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by Edward Nevraumont
Marketing BS with Edward Nevraumont

Interview: Vineet Mehra -- Former CMO Walgreens; Chief Growth + Experience Officer Good Eggs -- Part 2

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You can find Part One of my interview with Vineet Mehra here.

In Part Two of the interview I spoke with Vineet about his time at Walgreens. We talked about what makes Walgreens/Boots different from CVS and their other competitors. We dove into how Vineet used the vast amounts of data Walgreens was collecting (>80MM people in their US loyalty program) to fairly radically change business processes (including eliminating the flier completely). Enjoy.

Transcript:

Edward: This is part two of my interview with Vineet Mehra, Chief Growth and Experience Officer at Good Eggs. Today, we're going to dive into his time as CMO of Walgreens Boots Alliance.

Hey Vineet, I think we can safely assume that our listeners are familiar with Walgreens. Walgreens is slightly behind CVS in terms of number of pharmacies in the US, but you're way ahead in terms of number of pharmacists. You can say the similar thing in the UK. Boots has almost twice as many locations as the number two player, but more than three times the number of pharmacists.

Let's start there. Why do Walgreens and Boots have so many more pharmacists per location than their major competitors?

Vineet: At the very core of Walgreens—and we'll focus on there for now—is this idea that the biggest asset the business had even in a digital age was that Walgreens had the best corners in America in terms of where our stores were located. You go to any major city, any suburb of a major city, places where you least suspect a Walgreens, and it's on that perfect corner. It's easy to get in and out of. It's centrally located. We had a Walgreens within 2–5 miles of every single person in America.

That makes a really big difference in a business. Even in a digital age, believe it or not, physical location matters. I'm sure we'll get more into that, but that was a big part of what our difference was.

Edward: Does that explain why you have more pharmacists? Because every location you have is a busier location than where your competitors are placed?

Vineet: Yeah. We had some extremely busy locations and good corners where there's a lot of traffic. That probably does explain some of that for sure.

Edward: How does the business do that? Is it just because you guys were around longer? It feels like every pharmacy would want to be in the best location. Why did Walgreens get the better locations and your competitors did not?

Vineet: I definitely wasn't around for that period, but I'll tell you that the history of the company is fascinating at Walgreens. That idea of the best corners in America has been something that's been permeating in the company for multiple decades. While it sounds obvious, it's also not the cheapest play to go and acquire the best real estate in the country—the best corners—and build those out.

I wouldn't say that that is the most obvious play in terms of economics, but Walgreens always had foresight. The team that built up this business up to almost 9000 stores across the country really focused on that fact.

Isn't that how most great businesses are built? There are two or three things that initial leaders and founders think about, and they're uncompromising about it. In the case of Walgreens, it was all about finding the most convenient and easy locations for customers and patients to take care of their health.

Edward: Does that philosophy continue? I know you used the word convenient. Clearly, most drugstores, pharmacies, and convenience stores—convenience stores even have the word convenience in their name. How much of that flows through the company, this idea of convenience? Being in those great locations is convenient. Are there other things that pushed you in that direction?

Vineet: It's really about enabling people to take care of their health, but this idea of convenience is something that—as you see today—is all over the place. Convenience is taking different shapes and forms. Especially in a world like today where we live in an omnichannel world, people want to either pick up something. They want something delivered. They want something dropped off.

There are so many different ways that people want to acquire the goods and services today that convenience remains a big part of not just Walgreens but of the industry. You think of the entire categories and businesses designing themselves around getting goods to you as quickly as possible, on demand as possible.

I'd say that the Walgreens real estate strategy was just V1 of a world and human nature where people want things when they want them. That's especially true in healthcare and when you want to take care of a family.

Edward: Let's talk a little bit about you coming on board. Clearly, the real estate play has already happened, but you got to keep this business growing. What are the next levels? What do you do as CMO to get this business growing? Because again, that's what you're responsible for inevitably, getting this thing to grow faster than it was before you came along.

Vineet: It comes down to any job you get into. You look at what are your differentiated assets when you enter a role? Probably, that's part of selecting whether or not you join a company as well. Do you believe that if you join, there are differentiated assets that you can really leverage to drive competitive advantage?

In this case, one of the things Walgreens Boots had was an unbelievable loyalty program membership. Walgreens had close to (say) 80 million, 90 million people in this loyalty program. Boots had—from a ratio standpoint—a similar percentage of the UK population. Let's call it 15 million–20 million.

You put all that together. What I saw in a world where marketing was becoming increasingly digitized and increasingly programmatic was that we had access and understanding of what customers were doing because the vast majority of purchases happening at Walgreens were done as "logged-in users" of the Walgreens loyalty program. When you have access to that many customers and you have a platform like that, the opportunities in today's marketing ecosystem are endless.

Step one was really thinking about what was the future of that loyalty program? How would we leverage our understanding of consumer behavior at the identity level in the most powerful way possible? That's where we went with our strategy. We call that mass personalization.

