presents

Health Loyalty

The Future Well NYC & London T (US) 347.725.1630 & (UK) 07824 665 990 info@thefuturewell.com thefuturewell.com
Introduction to Health Loyalty

Loyalty programs have brought unprecedented opportunity to the retail industry and
simply revolutionized how retailers do business. For example, after Tesco introduced
their Clubcard, profits rose $400 million in just the first year. How can the health, well-
being, and sickcare industries use loyalty programs to reward customers, encourage
healthy behavior, and increase profitability?

We're living in unique times. There are multiple forces all coming together at this critical
moment in history to foster a whole new opportunity in "health loyalty."

• Internet-enabled smartphones enable innovative loyalty "check-in" apps that

mash up location with purchases.
• Rewards cards have become routine in consumers' everyday lives.
• Virtual goods have become low-cost, high-value new ways to reward customers.
• The prevalence of chronic, behavioural-based diseases in the developed world
prove there is an unprecedented need to nudge people toward healthy behaviors

Loyalty programmes benefit both sellers and buyers of goods and services. They offer
consumer data (personalised, aggregated, and analysed), a welcomed communication
channel, a targeted discount system, and a relationship building tool to the company
who develops them. To the customer, they offer "something for nothing" and a chance
for reward for doing what they had already planned to do.

But successful loyalty programmes are quite difficult to build and implement. Their suc-
cess has been mixed with some companies swearing by them and some struggling to
achieve the potential benefits and even closing their programmes.

But what are the innovations, best practices, and ultimate opportunities for loyalty pro-
grams in health and well-being?

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Why is healthy loyalty important today?

EPOS and Mag stripe cards enabled retail loyalty boom. The big expansion in
loyalty programmes in the UK came with Tesco leading the market into supermarket
loyalty programmes in 1995. At the time, they accounted for around one quarter of all
food sales in the UK. They now account for more than 30 percent. The Clubcard,
through data and promotions, is responsible for much of this growth.

The Tesco Clubcard programme was built on the heritage of loyalty discount vouchers,
"blue shield stamps." EPOS systems enabled a fundamental step change in data gather-
ing. And by 1993, magnetic stripe cards were inexpensive enough to enable a cost effec-
tive way to link the discount/loyalty programme to personalised data, thereby building a
totally new way to understand consumer demand and behaviour.

Personalised behaviour data totally changed how companies understood

consumer behaviour. The Clubcard tracked 80 percent of Tesco shoppers heralding
a reassessment of the use of market research at Tesco. By using the data about each cus-
tomer's shopping behaviour, rather than research about customer shopping behaviour
using a sample of shoppers, they got more precise and totally realistic results. They were
no longer relying on standard margin of error as is usual with traditional quantitative
research. Having access to real-time consumer behavior meant that researching a sam-
ple group to understand the present and forecast the future was pointless and costly.
The business was increasingly built on measuring and understanding what people did,
not what people said they did or were going to do.

Internet-enables smartphones are opening up a whole new world of 24/7

location-based data. If you know where I am, you can have a pretty good guess about
what I could be doing, and what I am definitely not doing. A recent study showed that
location data from mobile phones has indicated that 93 per cent of human movement is
predictable-- it is possible to accurately predict movement and location up to 97 per cent
of the time for the majority of people. Knowing where people are and what they are do-
ing are equally as important in understanding me, my health, and what I might need
and want to purchase or interact with.

Think about the ability to tie in qualitative data in real time to the behavioural data (how
satisfied are you with this experience? - answer on a 5 pt scale on your iphone right
now). For example, frogmetrics combines a touchscreen platform for data collection
with web-based analytics to help companies and researchers capture data in realtime. At
the point-of-experience, customers take a 30-second survey on the device. The results
are then wirelessly transmitted to the web-based analytics where they can be viewed

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immediately - not weeks or even months after the responses are collected, like other
methods of in-person data capture.

What is the healthcare opportunity?

The healthcare industry has been slow to use loyalty programmes, but demand and ac-
tion are now growing. In the US, start ups like Virgin Healthmiles now have 800,000
customers and health insurers are buying loyalty programmes and starting their own.

Healthcare retailers have probably been the leaders in health loyalty programmes. Boots
launched the Advantage Card in the UK in 1997. Tesco and JS have been using their re-
wards programmes to grow their health and beauty lines and pharmacy sales since 1995.
In the US, CVS launched their first-in-their-sector loyalty card in 2001.

