1. WALGREEN’S CONVERSION OPPORTUNITIES Unconverteds are a challenging target for Walgreens as they tend to be less involved in the VMS category overall than are those buying the category at the store. The Walgreens “Unconverteds” tend to be lighter VMS shoppers (10 trips/year vs. 12 for the Converteds.) While they generally under index on supplements, many of them do buy heart health products (49%) and/or calcium (40%). Importantly, the vast majority of them are AMV buyers(91%) suggesting that adult multivitamins are an extremely appropriate gateway to buying VMS at Walgreens. “Unconverteds” also tend to be less actively involved in the purchase process -- fewer of them make lists, check circulars, get information online, etc. Still, a fair amount do use coupons ( 27%) and check store circulars (about 20%) – perhaps a viable leverage point for Walgreens. It does not appear that online marketing would be appropriate for this group, very few of whom use the Internet as a a VMS information source (only 9%).

2. WALGREEN’S CONVERSION OPPORTUNITIES To attract this target, Walgreens should put added focus on those VMS products with broad appeal vs. specialty products appropriate for more deeply involved VMS consumers. While the “unconverted” skew toward Store Brand purchases (at 20%) they are as likely to have bought OAD and Centrum on their last purchase (23% and 22% respectively) as are the “converted”. In addition to giving attention to higher penetration category product segments, (heart health, calcium, etc,) a focus on the leading national brands (OAD, Citracal, Caltrate, Centrum, etc..) may be a way to entice the “unconverted” to start buying their VMS at Walgreens. In targeting these individuals, consider that they tend to be female (62%), white (81%) and employed (53%) –not very dissimilar from the already converted.

3. WALGREEN’S CONVERSION OPPORTUNITIES One of the major ways to increase VMS conversion is to shoppers who are buying their VMS at Walmart and Club Stores. While CVS is seen as being similar to Walgreens, the two stores do not seem to be competing directly with each other for shoppers. Even though Walmart dominates both conversion and loyalty, is at a significant disadvantage to Walgreens in critical areas such as customer service and being a source for health and wellness information. And when the “Unconverteds” are choosing Walmart over Walgreens they are doing so in order to one-stop shop for multiple categories – not because of any factors liked to the section. This suggests opportunity for Walgreens to establish itself as the optimum place to buy VMS due to its inherent health & wellness connection and its better access to store personnel. Capitalizing on the drug store opportunity would require a different approach. Clubs dominate in conversion, loyalty and shopper satisfaction. We know they offer a unique shopping experience and a type of good customer service that is highly appreciated by the Walgreens “Unconverteds.” The opportunity for Walgreens may be to further establish itself as a knowledgeable source for a spectrum of VMS – from AMV to more specialized supplements – requiring expertise one cannot find in Club. To best either opponent in VMS, Walgreens should continue to focus on health and wellness initiatives. They can do this through bolstering communication to shoppers about its commitment to their health and wellness at multiple touch-points (Walgreens.com, circulars, in-store, etc.) Giving added attention, space and support to a variety of VMS products is one way to clearly communicate this focus to shoppers.

4. WALGREEN’S LOYALTY-BUILDING OPPORTUNITIES Consumers who spread their VMS purchases across multiple outlets like shopping in those stores as much as or more than they like shopping in Walgreen’s. Shoppers overall perceptions of Walgreen are identical regardless of their loyalty. but the non-loyals are more likely to rate the other stores they are shopping in higher than they rate Walgreen’s. Enhancing the overall shopping experience will have a direct impact on enhancing VMS loyalty. Enhancing the overall shopping experience will have a direct impact on enhancing VMS loyalty. Older consumers tend to be more loyal than younger ones. Efforts targeted against younger consumers could improve loyalty among them. Somewhat paradoxically, claimed loyalty club membership is high among the least loyal group – low among the MOST loyal. (Note that we can’t, unfortunately, differentiate between the OLD “Register Rewards” Program or the NEW “Walgreen’s Reward” Program) At its core, consumer program is behaving as a promotional program -- and non- loyal consumers tend to be more promotionally focused than are others.

5. WALGREEN’S LOYALTY-BUILDING OPPORTUNITIES Growing loyalty among those who spread their VMS purchases across multiple outlets is a somewhat more achievable for Walgreens than improving conversion... The less loyal tend to be more involved in the category overall, buying across multiple segments, especially AMV, Vitamin C, Kids MV and Heart Health and, but even supplements, joint supplements, weight supplements – and they have an addressable need – they are more interested in breadth of assortment than the typical shopper, especially for a selection of new and unique items -- an advantage Walgreens is poised to deliver. They are more targetable for email blasts or other direct marketing initiatives – they skew younger, with larger households and are more ethnically diverse (25% non-White). At the same time, a primary hurdle among the LEAST loyal group is that they enjoy shopping in other stores for VMS. Relatively many shopped at Walmart last (33%), with smaller groups of them shopping in Club and Food (6% each). Enhancing the overall shopping experience may have a direct impact on enhancing VMS loyalty, as will differentiating itself versus CVS. Walgreens might try to build upon its slight advantages over CVS among its VMS purchasers in the areas of VMS product assortment, and its major advantages over Target for health and wellness focus.