Edward: Before you came on board, this loyalty program already existed. They already had these members, but you saw an opportunity to leverage them in a way they weren't doing before.

Vineet: Yeah. The program was extremely successful, but it was largely a couponing program. You would log in and then get access to different coupons. You could use (if you recall) the Walgreens flyer or the paper pamphlet that will come into your mailbox every single week. There was a lot of that happening.

You would get Walgreens points. You could use them to drive further discounts off the products you were buying. That's actually what it was. It was a promotion and discount program.

Coming out of Silicon Valley myself right before the Walgreens opportunity, I saw an opportunity to drive personalization and not use such blunt instruments as general couponing, general paper flyers, and things going to people's homes.

In today's world, if you get the right ad and MarTech in there, you can do things in a much more customized way. That's where we went off.

Edward: This couponing program was not personalized coupons. If it was a diaper coupon, it went to everybody, whether or not they thought that person had kids or not.

Vineet: There was some level of personalization, but it was things like you were part of a parent's club or you were part of another club. You were opting into different sorts of things where—as you know where the world's going today—can you almost predict what that person's next purchase is going to be and almost delight them before they're even thinking about the topic? It's all about can brands delight customers and do that at scale? That's what this strategy that we put in place called mass personalization was all about.

Edward: That mass personalization, was it effectively hey, we're going to keep doing the coupon program we're doing before, but now, instead of sending everybody the same coupon or coupons based on their affinity groups, we're going to change those coupons up per person in a way that we think is going to drive conversion higher?

Vineet: That was part of it, but it was so much bigger than that. It went all the way from shifting our media mix from being 70% bought in the upfronts—many of your listeners will know the upfront TV network buying situation—to 70% programmatic where we would buy most of our (let's say) CTV work and radio all programmatically because we could literally match customer cohorts through The Trade Desk and through DSPs into the the media world and get much more targeted in the messages we were sending.

It went all the way from the media down to things like how we were doing couponing which became much more personalized. We actually eventually ended up eliminating the paper flyer and roto completely which was quite a big move at Walgreens because that was a huge part of the shopping experience and journey at Walgreens. Our coupons and our personalization became so much more effective from a redemption standpoint than just a blunt instrument and then all the way down to creating new revenue streams.

We launched something called the Walgreens Advertising Group which was a way for CPG companies who really struggle with direct attribution of their marketing spend to actually buy into us almost like a media network and be able to track conversions with every dollar they spent.

It went all the way from completely transforming our promo and couponing world, to programmatic media becoming the source of our growth dollars, to an advertising network, through to (lastly) the launching of a new app which was irreplaceable.

I was in a retail pharmacy business at the height of COVID. People have to do vaccine setups, vaccination appointments, and testing. We created an app where personal health became the center of that app as opposed to couponing. The app became the digital front door for Walgreens which would then show you that you could go into shopping. You can go into healthcare. You can go into finding care. It was a total reinvestment in our app as well that became personalized to you as a user.

Digital front door, media, couponing, and programmatic advertising really just transformed the infrastructure of the company.

Edward: There's so much meat there. I want to dive into bits and pieces of this and we'll see how much time we have today. Let's talk about killing the flyer first. You had this flyer that existed for 100 years at Walgreens, and you killed it.

First of all, how do you get that decision through internally to go and kill something that's been around for so long? Then, how do you know what it's costing you after you do it?

Vineet: I don't know if it was really around for 100 years, but it's definitely around for quite a while. We're in this new golden age of marketing. What I love about this age we're in is that everything is measurable. Nothing has to be done with a blunt instrument.

This was done very simply. We first ran A/B experiments. We took certain areas where we might have pulled the flyer, and we ran only couponing programs. We looked at redemption rates. We talked to manufacturers who were supporting a lot of those coupons. We basically looked at raw data and the cost of producing that flyer—which is not cheap. You've got to print it and there's a lot of labor that goes into planning this. It's almost like you're releasing a little mini magazine or you have local paper every single week because you got to pick every box. There was a lot of cost involved in that.

We compared that cost to the upside of personalized couponing. We ran that in a very controlled way across the country in different areas with different cohorts and with different segments, and eventually got to the conclusion that hey, the data is now indisputable. The time is now.

We made that call. Was it an easy call? No. Was it data-driven? Yes. Was it a popular call? I'd say with half the company, the people understood it. Probably, the other half of the company, to this day, would want it back because there are just no perfect decisions. You're inevitably going to leave some customers not happy with the fact that you make that call. But you take all of the costs and more importantly the mindshare of people who are investing weekly and making that flyer happen every week and you repurpose that to the future of what retail is going to be that also pays dividends. Less hard to measure, but sometimes as a leader, you've got to make those calls.

Edward: Yeah. That's your limiting factor always, the number of smart people you have working for you and what they're spending their time on. What's the difference between couponing and flyers? Are those like electronic coupons? What do you mean by couponing?