Fast Moving Consumer Goods (FMCG) companies who are extending their footprint in
the healthcare space are looking at the potential for health loyalty programmes to differ-
entiate, grow and dis-intermediate the retailers.

There is also a potential to rebrand traditional restrictions (think an "in-network" group

of providers) into something more positive in the eyes of consumers. Instead of feeling
restricted by physician networks, consumers can earn rewards for staying "in-network"
and receiving health services from low-cost provider groups.

In addition, loyalty programmes in health offer great opportunities to "nudge" people

towards more healthy behaviours. This can potentially reduce total health system costs
and would be very attractive to governments in public healthcare systems.

Changes in personal technology offer new opportunities for loyalty programmes in

health. Back in 1993 there were no cellphones, the internet was not used very widely by
consumers, and EPOS tracking at the consumer level was revolutionary. But today there
are over 125 million Gen Xers and millennials in the US alone-- over one third of the
general population. There are up to 5 pieces of personal technology in 10 year olds' bed-
rooms (phone, Sony Playstation, Nintendo DS, laptop, mp3 player). The web is ubiqui-
tous and discussions about whether people will really take to buying something online
are gone. In addition, Apple has transformed personal computing with the ipod, iphone
and ipad. We are currently at the bottom of the hockey stick in terms of software appli-
cations for these devices and "look alike" devices from Apple's competitors.

So, almost 20 years on, loyalty programmes can access new personal hardware and
software that lend themselves to quick and easy personal data collection in the health-
care space. Not only can these devices link their data with the still prevalent EPOS data

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(which is now often available to buy), they can also collect far more pervasive personal
data 24/7.

This personal technology offers more than just retailers the chance to build a viable
health loyalty programme.

What are the major challenges?

The major challenge to overcome is privacy."Health data is something that peo-

ple want to keep very private." But times are changing. Digital natives are sharing more
and more information on Facebook and many other sites from a very early age (think
Club Penguin from Disney). In addition, Eons has shown us that even Boomers will
connect and share personal information if it helps others or helps them to connect.

More generally there is a huge wave of social, data-sharing applications coming out of
the US at the moment. Examples are foursquare, WeReward, loopt, eat.ly, daily burn,
blippy, daytum, and Healthy Wage.

People are seeing the value of sharing. Today's rewards run the gamut from virtual
badges, discounts for visiting a place most often, social clout, and good old-fashioned
entertainment. It is very important to understand the tradeoff between data privacy and
value. People are happy to share personal information when they can see a direct bene-
fit for doing so. Think about Realage which asks incredibly personal health data and
gets great uptake because they translate this data into a personal report matches their
"realage" with their chronological age.

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What is Health Information?
Traditionally, health has been spoken of and understood from the perspective of physi-
cal health. However, physical health is only one component of wellbeing and happiness.
Wellbeing can be understood from these perspectives:

• Physical Health
• Mental Health
• Financial Health
• Professional Health (are they doing meaningful work that maximizes their
skills?)
• Relationships with family and friends
• Immediate Community (a person's relationship to their local neighborhood)
• Global Environment (a person's relationship to the planet)

Much of this information is already shared. Consumers are using mint.com to maximize
their financial health and share information. They're using LinkedIn to maximize pro-
fessional relationships and opportunities. They're using Facebook to stay connected
with their family.

The Bottom-Up Loyalty Programme

Loyalty programs can also be tailored for small businesses. Foursquare's secret weapon
allows businesses to claim their own profile and create their own loyalty rewards and
rules for their own customers, tailored specifically for their local clientele. Today's loy-
alty platforms enable small or large scale customized by solo businesses or big brands
and tailored for the nuances of local clientele. This means an individual doctor can cre-
ate their own loyalty programs just as easily as Pepsi by changing a few settings in their
own practice's profile on Foursquare.

If yesterday's top-down loyalty programs are being disrupted by loyalty platforms, the
most important question to answer is "Does there need to be a loyalty platform exclusive
to the health and wellness industry?" If so, who controls the data? Until now the con-
sumer database has been owned by the loyalty programme owner. Sure there are data
protection controls, but the future gives the consumer direct control of their own "data-
base.”

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What do loyalty programmes mean for clinical
health information?
We believe the first step to personal medical records may well expand out of the per-
sonal health loyalty programme record. And expand over time, at the consumers be-
hest, to include not just wellbeing information but gradually the more personal health
information usually held in the office of your GP or specialist. Clearly this is dependent
upon a national health loyalty programme having some success in enticing 70 to 80 per-
cent of consumers to join.

