming very addressable. A consumer can buy something on

Amazon and Amazon can understand the context of who that person was, for instance. The second dimension is social networks at scale. Facebook, Twitter, and the like are well documented. The final dimension is mobility, which is to say that none of these other things are happening only at home on a desktop, they’re happening everywhere.

What’s keeping businesses from achieving true customer centricity?Part of the problem is that this conversation is too rational. It makes too much sense. It’s not like you meet with CEOs or CMOs who say they don’t want to know who their customer is. Nobody is saying that they don’t want or need to engage their customers on a one-to-one basis. This rationalization of the is-sue doesn’t allow business to put a lot of rigor into the planning of these strategies, so they take a capability approach from dif-ferent vendors, but the reality is they can’t really operationalize those things because

they don’t have the proper organizational design. There’s not been enough rigor put into the business piece of what economic or competitive advantage this level of engagement is really going to require. How much time investment are we talking about over time? How are we going to change our incen-tive systems and organizational design to capitalize on these strategies? All of these things are meaning-fully underestimated in these conversations.

Do you think the growing options in the auto-mation field are part of the problem?You’re going to need all of that automation, but nine of 10 people who build and spend money on this stuff will take two to three times longer to re-alize its full value, if they ever do. They aren’t think-ing about their different organizational structures, the competency of their teams, and the incentive systems of their teams. They aren’t thinking of these things early enough.

So the increasingly fragmented tech space may be hurting customer centricity then?No question. The reality is marketing is buying more tech than at any point in history. In my hum-ble opinion the CIO should be playing a bigger role in helping build out the road maps for how that tech will be managed throughout the enterprise.

This connected CRM conversation extends beyond marketing. Most CMOs own the media budget. Once these things go out of the domain of the CMO then you have to integrate with another organization. Most CMOs don’t own the Web experi-ence or the commerce experience. These initiatives are ultimately going to have to be lead by a COO, a chief customer offi-cer, or even a CEO to really find success.

BY PERRY SIMPSON

IT’S NOT JUST OMNICHANNEL,IT’S OMNIBRAND. It’s going to take an indivisible organization to

implement a truly optimal customer-centric strategy.

Rack Room Shoes may be fashionably late to the loyalty party, but with its stylishly mod-ern points program it’s a welcome guest

among shoe lovers.

Opportunity. Rewind to 2009. Rack Room Shoes stood at an interesting place in the footwear retail market. Like its competitors, the retailer was using multiple channels to reach customers and enhance their shopping experience. The usual suspects were all accounted for: email, social, the Web. The company also leveraged coupons, in-store associ-ates, and physical collateral such as signage. Even mobile, which was barely out of its nascent stages, played a key role. The one thing Rack Room Shoes lacked was an effective loyalty program. “We were very aware of what was going on in the market, but we were fairly late to the rewards party,” says Jan Mauldin, director of corporate marketing at Rack Room. “We knew we had a loyal customer base, so we started looking at who we could part-ner with to create a loyalty program.”

Rack Room spent the next few years shopping for a loyalty development partner, eventually clos-ing on Customer Communications Group (CCG), a relationship marketing agency.

Strategy. As with any successful undertaking, the first order of business was data. Rack Room Shoes “had a long history of conducting ongoing customer research through surveys, emails, etc. That’s not something retailers usually do,” says Sandra Gudat, CEO at CCG. “[The retailer] had a somewhat disembodied customer view because of this. They knew what customers said they did, but couldn’t see the actual behavior.”

Using Rack Room Shoes’ existing data as a

foundation, CCG worked with Mauldin and her team to better understand the retailer’s business and customers. “[We] looked at our customers’ frequency, average spend, sales data, traffic data, geography,” Mauldin says. “We built a consumer profile and found that [most customers] were moms. That’s our core shopper.”

The next step was learning what motivates those core customers to spend. “All of this re-search was important because it helped us under-stand what incentives drive these moms to shop more frequently,” CCG’s Gudat says. “These con-sumers are busy. They’re mothers.”

Rack Room had built a solid email list before the loyalty initiative began in earnest by sending promotions. Through their research CCG and Rack Room found that a large segment of customers were interacting with these emails on mobile. “We found that they do everything on the go, so mo-bile and digital were baked into the [loyalty] pro-gram from the beginning,” Gudat says.