Vineet: The flyer was essentially something that would go into your home and you'd see all the sales at Walgreens that week. Couponing would be like you get those paper coupons you can cut out. What we moved to was much more digital couponing. Literally in your inbox, here are the best coupons for you this week. We would use that instead of the flyers themselves.

Edward: Let's talk next about buying a television. You're buying 70% upfronts and then you switched to 70% programmatic television, is that right?

Vineet: Programmatic media in general.

Edward: A lot of programmatic media are things like digital paid social, Google Ad Network, and so on. Does that mean you shifted your spending from television to online digital?

Vineet: Not necessarily. Programmatic is a word that gets used and abused in many ways in our industry. At least the way my mind captures it, there's the direct response which are AdWords and some of the social media networks that are there. We continued to do that. That was never going to change in our mix.

What I'm talking about is more of the mid and the upper funnel where we did a lot of radio buys, TV buys, and some of that area that a lot of companies call brand media, a bit higher up in the funnel. A lot of that money was actually spent in the upfront. We would upfront-buy a whole bunch of TV inventory and lock that in. The problem with that is you don't have flexibility. If you try to cancel it, you get all these giant fees.

It was really in that space around TV which we moved a lot more to things like CTV, over-the-top players, full-episode players, and things like Hulu, YouTube TV, et cetera.

We started to shift a lot more money into still linear TV played on your screen but done through tools that were much more precise like connected TV and radio. Instead of going from general radio, we'd use things like Spotify and other ad networks that were much more logged-in, ID-based networks.

You got to remember, because we had this loyalty program, we had IDs. We could actually match IDs in a much more powerful way than most companies could. For all intents and purposes, we almost created our own walled garden media network in a way. We were able to do that in a pretty powerful way.

Edward: When you do that, do your CPMs go way up? When you're buying connected television or Spotify ads versus all city radio on the big station, your CPMs must be a lot higher.

Vineet: CPMs will go up just due to scale. Frankly, a lot of those audiences in CTV are more expensive to buy than linear, but ultimately, effectiveness goes up. That's why I think you've got to really look at things like attribution and those kinds of things more than CPM to make these kinds of decisions.

Edward: You could measure the lift when you started doing connected television because you could apply it to 80-million people on your loyalty program. How do you compare that to what it was before though? When you're running a national television ad, how do you know how effective that was?

Vineet: It's what everyone does. What's that saying? Fifty percent of your marketing is wasted, you just don't know which half. I think the way you look at it is you look at things like foot traffic. You look at things like redemptions. You look at things like online site visitors.

In the past, they were largely just multi-touch attribution tools that I would say are 60% at best. Even the best vendors in multi-touch will tell you these are not perfect tools. They're directional tools. But once you can get to ID-based and you can actually look at behaviors of groups of people that have been exposed to these ads within your own ecosystem, you can literally see what action they take after looking at that ad. It's almost taking a direct-to-consumer playbook to retail at scale. That's why we call it mass personalization.

Edward: Is there a risk though that now, because you're doing these connected television, that's a lot more trackable? You spend $1 and you know you're making $1.50, whereas before, you were spending $1 and you didn't know how much you were making. To your point, you're 60% accurate. Is it possible that you end up trading accuracy for impact? Is it possible that television before was more impactful and you just didn't know?

Vineet: It's possible. It's not that we moved out of TV. We were just rightsizing the amount of investment. We still did it upfront. I think that upfront TV is always going to play a role in large companies' marketing mix because you've got to raise top-of-mind awareness especially in a category like ours which is a high-frequency category.

It played a role, but again, everything is A/B tested. We would take control groups, we would remix things, and then we would go to the next one. As long as as a marketer, you're focused on experimentation and A/B test-based decision-making, you can work your way through this world of imperfect data that we have. That was the approach that we took.

Edward: Vineet, this has been fantastic. I would love to spend more time talking about basically the advertising group that you're building. I feel so many retailers are doing that now and I think digging into how you guys were thinking about it would be awesome, but we are going to wrap it up.

Before we end, can you tell me a little bit about a quake book that you read that changed the way you think about the world?

Vineet: Yeah. There's this amazing book by Bharath Anand—who I actually asked to join my board at Worldwide Effie—called The Content Trap. We live in a world now where with personalization, what's happening is we have so many channels we need to fill with content constantly. You've got journey after journey of email. You've got all these programmatic channels. You've got all these direct-response channels.

The key really is how do you not get wound up in this trap of infinite content and instead focus very clearly on what the role of content is meant to do in every channel and really enable your business to not focus on volume but impact?

It's a great book that is a great distraction of our time as marketers, which is how much content do I need? He really calls that the content trap. It's something worth talking about and reading.

Edward: Vineet, thank you so much for your time today. This has been fantastic.

Vineet: Thanks, Ed. Really appreciate it. Good to talk to you again.

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