Retail Pharmacy – Digital Personalization Beckons…

Grocery retailers have certainly been the pioneers of mass personalization in the omnichannel retail world. Next, with the greatest potential to benefit from personalization, in my view, will be pharmacy retail. In this article, Jonathan Reeve explains why and looks at three big opportunities for pharmacy retail in the years ahead.

So, why pharmacy?

If a pharmacy retailer helps me improve my health and quality of life, the value they deliver to me is unparalleled. As a starting point, therefore, the customer stands to benefit in significant ways.

Customers are already getting used to adopting digital technology to manage their health. There are several Apps available in Australia and New Zealand, including Amcal Pharmacy, Chemist Warehouse’s Wellness @ Your Fingertips, Green Cross Health's The Doctors, MedAdvisor’s Medications Management, and Priceline’s Pharmacy Script. However, the current offerings are yet to fully capitalize on the personalized marketing opportunity presented by customers using these Apps, even though personalized recommendations and offers would be a natural extension of managing one’s health via digital platforms.

The economics of pharmacy retail also support digital engagement. Many FMCG brands sold in pharmacies have high margins and the FMCG industry is keen to partner with retailers to engage digitally with consumers.

Most pharmacy chains have not yet capitalized on personalization due to the cost and complexity of using legacy technology to manage personalized offers. The use of software platforms hosted on services like Google Cloud, however, creates the opportunity for retailers of all shapes and sizes to access highly sophisticated personalization technologies in cost-effective ways.

In this article, I describe three opportunities I expect to flourish in pharmacy retail in the future:

1. In-store subscription programs
2. Merging above-the-line and below-the-line promotions
3. Loyalty rewards to promote health outcomes

1. In-store subscription programs

The last few years have seen rapid growth and innovation in the use of subscriptions, from meal delivery services such as HelloFresh to media content from the likes of Netflix. More recently, we have seen The Warehouse Group (MarketClub), Wesfarmers (OnePass), and Woolworths Group (Everyday Extra) pioneer subscription programs in Australian and New Zealand retail.

Subscriptions work for customers when they have predictable demand and are happy to be loyal to a particular retailer or service. These conditions suit pharmacy stores since customers will visit a pharmacy store regularly to get a repeat prescription or replenish a product they use consistently throughout the year. Subscriptions offer a great opportunity for a pharmacy retailer to ensure the customer keeps coming back to their store. New parents, for example, might be offered the opportunity to subscribe to a baby club for 12 months, with discounts offered on categories like nappies, wipes, formula and related products.

Most pharmacy retailers can’t deliver a subscription program to customers shopping in physical stores because they don’t have the tools to build a personalized digital connection. If they wanted to run a one-to-one subscription service, their existing technology wouldn’t allow them to deliver it at the checkout. However, cloud-based technologies are increasingly giving bricks and mortar retailers access to the same digital marketing technologies that Amazon and the eCommerce pure-plays take for granted.

2. Merging above-the-line and below-the-line promotions

Currently, there is a big divide between “above-the-line” and “below-the-line” promotional spend in pharmacy retail. FMCG brands and pharmacy retailers may manage these through different teams with different budgets. Digital technology provides an opportunity to merge these two areas of advertising into fully measurable “through-the-line” activity, with huge financial benefits.

While the majority of advertising spend across retail is now digital, promotional spend by pharmacy retailers and brands has not followed. An obvious example is the paper catalogue printed by some pharmacy retailers but funded largely by FMCG brands. These lead to environmental waste, for sure. Also, being store-wide and offering only generic promotions means customers potentially miss out on more personalized promotions that would have been more relevant to them, as well as costing the retailer less. Thus, the potential win-win of personalization gets missed.

The Benefits of Personalized Promotions

Some grocery retailers are pioneering the use of personalized digital offers, which I believe provide a better model for the pharmacy sector for managing promotions. In this emerging model, each customer is issued a personalized digital catalogue and receives a unique coupon for the product(s) on promotion. Retailers and FMCG players gain access to a new source of data as individual redemptions can be tracked in real-time, and customers get tailored opportunities that work for them.

3. Using loyalty rewards to promote health outcomes

As mentioned earlier, many pharmacy chains now offer health management apps. However, these are typically siloed from other parts of the customer experience, in particular the loyalty program. Canada’s biggest retailer, Loblaw, has integrated loyalty into its health and wellness app, PC Health, which launched in 2020. After downloading the app, users are taken through a 25-question onboarding flow that leads to a personalized set of health resources and free health programs that help customers build healthy habits. Users can earn loyalty points by completing activities linked with positive health outcomes, for example, completing an online course to help you boost your mental well-being. Loblaw has been continually developing and refining its App to make it the “front door to healthcare” for Canadians, offering both healthcare services and incentives to boost health outcomes.

In Australia, Woolworths Group has been pioneering retailer health and wellness initiatives through its healthylife business and recently announced the launch of online health services, including access to telehealth appointments. In a first for Australian retail, the Everyday Rewards App now includes Food Tracker, a free tool that helps customers make healthier food choices based on their purchase history.

How to get started?

The simplest way for a pharmacy retailer and its brand partners to get started in mass personalization for a modest investment is to collaborate on "through-the-line" promotions. These offer an immediate opportunity to save money and simplify their current approach to promotions. And most importantly, they provide high-value, real-time, targeted solutions to customer needs.

An earlier version of this article was published in Inside FMCG magazine in July 2021.