Execution. CCG also found through the research that Rack Room’s customers wanted shopping re-wards to accumulate quickly and wanted access to them easily. As such, traditional rewards sys-tems were out of the question. “These customers don’t have time to wait 30 days for a postcard in the mail telling them about points,” Mauldin says. Consequently, the retailer opted for a digital launch of the loyalty program.

“When we were conceiving the program we saw that these moms were heavy smartphone us-ers,” Gudat explains. “We designed the program so that [Rack Room’s customers] could do every-thing from their phone.”

CCG developed the program so that physical

membership cards were unnecessary. The only requirements from customers are their name and email address. “Essentially [their] name and email is their member number,” Mauldin says. “That al-lows us to give customers an immediate response.”

Knowing Rack Room Shoes’ customer, CCG rec-ommended a basic rewards process. Rack Room Rewards shoppers receive $15 for every $200 they spend. They receive the rewards instantly, and even get notifications if they are within a few dol-lars of the $200 threshold, in addition to regular points tracking. “Periodically, they receive promo-tions that help them toward that $200,” Mauldin says. “They’ll typically get promotions on days like their birthday and other parts of the year.”

Customers can select their preferred channel of communication; the prevailing method is email. “Other than telling people they have points, the whole point of communication in this program is to create engagement with an individual,” Mauldin notes. “Mobile text is limiting, so our customers tend to prefer email. Specifically, they prefer to open emails on their mobile device.”

Even so, Rack Room Shoes uses both to inter-act with its customers, sending offers and promo-tions through SMS or responsive emails based on customer preference, as well as the optimal chan-nel for a specific message type.

Results. Rack Room Shoes launched its loyalty re-wards program at the end of April 2013. As of May 2014, 2.1 million customers have enrolled. Through the program Rack Room Shoes was able to cap-ture 20% more of its customers’ overall shoe bud-get and the number of customers spending more than $400 a year has also increased. “We feel very good about the program,” Mauldin says.

IF ONLY ENGENDERING LOYALTY WAS AS EASY AS CLICKING YOUR HEELSRack Room Shoes combines data, research, and mobile email to deliver a high-heeled digital loyalty program.BY PERRY SIMPSON

Any company that wants to deliver an excel-lent customer experience has to start with voice of the customer (VOC). But most or-

ganizations don’t really understand their custom-ers, nor are they able to keep pace with changing customer needs, preferences, and expectations. So said Research Director Jim Davies during a ses-sion at the Gartner Customer 360 Summit 2014.

Davies explained that VOC comprises three types of feedback: direct, where you ask for feedback such as through a survey and customers give it; indi-rect, where customers are talking about you instead of to you, as with a tweet; and inferred, where the actual feedback is in customers’ heads but can be surmised based on information such as behavioral and operations data. VOC is about bringing all three together to get a holistic view. It includes collecting, storing, analyzing, and then acting on that feedback.

Putting a comprehensive VOC strategy into place isn’t an overnight process, Davies said. He noted that the best approach is multiphased. For example, start with auditing current VOC activities and building a business case; then define the full scope of VOC and assign supporting metrics; and then pilot tech-nologies and roll out specific initiatives. While this takes time, it’s also important to be nimble, he said. “Are you a meerkat or tortoise in terms of VOC?” he asked. Meerkats are fast, alert, and community focused; tortoises are slow and plodding.

Davies recommendations included:

For direct feedback—When surveying customers, be engaging, person-al, relevant, brief, and timely. Also be multichan-nel; that is, consider which channel is right for that customer and that interaction. Most important,

take action. “There should be processes in place to act on what you’ve learned,” Davies said.

In terms of event-based surveys that are linked to a specific interaction or event, use no more than three or four questions. For relationship sur-veys—where customers are asked how the rela-tionship’s been over X period of time—use 10 to 12 questions. “Be prepared to be open and follow up,” Davies advised. “‘We sucked at A and B, and

we’ve completed improvements on A, and are still working on B.’ Customers who feel listened to are more likely to give additional feedback.”

Davies also recommended using strategic sur-veys with subset of key customers. These surveys are usually phone based and dive into detail about a specific topic.

Indirect feedback—When determining where to look for indirect cus-tomer feedback, consider which channels provide the best blend of volume, richness, and useful-ness. For example, there may be reams of tweets

on a brand or topic, but it may be random chatter (“Heading to Starbucks for my morning jolt”) instead of opinion or sentiment. Davies also suggested that marketers consider scalability, cost, and timeliness.

Inferred feedback— All interaction channels are relevant—from email responses to contact center conversations to web-site behavior. Look for reporting that shows how a channel is performing in terms of customer experi-ence; for instance heat mapping a mobile app.