In the US and the UK there is no clear route or standardised model for a personal health
record which has been enacted. In the US, many companies are vying, with different
systems and models to be the leader with limited government guidance or help. In the
UK, the NHS has not been successful in getting a record in place. Interestingly, here is
what Cameron said about this 12 months ago

"You don’t need a massive central computer to do this. People can store their health re-
cords securely online, they can show them to whichever doctor they want... But best of
all in this age of austerity, a web-based version of the government’s bureaucratic
scheme services like Google Health or Microsoft Health Vault cost virtually nothing to
run."

So, we may well see the UK government encouraging commercial entities to build con-
sumer driven health records. The value creation in this is phenomenal.

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What health loyalty programmes do we see being
successful?
There are opportunities in the following areas

• The Multi-Retailer Programme (e.g. nectar in the UK)

• The Condition-Specific Programme (e.g. the "living with diabetes" loyalty pro-
gramme)
• The Target Group Specific Programme (e.g. mother and baby, over 75 single
woman)
• The Medical Practice Programme - (e.g. following protocols, enrolling patients
into programmes)
• The Doctor-Prescribed Programme - programmes for their patients and families
• The Employer/Insurer Programmes (probably US only)Success will be deter-
mined at two points. The entity funding the costs of the programme and rewards
(funders) and the entities enjoying the benefits (spenders, savers, and sellers).

Consumers and doctors will have to feel that they gain something for nothing. For the
funders of the programmes, who might be national health systems or retailers or
brands, success will be determined by the degree to which health behaviour and out-
comes are changed (with resultant cost savings) and the growth through increased sales.

The secret sauce might come from a programme that can fund itself not through health
behaviour change, but through purchasing or real time location tracking (i.e. did they
buy something? and did they come into the shop/health location?).

Success will also be determined from an ever evolving programme that keeps the par-
ticipants interested and engaged. This means that success will also continually evolve.

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What kind of rewards will work in health?
No commercial entity has yet successfully cracked the business model around financial
rewards now for behaviours which will, hopefully, affect health outcomes later. It's
highly likely that any model based on this concept of personal rewards in the distant fu-
ture will ultimately fail.

It also seems likely that the most successful health rewards programme will be based
upon selling products, services and experiences to its participants. Building the model
on savings linked to health behaviour change alone will be problematic (or even impos-
sible?). If the programme can sell products and services in an increasingly targeted way
to existing customers and bring in new customers at a low cost per acquisition then the
model will be both feasible and profitable.

There has been a lot of public discussion around what is the right amount of money to
reward someone to guarantee behaviour change or "compliance". For example in the
US many think that $200 is a good number to encourage people to fill in a voluntary
health assessment questionnaire provided by a health insurer. In fact, the financial re-
ward given for behaviour change should be directly correlated with how onerous the
task being rewarded is and who the consumer feels will truly benefit from the behaviour.
If they feel it's their benefit then, of course, the reward can be smaller.

If you think about many coffee chain reward programmes you get the 10th or 12th coffee
free for doing no more than flashing your card. While in a supermarket programme the
standard minimum is ten times less than this at 1%.

We see an opportunity in media content such as free digital media downloads as re-
wards. The upside of this would be to break the direct line between users and rewards
costs which happens in most rewards programmes. Today's personal technology gives us
a low cost way to distribute.

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What is the potential market positioning?
In a successful health rewards programme it will be important to position the pro-
gramme as a helper and facilitator rather than as a rewarder. This positioning may be
considered as a mutuality between the provider and user. Where although it should be
perceived to be easy to earn the rewards, you still have to do something and take per-
sonal responsibility.

This is quite different from many existing programmes where the positioning is often
more around a "thank you" for what you are already doing and continue to do.

How can you establish a successful health loyalty

programme?
Here is a checklist of some of the people and things you will need:

• A "test and learn" philosophy. There is no roadmap to follow, so experimentation

is key.
• A list of clear benefits you are after (such as the trade off between behaviour
change, outcomes and sales; the benefit of the data; and the benefit of the direct
to consumer channel).
• A strong team champion who understands and has built loyalty programmes.
• Experts in
◦ your company culture (if you are large).
◦ consumer engagement, consumer behavior and attitudes, and data analy-
sis.
◦ creative information technology
◦ bricks and mortar type epos systems, online, mobile apps.

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Please contact us for more information.

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