Walgreens wants to use wearables to give instant discounts for exercising

Consumers love the idea of being healthy far more than they love doing what it takes to be healthy. For Walgreens, that's a win-win.

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Mobile health data is one of those yin-yang concepts, where the potential to help consumers vastly outdistances other mobile efforts, but the potential to hurt them with devastating privacy losses is dangerous. Not only is the same true in retail healthcare — think Walgreens, Rite-Aid, CVS and the pharmacies within Walmart, Target and Kroger — but it can be even more pronounced.

It's therefore only fair to give top-level kudos to Walgreens, which is bravely pushing the envelope, including one effort to give shoppers wearable devices that report health data — how much exercise is happening, at what level, what foods are being purchased, etc. — back to Walgreens. In exchange, Walgreens is preparing to issue automatic credits when customers check out.

From a psychological perspective, it's clever. By rewarding behaviors seen as healthy, Walgreens can be seen as being truly interested in its customers' well-being. At the same time, given that American consumers are, after all, American consumers, there is little long-term risk that Walgreens' incentives will balloon to the point where it will have to lower profits. In short, consumers love the idea of being healthy far more than they love doing what it takes to be healthy. For Walgreens, that's a win-win.

The goal of seamlessly connecting a mobile device — often a wrist-wrapped wearable, but smartphones are involved as well — to the Walgreens POS comes via a partnership between the retail chain and Alegeus Technologies.

Many of the details are still being explored, according to Alegeus chief strategy officer John Park, especially in terms of what kind of rewards will be offered for different behaviors. "We're looking at everything from 1,000 to 5,000 reward points," which amounts to about $1 to $5, Park said, with a targeted cumulative reward ceiling of about $500. "It doesn't take a whole lot of dollars or incentives to change behavior."

This gets into more consumer psychology. The simple fact that the consumer will get any money from good health behavior may be more persuasive than the actual amount, especially if shoppers believe that it's behavior they should be doing anyway. Secondly, the vague belief that activity level and foods purchased are being monitored by somebody out there — the Big Brother syndrome — could itself change behaviors. This is similar to how Nielsen households tend to watch more of what they want people to think they are watching rather than what they would watch if they thought no one could see.

The encouraged behaviors are wide-ranging, from getting a flu shot to eating well and exercising regularly. Park said the wearables Walgreens is using, from a company called Hat Trick Motion, and these specialized accelerometers track three elements of a shopper's exercise efforts: frequency, intensity and tenacity. It is a bracelet, a band or sometimes it can be clipped to clothing.

"We pay attention to your activity level throughout the day," Park said, adding that his team also looks for fraud attempts by analyzing activity patterns. "We look at the digital footprint, to see if it starts to change or is too similar to someone else's. You can't simply put it on your dog or throw it into a dryer."

There is no way for the system to track what someone eats, but it can, and does, track what food shoppers purchase. "This is a program that rewards and incents individuals to make better choices around their eating and nutrition," Park said, offering the example that a purchase of Special K cereal would score well "and a chocolate bar, it will dock you on that score. It works through the loyalty program at the SKU level."

This system could certainly be tricked by a consumer who wanted to do so, but Park argues that few would bother because people actually want to improve their health. "A savvy shopper simply wouldn't use their loyalty card for [negative] kinds of purchases. There is a way to game the system," he said. "But the point is that we're educating them on their bad choices." In other words, if the consumer has figured out the difference between good and bad purchases, half the behavioral-changing goal has been met.

"All we're trying to do is move the needle just a little bit," he said.

Walgreens is making the smart move here, leveraging IT efforts — connecting the dots between wearables, smartphones, POS and loyalty apps — to something that is not only good for shoppers, but good for business.

Copyright © 2015 IDG Communications, Inc.

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