The key to creating a holistic—and more ac-tionable—view of customer sentiment is to put all three together, Davies said. His recommendations for doing so were:

Collect: Prioritize projects to collect all three types of feedback based on the richness of each as determined by pilots programs.

Analyze: Determine the right data model and supporting analytics tools and then use them to transform customer input into actionable insight.

Act: Creative action plans to address opportu-nities and problems revealed through customer feedback. These may involve changes to people, process, and technology. Distribute relevant in-sight and the corresponding actions across the organization in a timely manner.

Own: Get commitment from the CEO for a ma-jor VOC strategy. Find an owner who has cross-de-partment responsibility to join pieces together.

Collaborate: Create a VOC team with a mix of full- and part-time involvement. Find people who are pas-sionate about listening to the customer and want to use that insight to drive the business forward.

“VOC works and there’s business value in doing it,” Davies said.

VOICE OF THE CUSTOMER IS FAR MORE THAN SURVEYS

Gartner Research Director

Jim Davies

BY GINGER CONLON

Linking what’s learned from direct and indirect customer input creates a more holistic view of customers’ expectations, needs, and perceptions.

Feeding the Mobile SharksMobile shoppers are out there. Dun dun, dun dun, dun dun dun dun...

CONSUMERS WHO SAY THE FOLLOWING DEVIC-ES ARE THE EASIEST TO USE WHILE BROWSING DEALS, COUPONS, AND SALES

4.2%TABLETS

5.1%COMPUTERS

90.7%SMARTPHONES

81.1%COMPARE PRICES

73.3%SEARCH FOR COUPONS 70.5%

RESEARCH ITEMS59.6%PURCHASE IN-STORE

OR ONLINE

54.7%ADD ITEMS TO SHOPPING LIST

50.7%COMPUTER

27.4%SMARTPHONES

21.9%TABLETS

CONSUMERS WHO PERFORM THE FOLLOWING SHOPPING ACTIVITIES ON THEIR MOBILE DEVICES

SHOPPERS ARE MOST LIKELY TO PURCHASE AN ITEM THEY’VE BEEN EYEING WHEN

39.6%THE ITEM GOES

ON SALE

29.6%THEY NEED THE ITEM

23.0%THEY FINISH COM-

PARISON SHOPPING

7.8%THEY FIND A COUPON

54.4% 21.1% ITEMS BEING

ON SALE

15.2% BRAND

60.7%ITEMS BEING ON SALE OR CLEARANCE

10.9% HAVING A COUPON OR OFFER

9.4% WIDE SELECTION

RESPONDENTS WHO SEARCH FOR OFFERS AND DEALS:

SOURCE: G/O DIGITAL

I

PURCHASE INFLUENCERS FOR ELECTRONIC SHOPPERS

REVIEWS AND RECOMMENDA-TIONS

PURCHASE INFLUENCERS FOR APPAREL AND SHOE SHOPPERS

49.2%

43.0%

39.3%

36.7%

29.2%

RESPONDENTS WHO DO THE FOLLOWING WHEN THEY NEED TO BUY SOMETHING:

CONSUMERS WHO SAY THE FOLLOWING DEVICES ARE THE EASIEST TO USE WHILE SHOPPING IN STORE:

PURCHASE INFLUENCERS FOR GROCERY SHOPPERS

29.8%ITEMS BEING

ON SALE

26.4%ITEM

QUALITY

20.7%EVERYDAY

LOW PRICES

ONLY WHEN THEY NEED SOMETHING SPECIFIC

RIGHT BEFORE THEY PUR-CHASE SOME-THING ONLINE

FREQUENTLY IN THEIR FREE TIME

EVERY TIME THEY PLAN A SHOPPING TRIP

WHEN THEY’RE SHOPPING IN-STORE

BY ELYSÉ DUPRE & JAMES JARNOT

Traditional metrics are single channel only; but the reality is that customers are mul-tichannel and multi-device. Eric Feinberg,

senior director of mobile, media, and entertain-ment at Foresee, reminded attendees of this tenuous situation at eTail West.

“Customers walk in the door with expecta-tions; sometimes you can control that, some-times you can’t,” he said. “They have an experi-ence. Will they be satisfied and then exhibit the behaviors you want?” Will customers, Feinberg posited, purchase (and in which channel), rec-ommendation, and refer? He also pointed out that customer satisfaction with those experi-ences will impact not only current, but also fu-ture behaviors.

