Can iBeacon Boost Duane Reade's Customer Loyalty Program? - eMarketer

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Can iBeacon Boost Duane Reade's Customer Loyalty Program?

41% of US smartphone users reported ignoring push notifications when they were not relevant

May 29, 2014

Duane Reade, New York City’s dominant chain pharmacy and a subsidiary of Walgreen Co., along with drugstore.com, will now be utilizing iBeacon to boost its customer loyalty program. The addition of iBeacon Bluetooth low energy (BLE) technology comes as part of an iPhone app update designed to foster greater customer engagement in-store and push deals directly to customers’ phones.

MarketWatch explained the origins of iBeacon technology: born alongside iOS 7 with geofencing to “provide apps a new level of microlocation awareness, such as trail markers in a park, exhibits in a museum or product displays in stores.” For Duane Reade, the microlocation data will quickly check a customer’s shopping history and recommend items to purchase based on that person’s precise location within the store, allowing product and service insights to reach the right customers, in the right place, at the right time.

Duane Reade is testing this technology at 10 stores—of over 250—in the New York City metropolitan area. But while New Yorkers from “the City” long to be the center of the universe, umbrella company Walgreens has over 8,000 storefronts in all 50 states, the District of Columbia, and Puerto Rico, opening the possibility that iPhone-integrated iBeacon technology may not be scalable for the brand nationwide.

But one thing that might be scalable is the need for speed. While Duane Reade’s approach aims for “New York Living Made Easy,” Tim McCauley, senior director of mcommerce for Walgreens, told eMarketer that its target customer using the Walgreens phone app “want[s] to be done very quickly. We’re not a game that they want to have fun playing around with. This is a trip they need to make, and they like that we can help them get through it quickly without missing any items.”

But David Edelman, partner and global co-leader of digital marketing and sales practice at McKinsey & Company, warns that iBeacon technology can cause huge headaches for brands without“ digitized store planogram[s]”: “Everybody likes getting a discount, but if a shopper is being bombarded with irrelevant discounts, it’s not going to work. ... Retailers first have to know where everything is on the shelf, in every one of their stores.”

And, according to a November 2013 Swirl survey conducted by Research Now, 41% of US smartphone users reported ignoring push notifications when they weren’t relevant to their interests or location.

Still, drugstore chains have championed loyalty programs with more fervor than any other retail sector. According to eMarketer, Walgreens, CVS and Rite Aid have spent hundreds of millions of dollars developing loyalty programs, especially those integrated with digital, each. But of the three, Walgreens has so far had the least developed program: CVS has led the pack, funneling 84% of front-end sales through its loyalty program; Rite Aid did the same with 74% of its sales; and Walgreens only around two-thirds.

In the struggle to position itself as a fully integrated lifestyle brand and occupy the same mental place for customers that a gym or doctor might, Walgreens has even allowed customers to accrue rewards points for “good behaviors” such as getting flu shots or high levels of physical activity as reported by their FitBit gadgets.

Not to mention, loyalty programs offer up huge opportunities to mine customer data. A March 2013 Brick Meets Click study showed that mobile devices and in-store tracking were two of the leading sources of customer data for US retailers.

In an interview with eMarketer in December 2013, John Learish, senior vice president of marketing for Rite Aid, noted that the customers who raise their hands to sign up for the loyalty programs are then far more engaged long term—and drive significantly more profit to the business: “We are getting significantly higher market baskets. We’re getting higher trip frequency. We’re getting higher profit from these customers. We’re [also] investing significantly more on rewards for these customers, but we’re getting the payout in terms of what they’re generating for us.”

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