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Walgreens’ Robert Tompkins and Katie Vogt of Walgreens Advertising Group (center) discuss retail media with representatives of several key self-care suppliers.
DEERFIELD, Ill. — In December 2020, Walgreens made its debut in the fast-growing retail advertising field with the launch of Walgreens Advertising Group (wag). The move was timely: A recent study by Morgan Stanley estimates that retail advertising generated $80 billion last year (excluding China) and will reach $130 billion in revenue by 2025.
However, wag offers brand manufacturers more than just another media network. With approximately 9,000 stores and 100 million-plus members a part of its free myWalgreens loyalty program, Walgreens and its supplier clients can leverage extraordinarily rich first-party shopper data and the power of closed-loop reporting. Moreover, its use of advanced audience science provides enhanced consumer insights, optimization and measurement, through its Customer Insights Gateway that shows what customers are buying and what they’re buying it with. These tools enable Walgreens and its supplier partners to fine-tune or modify their messaging on the fly, thus deepening their relationships with shoppers and delivering more-tailored shopping experiences, which provides better efficiencies and overall campaign effectiveness.
From its inception, wag has focused on giving clients the ability to leverage its 1PD (first-party data) on the open Web — putting the data on the platforms where brands are already advertising, instead of limiting them to use myWalgreens data on-site only. Programmatic, CTV, social, search and streaming audio are all off-site channels that can be activated with wag data by not only supplier brands but media agencies for their full-funnel needs.
During a recent panel hosted by Chain Drug Review, Walgreens executives and supplier clients in the health and wellness category who are utilizing wag services discussed their experiences thus far and looked ahead to explore the future of retail media. Participants from Walgreens included Robert Tompkins, group vice president and general merchandise manager of health and wellness, and Katie Vogt, senior director of client success for wag, while supplier partners included George Leone, Walgreens team leader for Haleon; Jaclyn Meyers, team leader at Bayer; Sarah Schneider, vice president of customer business development for Reckitt; and Jeff Taylor, director of national accounts for Pharmavite.
The power of wag
Katie Vogt
Vogt kicked off the discussion by noting that wag is well positioned to support Walgreens’ mission to meet consumers’ health and well-being needs. It does so through its three pillars of being human, integrated and open.
Being human, she noted, relates to deepening relationships with customers on their unique health care journey. “Everyone’s health care journey is completely unique, and we want to be able to meet people where they are and provide them solutions for their health needs,” Vogt explained. “And we do that through the power of our first-party data. There’s so much that we can know about our customers, and we use that data for good to deliver on their needs and provide them with optimal solutions.” Being integrated, she added, relates to wag’s ecosystem of activation platforms providing more opportunities for brands and agencies.
Finally, being open characterizes the way Walgreens and wag interact with supplier clients with more flexible services and solutions. wag’s goal is to be transparent and easy to work with, Vogt emphasized. “We want to make sure that we’re meeting the needs of our clients, our supplier partners, delivering on their brand objectives and driving sales to their brands and to Walgreens through strong partnerships,” she said.
Walgreens’ massive scale enables wag to reach virtually any customer cohort with its messaging, Vogt pointed out. The real value of Walgreens’ data, however, is unlocked through the company’s customer insights platform, which is powered by Circana (formerly IRI and NPD). Supplier partners can subscribe to these insights to understand how customers are engaging with their brands and their categories. wag has a fully staffed insights team to support the subscriptions and ensure clients get the most out of customer insights.
In addition, wag launched a media insight suite within the platform that provides a deep exploration of customers who convert through advertising, including their behavior over time, not simply one transaction.
The intention of these insight capabilities is to unlock customer profiles, understand what motivates our customers and how they’re behaving with us,” Vogt said. “This customer understanding drives brand sales, both through merchandising activations, such as smarter assortment and promotional decisions as well as media activations powered by our first-party data and customer insights. The findings uncovered from insights directly connect to a media activation’s audience strategy, identifying who we should reach to deliver on an objective, informs the creative approach, such as what product is best to feature, enables messaging personalization to different types of customers and determines what promotion to feature that will drive a behavior that is truly incremental.
Beyond its massive set of data and insights, wag can achieve its goals and those of its supplier partners by leveraging artificial intelligence that unlocks rich customer profiles and allows it to target specific customer audiences based on past purchasing behavior, then delivers relevant ads using an extensive array of platforms that range from social media campaigns to CTV.