Feinberg went on to explain that many ele-ments of the customer experience are knowable across touchpoints; for example, site navigation and access to and depth of product informa-tion. So along with tracking customers’ behav-iors to infer the pros and cons of the customer experience, marketers should ask for custom-er feedback directly. Collect in-channel insight and measures. Ask customers where they came from and where they went next. Doing so cre-ates visibility into the cross-channel experience. Feinberg recommended that marketers do all this to uncover the gaps between the experi-ence that customers expect and what a com-pany is delivering, and then marketers can use that information to determine how they can they close that gap.

To accomplish this, marketers should ask themselves: How are we doing, what should we do to improve the customer experience and why, how do we prioritize? The answers should be in-

formed by that customer insight. “Customer ex-perience priorities are best viewed through the lens of the customer,” Feinberg said, adding that marketers should measure the customer experi-

ence to see where to focus. But, ultimately, the answer to “Why should we do it?” is revenue.

According to Feinberg, 57% of custom-ers surveyed by Foresee are multichannel and tend to be more satisfied and valuable than single-channel customers. For this reason, he emphasized the importance of delivering a consistently top-notch experience across chan-nels. “Every channel has to be excellent or every channel fails,” Feinberg said. “If a customer has a poor experience with a company in one chan-nel, it’s unlikely he’ll visit another of that compa-ny’s channels.”

ARE CUSTOMERS SATISFIED WITH YOUR MULTICHANNEL EXPERIENCE?

“CUSTOMERS WALK IN THE DOOR WITH EXPECTATIONS; SOMETIMES YOU CAN CONTROL THAT, SOMETIMES YOU CAN’T. THEY HAVE AN EXPERI-ENCE. WILL THEY BE SATISFIED AND THEN EXHIBITTHE BEHAVIORS YOU WANT?”

BY GINGER CONLON

If one channel fails a customer, the whole cross-channel experience fails.

Another reason for marketers to hone their mobile strategy? Retail m-commerce sales are expected to surge about 37%

this year to about $58 billion—or roughly 20% of retail e-commerce sales, according to eMarketer.

In fact, m-commerce is changing the game for marketers by building a bridge between brick-and-mortar stores and online shopping, notes Cal Bouchard, director of e-commerce for outdoor clothing retailer The North Face.

That link allows marketers to connect with con-sumers anytime, anywhere, she says. “You have to be where your customers are and where they’re in-teracting with brands,” Bouchard says. “If you’re not on mobile, you’re missing out pretty significantly.”

Here are three m-commerce trends that are helping to fuse in-store and online shopping into one seamless experience.

BeaconsBeacons are Bluetooth-powered devices that communicate with shoppers’ smartphones while in-store or outside a store. They allow market-ers to send relevant messages by using timely, geo-precise targeting. Beacons give marketers the opportunity to connect with consumers at the most opportune time, notes Michael Becker, North American market development and strategic ad-visor for mobile solutions company Somo.

The North Face is one brand currently inte-grating beacons into its marketing plans. The re-tailer sends push alerts—such as product intro-ductions—to its app users who have opted in to receive them. These alerts drive significant traffic to its stores. Beacon alerts, Bouchard says, will al-low The North Face to advance its engagement to the next level—particularly by sending alerts to geo-targeted customers near or at brick-and-

mortar locations, rather than to all app users.Why marketers should care: Beacons can be

solid measurement tools for marketers, Becker says. These devices allow marketers to track incoming store traffic, measure engagement, and assess sales. But marketers must then use that information to

communicate with consumers in a way that’s au-thentic to the brand, Bouchard says. “People are willing to give up their information if they’re going to get a relevant message back in return,” she says.

Mobile walletsA mere 19% of consumers say they’ve received mo-bile wallet–specific offers from retailers, according to the 2013 Mobile Wallet Consumer Report from mobile marketing solutions provider Vibes. This may be a missed opportunity.

Mobile wallets—like Apple’s Passbook and Goo-gle Wallet—benefit consumers and marketers, notes Alex Campbell, cofounder and chief innovation of-ficer of Vibes. Mobile wallets provide a paperless way for consumers not only to purchase, but also to store everything from boarding passes to loyalty cards. Marketers can set geo-fences for their mobile wallet content, Campbell notes, including reminding consumers of saved offers when they enter a store.

One success story is Starbucks’ Square Wallet,

which enables mobile transactions and receipt management for its U.S. stores. According to Star-bucks’s Fiscal 2013 Annual Report, U.S. customers make more than four million mobile transactions per week via Starbucks’s mobile payment apps.

