The Customers Are Always Right
No one subscribes to this combination of old and new more stringently than drugstore.com, the Bellevue, Washington-based start-up launched in January of 1999 and a leader in the online drugstore market.
Following a solid year of blanketing the airwaves, the portals, and the morning talk shows with the virtues of buying vitamins and toiletries online, the company had a watershed month this past February when it hit the million-customer mark, handily beating out competitors like PlanetRx. Though the occasion was heralded with the usual hoopla, it was only the beginning of the struggle for this young company.
Now drugstore.com has to engage the individual customers in what it hopes will be a lifelong relationship. To accomplish that, this e-tailer is using every technological and strategic arrow in its quiver to understand what its customers buy and why -- and to make sure that drugstore.com is the only place they purchase any one of the 15,000 products available through the site.
On the technology front, the company uses an array of sophisticated data-analysis tools, many of which are homegrown, to gain a complete picture of its customers and their behaviors. Every time a visitor logs on to drugstore.com, the path that individual takes, the clickstream, is logged to a massive data warehouse running on Oracle8i. Transaction and order data are simultaneously pumped into the data warehouse. In the background, proprietary software is correlating that data with existing customer and marketing data.
Then comes the real work of slicing and dicing, often referred to as business intelligence. Using custom-made analytical software, drugstore.com's marketers look at that customer data in, well, about a million different ways. For example, reports are generated to reveal which customers buy which brands, how many customers purchased a particular sale item and whether they clicked through from an ad, and how customers are responding to direct-marketing campaigns, as well as which customers use online shopping lists. This analysis is fed back into the company's overall marketing strategy, helping to determine everything from where the next ads should be placed to what kind of email newsletters should be created and to whom they should be sent.
"You have to understand how to segment all the customer-related data available so that you can figure out how your customers want you to interact with them," says Judith McGarry, vice president of strategic partnerships. "Those interactions are crucial, because they are the way you retain your customers. Trust and loyalty aren't built on one incident but rather on thousands of little interactions."
McGarry and company's efforts are paying off. In the first quarter of this year, 50 percent of the orders logged on the site were from repeat customers, and that number jumped to 59 percent in the second quarter. In addition, customers are spending more when they come back. The average order size hovers around US$43, up from US$17 in 2Q 1999. And with many orders coming from folks replenishing their rations of shampoo, razors, and deodorant, much of that is money in drugstore.com's pockets.
In addition, the company is brokering partnerships that will bring even more shoppers into its fold. This summer, deals with national health-insurance companies Wellpoint and CIGNA Healthcare were announced. Under these agreements, drugstore.com will be the exclusive provider of online prescriptions for Wellpoint's 22 million members and CIGNA's 25 million, and it will market special promotions and sales to those individuals.