Robert Tompkins
However, the key to maximizing the value of its ad messaging lies in being able to accurately measure the effectiveness of those ads. A recent study by the Boston Consulting Group points out that one of the competitive strengths of retail advertising is the fact that advertisers like the visibility of performance provided by closed loop measurement — establishing proof that a customer bought a product in response to an ad — which ties the sale back to the media campaign. wag can achieve not only closed loop measurement but also real-time optimization by feeding SKU-level, daily transaction data to the Walgreens Demand Side Platform (DSP). As a result, wag is able to deliver more efficient ad campaigns and validate its clients’ ad investments. “What this means is, when someone sees our ad and they go into Walgreens and make a purchase, we know it,” Vogt explained. “That means we don’t need to spend another dollar of our brand’s media on that customer; we’ve converted them. Our algorithms are smart enough to move on to the next best person to drive a sale to the brand.
“This real-time optimization is what’s powering our results, and it’s working. We’re seeing an average 20% sales lift and a $4 to $6 average return.”
A game changer
According to Tompkins, the health and wellness category management teams leverage the same insights that their supplier partners use as they build strategies together. That allows both sides to agree on a set of strategies and tactics that they know will achieve their goals.
“It’s been a seismic change in a very fast few years, but as we’re getting closer to the insights, we’re getting closer to shoppers and better understanding how to activate them, convert them in-store and online, and drive results,” he observed.
Pharmavite
Jeff Taylor
wag’s ability to provide shopper insights and then identify and target valuable customer segments has been critical to Pharmavite’s success with Walgreens, according to Taylor. First, they identified the senior shopper, a core consumer in the vitamin, mineral and supplements (VMS) business, as an opportunity to improve performance.
In the past, Taylor noted, an advertising campaign might be executed with a shotgun approach that included some misses as well as hits. “What wag advertising has brought to the game is that it’s very precise,” he said. “Working together, we figured out what tools we wanted to use and how to create the target audience to make sure we were hitting the right consumers.”
Working from the insights on the senior shopper, wag was able to break down the target audience into three segments: seniors who were buying the VMS category; seniors who had lapsed; and seniors who were likely to immunize, but who were not yet buying vitamins. Campaign results were double the benchmarks.
“We had a lot of folks that came to Walgreens for the first time to get a test or an immunization,” Tompkins noted. “The great news was, when that happened, we converted them into vitamins. Plus, we then had the ability to target the lapsed vitamin customers to get them back into our doors, which was very effective, and really important for the long-term strategy.”
Haleon
For Haleon, meanwhile, wag’s capabilities offered the ability to target allergy and cough/cold sufferers on a geographic basis as the seasons progressed. The convenience of Walgreens’ approximately 9,000 stores was another vital asset.
George Leone
“When somebody is sick, they know Walgreens is convenient to pick up their product,” Leone explained. “But we wanted to make sure we also got the right message and the right geo target. If we knew the allergy season was hitting at that time, we’d leverage the wagDSP and go into the geo-targeted areas, and we would be able to target the consumer who knows allergy or cough/cold incidents are going up.”
As was the case with Pharmavite, the wagDSP amply demonstrated its power in this campaign. As Vogt noted, the daily SKU-level data that it consumes revealed where allergy or cough/cold sales were ticking up daily, enabling wag to immediately fine-tune its ad delivery.
“The other benefit of the DSP, in addition to being real time, is that it also includes all of the historical behavior of our customers as well as their purchase cycles,” Vogt said. “So, we know when someone stocked up last year; we know when someone buys large counts or multiple units at a time. And our models are smart enough to identify an individual who is likely to stock up and send them a message before the season starts.”
The wide variety of channels that wag can utilize provides the flexibility to offer personalized messages that can help the customer sort out complex categories such as cough/cold, VMS or analgesics. For example, Vogt pointed to email and CTV, which provide more space or time to educate the customer about a product, a category or a condition. In the end, Tompkins added, it allows Walgreens to provide better care because the individual’s needs are known.
Reckitt
According to Schneider, working with wag was an opportunity to further build Reckitt’s Mucinex brand for the future while leveraging wag’s consumer insights and enormous shopper reach to drive omnichannel growth in the cough/cold category. The COVID-19 pandemic has rendered past shopper behavior patterns irrelevant, she said. “Now it’s about delivering against how she wants to get her item fulfilled regardless of whether it starts on her phone, it starts in the doctor’s office or it starts in front of a shelf,” she commented. “How shoppers interact with our brands has changed forever. And that’s really an area that we wanted to explore and elevate with Walgreens, because we have a shared mission to help people feel better fast.”
Sarah Schneider
Vogt pointed out that the collaboration began with a three-sided conversation that brought Walgreens merchants, the Reckitt team and wag together in one room. “Not every retail media network has a really strong partnership with merchandising that enables those kinds of three-way conversations,” she said. “That’s where the big ideas come from. That’s how we deliver on joint brand and Walgreens objectives.”
Tompkins agreed that the partnership between his health and wellness merchants and the wag team has been extraordinary, with both sides learning from each other.