Why marketers should care: In addition to driv-ing loyalty, mobile wallets allow marketers to re-vise offers instantly. “If [an offer] expires, or you see it not working as you thought it would, [you] can now update that,” Campbell says.

In-store tabletsConsumers aren’t the only people retailers should consider when building mobile commerce strate-gies. Rick Chavie, chief solution officer of omni-channel commerce software provider hybris, says they should also think of their sales associates. Having in-store tablets, he says, enables sales staffers to view consumers’ online behavior, pur-chase histories, and wish lists.

Based on this data—as well as on information gleaned from in-store conversations—marketers can create targeted offers that associates can then present to customers in store, Chavie says.

Why marketers should care: Arming sales asso-ciates with tablets ensures that they have the same or more data than their highly informed customers. This enables associates to deliver an engaging, rele-vant customer experience and combat showroom-ing. For marketers who want to use tablets in-store to allow customers to self-serve, it’s important make sure those devices enhance the customer experi-ence, or those retailers may find that tablets are ig-nored in favor of speaking with an associate, notes Valerie Hoecke, Benefit Cosmetics’ SVP of digital.

“Digital has to supplement the…customer ser-vice experience that you have in your stores,” she says. “It’s not going to replace [it].”

MOBILE TRENDS THAT MAKE REG-ISTERS RING M-commerce is changing the game for marketers by building a

bridge between brick-and-mortar stores and online shopping.

BY ELYSE DUPRÉ

Amazon’s ubiquity will likely remain undis-rupted as the world continues to digital-ly mature. That’s no small amount of bad

news for physical retailers, who struggle to com-pete with the convenience, prices, and expansive inventory of the mighty e-tailer. “A straight match with Amazon is simply out of the question. Ama-zon doesn’t have the overhead of a traditional re-tailer,” says Rodney Mason, CMO of dynamic pric-ing company Parago. “People do prefer to shop in stores, but they’re so price sensitive that they’ll take those Amazon prices all day long. But, there’s an opportunity here for retailers to leverage re-bates and in-store pickup.”

In a recent study, Parago found that 65% of shoppers are more sensitive to price today and 70% actively look for better prices on their mobile

device while physically shopping in stores. “The amount of people showrooming jumped in just four months, mostly due to higher smartphone penetration,” Mason notes. The study, which con-sists of data from a survey conducted during the peak of 2013’s holiday season, found that 62% of all shoppers own a smartphone, with the 18- to 29-year-old bracket having the highest penetra-tion at 85%. Of more than 1,900 consumers sur-veyed, 95% shop on computers, including 99% of shoppers with an income of $50,000 or more.

These consumers are deeply concerned with price and, with a shorter path to purchase, are closing on deals much faster. “The average time to purchase is down to just over two days. People are only really comparing prices between one or two stores before making their purchase,” Mason

explains. At 97%, almost all surveyed consumers reported that they search online for best pric-es, rebates, or other deals before heading out to stores. About 94% still review circulars and print ads for deals. “There’s a huge opportunity here to leverage in-store pick up,” Mason asserts. “Walmart does this to great effect, but no one else seems to.”

But what about shoppers who are in the store looking for a great deal right now? They’ve pulled up a link on Amazon with a better price on the item in their physical shopping cart and now they’re considering whether it’s worth it to close with Amazon and reap the savings. As a re-tailer, it’s almost a no-brainer to attempt to beat Amazon’s prices. However, Mason warns against aggressive price matching with the e-commerce colossus. “Look what happened to Best Buy. They tried to institute a price match policy during Q4 2013 and their earnings were abysmal,” Mason says. “If brick-and-mortar stores match Ama-zon they’ll go out of business. But, since online shopping has grown so big, if [physical retailers] don’t match Amazon they’ll also go out of busi-ness anyway.”

Instant rebate offers can provide physical retail-ers with a means to combat Amazon’s lower price, without forsaking long-term earnings, according to Mason. “Putting an offer in the customer’s hand works, and a lot of consumers are willing to make an immediate purchase in-store if the retailer can offer the best market price through something like a rebate,” Mason explains. “That doesn’t mean institute a convoluted rebate process though.” It means be creative and keep it simple.

“Ultimately, retailers need to disrupt the omni-channel,” Mason adds. “When there’s a chance to shoot that best offer, you’ve got to do it.”

