Walgreen’s Market Segmentation

On a high level, Walgreen’s segments the market into two main consumer groups: pharmacy and retail store. However, they are constantly looking for ways to integrate these businesses and disintegrate the differentiation of a pharmacy customer and a store customer. I have noticed their recent attempt to transform customers of one or the other into loyal, Walgreen customers by offering specific promotions that pull them across segments. One in particular is the $25 gift card offer. Patients who are willing to transfer their prescriptions to us from a competing drug store are rewarded with the gift card. Then, they can use their gift card for future Walgreen’s purchases. This is beneficial in numerous way:

1. Reach out to the pharmacy market segment of competitors to gain new customers
2. Retain the new customer for a purchase worth at least $25
3. Spend a little, spend more—customers must first spend money at the pharmacy counter to get the gift card, and then spend even more money on the subsequent purchase with the gift card. More than likely, the $25 gift card will create a profitable sale because the customer will be willing to spend an amount exceeding that of the gift card (they see it as a discount).
4. Increase the amount of time the customers are not spending money at competitors
5. Cross-segment shopping increases the amount of the sale per customer visit

Walgreens could do a better job of segmenting the market even farther, especially in the pharmacy. Since we have access to every patient’s demographic information, we could personalize advertisements that target a specific set of pharmacy customers. I have been involved with small attempts to do this at my store. We have an on-site clinic that is now administering the Shingles vaccine. To make patients aware of this service, we put stickers on their prescription bags. Since the vaccine is indicated for those over 60 years old, we only sticker the bags of patients whom we identify to be in this age group.

Personalized marketing efforts such as this could be done on a much larger scale through various mass media. Walgreen’s should take advantage of that data that is compiled from our millions of pharmacy customers nationwide that is right at our fingertips.