“I think the word’s out,” he said. “An investment in wag media works. It’s a great place to invest. It’s a great place to put incremental dollars. It’s a great place to shift media dollars to. In some cases, you see strong incremental sales lifts (or iROAS) and you know that the homework/teamwork worked. We’d encourage all new suppliers or suppliers that aren’t as embedded in wag to reach out to the wag team to learn more.”
Bayer
The stage was set for Bayer’s collaboration as the manufacturer initiated discussions with Walgreens several years ago to exchange insights as it prepared an Rx-to-O-T-C switch for its Astepro antihistamine nasal spray. When wag debuted in 2020 and unveiled the assets it could provide, the question of partnering was a “no-brainer,” Meyers recalled.
Jaclyn Meyers
“With wag, we had the ability to make really unique plans that were regional, that were specific to the consumer, very personalized,” Meyers explained. “But a key thing for us was the reach — the number of consumers that we could reach with our dollars was more than we can do with probably many other retailer media assets and some other of our own media. That was a huge benefit for us.” It then launched a 360-degree campaign that included several channels, ranging from the wagDSP to Facebook and YouTube, from Walgreens.com to in-store messaging.
As was the case with other suppliers, wag’s nimbleness — the ability to modify and fine-tune the messaging in mid-campaign — was also a critical benefit.
“Where wag really stepped up was its ability to adapt within the allergy season,” Meyers recounted. “We had the ability with our launch to adapt our media as things happened. If we saw a spike in Florida or California, we could beef up the media there very quickly. Having that adaptability on top of a very regional, very personalized campaign was really top notch.
“That’s just not something you can do with TV and some of the other assets of national media. That made Walgreens a very clear partner for us, and we were very excited to establish what we think is one of our best-in-class partnerships.”
What clearly emerged from the experiences of these suppliers in utilizing wag is the quality and power of its assets, in utilizing the power of wag’s omnichannel capabilities and quality of first-party data, which are unquestionably competitive differentiators for it in the retail media space.
But it would be a mistake to ignore the significance of the three pillars that Vogt defined at the outset of the conversation. In particular, the third pillar, being open, is an important cultural attribute that the participating suppliers agreed sets wag apart.
“There’s a lot more transparency here, and there’s a lot more collaboration and partnership,” said Meyers. “As they’re learning, we’re learning, and we’re sharing that. It’s very much a win-win for both of us, as a manufacturer and for the retailer. So when I think about partnering here, that’s a key piece.”
That philosophy helps make it feasible as well for smaller or niche suppliers to consider the investment to work with wag. As Tompkins pointed out, Walgreens has a long history of bringing in niche suppliers, including female- and minority-owned businesses, and wag is following the same path. Vogt added that the scale of wag’s first-party data makes that approach possible.
“If a certain product is really niche and serves a very specific need, we can still reach at scale customers who are relevant for that brand,” she said. “And we have options for levels of investment that would enable even a small brand to partner with us to reach those customers.”
Huge potential
In any event, retail media is still in its early days and will undoubtedly evolve and change as the field grows and attracts increased advertising dollars. The Boston Consulting Group study mentioned above estimates that the retail media market will grow 25% a year to $100 billion over the next five years, and account for more than 25% of total digital media spending by 2026.
As Leone noted, capabilities that drew heavy investment five years ago have evolved and no longer deliver the same returns. That, combined with the seismic change in consumer behavior triggered by COVID-19, make it imperative for brands and retailers to continue to test and learn, suggested Meyers.
At the same time, the supplier participants emphasized that brand manufacturers who are still sitting on the fence regarding retail advertising are missing an opportunity. “People who haven’t done this yet are missing the boat,” said Pharmavite’s Taylor. “Testing and learning, we’ve learned so much about our consumers and what they react to, not only here at Walgreens but on a broader scale. That means a ton, and we’re ahead of the game. And the results speak for themselves.”
Reckitt’s Schneider concurred. “The suppliers and the retailers who win will be those who are nimble, who are willing to fail, fail fast and, hopefully, fail forward, so that we can then understand exactly what the consumer wants to buy, how she wants to buy it and how she wants it to be delivered, because that’s what she’s looking for,” she remarked.
For Walgreens and for wag, the potential remains enormous, according to Tompkins. “There’s still so much upside,” he said. “When I look at household penetration numbers on brands and categories and the use of Walgreens’ assets, when I look at the opportunities to improve regimen, to keep people healthy, to make sure that they’re being messaged to stay on course — the regimen opportunity is immense. And I don’t know that we’ve even really scraped that surface completely yet.
“And remember, 100 million-plus individuals in this database that we’re trying to create a customized health and wellness experience for. So we’ve got a long way to go and a ton of opportunity to drive sales.”