RETAILERS NEED TO REVIVE THE REBATEBY PERRY SIMPSON

Direct price matching with e-tailers is folly, but smartphone penetration and showrooming necessitate action from retailers. Could rebates be the answer?

Loyalty: Every brand wants it, but not every brand has it. CVS/pharmacy (CVS), the re-tail division of CVS Caremark Corporation,

definitely does. More than 70 million households used its ExtraCare rewards program in the past six months, and more than 90 million households

used it in the past year. In fact, one out of every three people in the United States has an Extra-Care card. But that doesn’t mean CVS/pharma-cy can get complacent. The retailer has worked diligently to keep the rewards program fresh and relevant—from improving its convenience and

personalization to engaging customers via mo-bile and social.

The goal of CVS/pharmacy’s ExtraCare re-ward program is twofold: provide instant savings and thank customers for their patronage to re-tain business. “It makes us feel good to let our customers know that we notice and appreciate [them],” says Melissa Studzinski, VP of customer relationship management for CVS, “but we also know that it helps [them] choose us more con-sistently over time.”

Retaining customers in today’s crowded mar-ketplace is increasingly difficult, especially given that CVS sells products that consumers can buy from a broad array of retail outlets, including Big Box retailers, grocery stores, and specialty e-tailers and retailers. CVS Caremark, which also includes pharmacy and corporate divisions, generated ap-proximately $126.8 billion in net revenue last year; the retail pharmacy segment accounted for $65.6 billion. But competitors across categories put on the pressure with their own earnings: Walmart earned $279.4 billion in net sales in the U.S. alone, Kroger grossed $98.4 billion, and Walgreens took in $72.2 billion, according to each company’s fiscal year highlights.

“If you think about all of the things we sell, you can pretty much get them anywhere…. What we’ve seen is that the more you acknowledge and thank your customers, [the more] you tend to be more top of mind,” Studzinski says.

And, with the ongoing evolution of consum-ers’ shopping habits, CVS has had to find new ways to thank customers and stay top of mind. Fortunately, its continued commitment to deliver-

CVS/PHARMACY DEVOTES “EXTRACARE” TO ITS LOYALTY PROGRAM 7 ways the retailer keeps its program relevant and engaging enough to

scores points with its customers.

BY ELYSE DUPRÉ

ing relevance through data has helped the ExtraCare program evolve along with the retailer’s customers. Here’s how CVS/phar-macy grew its more than 15-year-old re-wards program into what Studzinski refers to as the “Kleenex” of all loyalty programs.

ExtraCare wasn’t built in a day. The retail pharmacy began piloting it back in 1996; the ExtraCare program shoppers know today didn’t appear in market until 1998, Studz-inski says. During this two-year period CVS tested several iterations of the program, including the types of rewards customers could earn and whether they needed their ExtraCard card to access sale prices. The

retailer also relied on qualitative data—in-cluding customer advisory boards, focus groups, and interviews with shoppers and store associates—to inform these decisions.

“We were a small team at the time. I want to say that there were five or six of us,” Studzinski recalls. “We would jump in two cars and drive to Albany, or jump in two cars and drive to Hudson Valley. We would talk to store managers, associates, [and] customers.”

The program was off to a good start. Af-ter testing it in six markets, CVS found that 75% of customers surveyed said that they would shop at CVS more often because of ExtraCare, Larry Zigerelli, CVS’s EVP of marketing at the time, stated in a 2001 press release. In February 2001 CVS rolled out ExtraCare chain-wide.

As the program has grown, it’s stayed true to its customer-centric roots. “It’s real-ly no different than how we operate today,” Studzinski says. “Obviously, we’re a much larger team, and the program is 70 million strong. But that whole idea of how do you get closest to the customer—we still abso-lutely do that on a daily basis.”

The year CVS/pharmacy debuted its Extra-Care program chain-wide it also launched targeted direct mail for the program.

CVS’s earliest personalization efforts included sending customers mailings con-taining offers or new store announcements based on previous purchases and geo-graphic data. “At the time, that was about as innovative as you could get,” Studzins-ki says. But CVS faced challenges: Mainly, customers would have to wait weeks for CVS to print and mail them their coupons.

To get offers in shoppers’ hands more quickly, CVS started printing personalized coupons at the bottom of receipts in 2003. But receiving coupons after customers fin-ished shopping didn’t jibe with their purchase flow: Customers wanted to receive offers before they hit the aisles. In 2007 CVS ad-dressed that preference with a pilot program that converted some of its price checkers into ExtraCare Coupon Centers—kiosks that enable customers to print deals in-store; the retailer rolled them out chain-wide in 2009.

