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How to Copy Starbucks: Demystifying Healthcare Loyalty Programs

How to Copy Starbucks: Demystifying Healthcare Loyalty Programs

I just offered to buy our entire software engineering team whatever they want from Starbucks.

They are doing great work and definitely deserve it, but I would be lying if I didn’t say that part of me was thinking about all of the stars I would get as a rewards member.

With two kids under the age of 4, coffee from Starbucks gets me through the day and at this point I appreciate every star I get. I surely set a new personal record for coffee consumption in 2016. I probably also set a record for purchases of amoxicillin due to my three year old getting a sinus infection every time she gets a cold. Unfortunately, her pediatrician doesn’t offer rewards like Starbucks, but if there was one that did I would strongly consider a switch.

Early in 2016, JAMA published a report that had me thinking that I may actually get my wish of a loyalty program from my provider. Following the article there were numerous reports of success stories and compelling research related to healthcare loyalty programs.

  • Primary Health Network has offered 10% discounts on pharmacy items not covered by insurance to their “VIP” program patients with great success
  • A group of researchers from The University of Michigan School of Medicine noted that use of loyalty programs can actually “broaden the concept of a healthcare “network” by adding urgent care facilities and pharmacies, or even restaurants and grocery stores to the list of sites offering healthy diet programs.”

So, if a loyalty program is such a great idea, why aren’t more health systems doing it? There are a few key reasons for this lack of progress. In the rest of this article I’ll break these reasons down and help you understand how to overcome each one.

Reason #1: It’s too complicated.

Loyalty programs are very new to the healthcare industry, so getting large (often slow moving) organizations like health systems to adopt what on the surface looks like a complex and foreign concept can be tricky.

The antidote to this concern is simplicity. The beauty of loyalty programs is that you can implement them in really simple forms and get great results. To do this I suggest taking a “Lean Startup” approach by starting with something small and easy to test. See what result you get and utilize that result to build momentum. For instance, keep a log of every time a patient completes a preventative care visit, offering benefits when a specific number of visits is reached.

Airlines do a great job of keeping their rewards systems really simple and easy to understand. A mile flown = a mile earned. Find your “mile” and go with it.

Reason #2: There is no measurable ROI.

With budgets tightening, a dynamic political landscape, and the move towards value-based care, Health Systems are scrutinizing every dollar spent and requiring ROI to be part of the discussion. With so few examples out there of health systems getting value from loyalty programs, how do you convince your organization that it is a worthwhile investment?

One place to start is to look at other high-trust categories that are getting significant ROI from their loyalty programs. A great example of this is in banking. Credit card rewards have existed for a long time, but the financial services industry has been expanding loyalty to all aspects of their relationship with customers. Citi’s Thank You program does this by offering points bonuses for every month a credit card customer also maintains a bank account.

Another way to focus on value is by identifying a key value driver for the business and then building your loyalty program around that metric. Starbucks focused on value when they made their recent (and controversial) shift to basing their star rewards on dollars spent vs. transactions tendered. This change means that higher spenders are rewarded more, which in turn incentivizes those more valuable customers to keep coming back. The popularity of this model has driven mobile sales up to about 6 million orders per month*.

If you are an ACO that is incentivized to improve the health outcomes of populations of patients, focus your program on rewards that promote healthy decision making and compliance with chronic disease management care plans.

Reason #3: We don’t have the systems we need to implement a loyalty program

It’s true that for many of the major loyalty programs you have heard of - Starwood Preferred, Starbucks Rewards, American Express Membership Rewards - there is some combination of CRM, Content Management, and loyalty specific software being used and that can be difficult/expensive to put in place.

The solution for this is to reduce your total cost of ownership for a loyalty program by leveraging as much of your existing systems infrastructure as possible. It’s likely that you already have a Content Management System (CMS) running your web properties and you may also be utilizing a Customer Relationship Management (CRM) system to communicate with your existing customer base. The good news is that with only these tools you can begin to run a loyalty program. CRM software such as Salesforce and Evariant offer options for managing loyalty programs through partnerships and existing solutions. So, you can manage your customer communication and the loyalty process through your existing CRM database. Leverage your CMS platform to manage and drive content to your patients through the web, social, and marketing campaign channels.

To take the leanest possible approach, consider a simple, manual process that doesn’t rely on any significant technology at all. By taking a “concierge” approach to loyalty, you can test the value of the program with a minimally viable structure.

Conclusion

In an environment where patient retention has quickly become a more important metric than patient acquisition, it is time for health systems to take a hard look at what a loyalty program can do to build strong, lasting relationships with patients.

As you plan your health system’s loyalty program keep these three principles in mind:

  1. Keep it simple. Find something easy to implement. Get it in place. Test and learn.
  2. Build around obvious value. What are your key business drivers? How can you incentivize patients to drive value? How can you give those patients value in return?
  3. Use existing technology. Do you have an existing CRM tool? Use your content management system to push personalized content to patients. Think of ways to handle easy tasks without technology.

Are you currently testing a healthcare loyalty program? If so, I’d love to hear about it. Just email me at bryce.cannon@modea.com.

*http://www.businessinsider.com/starbucks-rewards-makes-major-change-2016-4

“This post was written as a guest blog and featured on Greystone.net.”