“Things that we’ve heard from custom-ers [and that] they’re interested in have really driven a lot of our initiatives,” Studz-inski says.

2 PIONEERINGPERSONALIZATION

More than 90 million house-holds used their ExtraCare card in the past year.

1TESTING AND LEARNING

Today, customers scan ExtraCare cards at the Coupon Centers approximately 9.6 million times per month; CVS distributed $1.1 billion in savings and rewards through the Coupon Centers in 2013.

Between introducing personalized receipt cou-pons and rolling out ExtraCare Coupon Centers, CVS focused on developing its brand. The com-pany expanded its business by acquiring smaller drug store chains—including Eckerd, Sav-On, and Osco—from 2004 to 2006. During this time CVS also broadened its marketing channels, which included the introduction of targeted emails for ExtraCare.

Initially, CVS used email as a way to deliver offers electronically. But after dabbling with the channel, CVS decided to also use it as a notifica-tions tool, such as by alerting customers within certain geographies if new stores were opening or if particular locations were offering flu shots.

“Email marketing was nascent at the time,” Studzinski says. “So there weren’t a lot of people doing marketing in the space. It was much more of a communication vehicle.”

It was also a valuable way for CVS to gain in-sight into whether its communications were rel-evant to shoppers. “With direct mail…we don’t know if [customers] couldn’t use it, if they liked it, or they didn’t,” Studzinski says. “With email, it’s pretty clear. I unsubscribe. OK. I guess we didn’t do a good job of giving you the information that you were looking for from us.”

Using ExtraCare data and predictive model-ing, CVS is now able to generate open rates two times the industry average and click-through rates five times the industry average, according to the brand’s Q1 2014 earnings report.

Even as CVS’s email performance improved, its on-the-go customers sought additional touchpoints. So, in 2009 the brand launched its first mobile site, which enabled customers to locate their nearest pharmacy, manage prescriptions, and view available savings. In 2010 CVS introduced a mobile app that offered new capabilities, such as scheduling flu shots.

CVS continued to extend its mobile presence. For example, in 2011 the retailer streamlined its shop-per journey by enabling customers to keep track of their ExtraCare rewards, browse through more than 25,000 products in the online catalog, purchase items, and redeem coupons all via its mobile site. Additionally, to give consumers more choices for accessing their coupons, CVS launched its Send to Card feature, which allows customers who receive email offers to send them electronically to their Ex-traCare card instead of printing them. In 2012 CVS enhanced its mobile app, including adding a pill identifier and the ability to use a smartphone as dig-ital ExtraCare card. The retailer even introduced an iPad app with a virtual 3-D pharmacy in 2013.

CVS’s mobile Web visits nearly doubled over the past year—after tripling the year prior—and the number of monthly iPad visits to CVS.com has more than doubled compared to the year before.

As with its email efforts, expanding into mobile gave CVS another window into consumers’ shop-ping preferences, Studzinski says. For example, the retailer could determine whether customers prefer to view offers in-store, online, or via the app. The Send to Card feature also provides the retailer with valuable data. It allows CVS to detect which categories and products consumers are looking for.

Over the past three years about 85% of CVS’s customers have adopted the Send to Card capa-bilities. Still, Studzinski says that it’s important to keep the print options available to provide flexi-bility and choice, as well as connections between digital and in-store. For example, if shoppers forget which offers they sent to their card, they can print them at the ExtraCare Coupon Center. “It puts the customer in the driver’s seat as she’s planning her shopping trip,” Studzinski says.

However, deciding how they receive their re-wards isn’t the only choice CVS customers make. In the case of the ExtraCare extension program, Beauty Club, the retailer also enables them to choose what kind of rewards they’d like to receive.

After talking to customers who frequently pur-chased beauty items, CVS’s marketers hypoth-esized that a targeted program would appeal to beauty-centric consumers. So it launched Ext-raCare Beauty Club in January 2011. Customers who enroll in the program received beauty perks, such as a 10% off beauty shopping pass upon en-rollment and $5 in ExtraBucks Rewards (or store credit) with every $50 beauty purchase. In addi-tion, members received monthly email newsletters that include coupons, advice from beauty experts, and product information.

3 CONJURINGCONVENIENCE

4 OFFERINGCHOICES

[T]hat whole idea of how do you get closest to the cus-tomer—we still absolutely do that on a daily basis.Melissa Studzinski CVS

More than 13 million customers have enrolled in the Beauty Club since its inception. These members, according to CVS’s Q1 2014 earnings report, spend 2.5 times more than the average beauty customer.

Studzinski says that the program is the high-est-rated concept CVS has ever put into market re-search. “It actually scored off the charts,” she says.

Studzinski attributes customers’ enthusiasm for the club to the ability to choose to be a part of it in the first place. “If we started rewarding ev-erybody who bought any beauty products, our definition of beauty [would be] pretty broad,” she says. “What we found over time is [that], again, this is about choice. If you let the customer say, ‘Yep, I’m really interested in beauty so please re-ward me specifically for it,’ it feels that much more important to her and that much more relevant.”

In fact, the success of the Beauty Club has sparked similar initiatives like the ExtraCare Phar-macy & Health Rewards, which debuted in Feb-ruary 2013 and rewards customers with $5 of Ex-traBucks Rewards for every 10 prescriptions filled.

Not only does CVS adjust its marketing based on customers’ shopping trends, but it also fine-tunes its programs based on broader market shifts. For example, decreases in newspaper readership prompted CVS to evaluate whether it should still try to reach customers through Sunday newspa-per circulars. So, this past October CVS decided to modernize its weekly sales circular by launch-ing a digital version called myWeekly Ad, which customers can sign up for online or via the retail-er’s mobile app.

The front page of myWeekly Ad is customized based on each recipient’s purchase history, Extra-Care rewards information, and data provided via

customers’ profiles, such as gender. CVS can also present offers based on the category of product consumers tend to purchase.

Recipients are able to view myWeekly Ad on-line or via their mobile devices. To help shoppers

on the go, CVS enables customers to build digital shopping lists, which they can print, email, or view via their mobile devices. Of course, customers can also send deals to their ExtraCare card.

“It’s taking the same information in the Sunday circular and reorganizing it to make it more ship-pable and more relevant,” Studzinski says.

So, how can CVS determine whether its initiatives are effective? One way is via social interactions. These dialogues allow CVS to learn about custom-ers’ experiences in a more “spontaneous” and re-al-time way, compared to the traditional means of customer research or call centers, Studzinski notes.

Social also serves as a way the retailer can in-form customers about new deals or launches. Ad-ditionally, customers who are involved in CVS’s on-line communities teach each other by answering members’ questions. And CVS learns a great deal, as well. As with email unsubscribe rates, the num-ber of social reactions and comments helps the retailer gauge whether its discussions and posts are relevant to its customers. “It’s a good two-way dialogue,” Studzinski says.

What’s next for the ExtraCare program? Studz-inski says she’d like to turn the program into a more one-to-one experience. “It sounds easy,” she says, “but actually delivering that so that every single customer feels like the program is perfect for [her]—that’s ultimately when we’re successful. Each customer is going to have a different experi-ence and she’s going to feel like it’s absolutely the most relevant program for her.”

6 JOINING THECONVERSATION

Each myWeekly Ad is customized based on purchase his-tory, ExtraCare rewards information, and data provided via customers’ profiles, such as gender.

5 SHIFTINGGEARS

7 PAVING THE FUTURE

Lena@clewgarnet

@BurkieYCP It’s not a case of marketing TO women. It’s just a case of not actively driving us away.FaZe CBass

@FaZeCBass

The Share a Coke cam-paign is some of the best social media market-ing i’ve seen in a long time

Christel Quek@ladyxtel

A product is an object that is built in a factory.A brand is a personality built in trust & relation-ships. #brandbuilding #marketing

bounceupinher@alcoholoffame_

Nike is a marketing company that sells shoes on the side

Brendan Cottam@bjcottam

As an online marketer - fun walking through a mall seeing what retail is up to these days.Tim McLain

@tmclain

#NMGPrimetime retailers: “If you don’t have a mobile strategy, you don’t have a future strategy.” Eric Schmidt, Google #AssertiveOnline

Alicia Fiorletta@AliciaFiorletta

Omnichannel, at the end of the day, is about customer choice. - BOOM. THANK YOU, PANEL! #eTailEast

sethearley@sethearley

Tracking across devices is very difficult. Significant efforts to drive traffic - attribution is major challenge #eTailEast #omnichannel

messagerewards.com@MessageRewards

“In 2014 & beyond retail businesses better be ready to use mobile to market or they will lose the edge to the competition!” #marketing

TWEETS