Leveraging ExtraCare: Conversion and My Weekly Ad
Fifteen years worth of ExtraCare learnings also have dramatically influenced the way CVS Caremark markets and merchandises to its best customers. These learnings have informed a critical part of its overall retail strategy, SVP merchandising Judy Sansone told DSN — conversion.
“What we found was we had a lot of upside with existing customers,” Sansone explained. “Conversion is the way we bring personalization to existing customers; by giving them offers that are highly relevant to them, we can really engage them across the store.”
Prior research had shown the company that customers tend to shop a limited number of categories. For example, the data revealed that pain relief customers bought hair care products 42% of the time, and oral care customers bought vitamins 36% of the time.
The early results have been “a tremendous success,” Sansone noted in a late-September interview. “Just in the last month, we’ve converted [more than] 2 million people to buy in categories they’ve never bought in.” According to Sansone, who was reticent to point to any single vendor success story, the big wins have been in the “health, beauty and personal care categories.”
Conversion will continue to be a major component of the company’s retail growth strategy going forward, she said. At the heart of conversion is CVS Caremark’s broader retail mission to personalize its relationship and its communications with its best customers. “We have worked to innovate in a number of different ways to engage with the customer,” Sansone said. “In the past, it’s been really traditional methods — most people are familiar with coupons at the register or [printing] coupons from the kiosk; those are fairly traditional. But we have [made] huge innovations in our digital strategy around email and around social media — … the number of tools and channels we have today to reach customers, pre-shop, during shop and post-shop is tremendous. It’s sophistication in the kind of offers they’re get ting, but also in the delivery mechanisms to engage the customer.”
Enter the most recent example of how CVS Caremark is personalizing the conversation with its best customers through ExtraCare: My Weekly Ad. The new digitized circular initiative, which launched in September, enables CVS to personalize its weekly promotions down to the user based on past purchasing behavior.
“Last week, we had one circular,” Sansone said, during the Sept. 20 interview. “This week we have a different versions for each of our customers.”
My Weekly Ad is enabling CVS Caremark to engage in more meaningful and relevant communication with customers, SVP/ chief marketing officer Rob Price explained. “Newspaper and television, and all of the mass media vehicles have had a very good run, and they will continue to be a very big part of what we do,” Price said. “But we’re mindful of the challenges of mass media — declining newspaper circulations, etc. And also we’re mindful of big changes in consumer behavior; whether it’s digital commerce or personalizing your sneakers, playlist or teddy bear, there is a sea of change occurring out there, and we want to participate in that. … I think from a media and marketing and promotional standpoint, My Weekly Ad is about moving toward that convergence.
Registered ExtraCare members get their own personalized front page customized with offers “based on the items they buy at CVS,” Sansone said. The offers are specific to the SKU and store level, and the ads can even instruct the customer on where to find the items on the shelves of their local store. The app also allows users to create a customized shopping list from items featured in My Weekly Ad.
The ability to create this kind of personally curated, geo-mapped shopping list is unprecedented in loyalty programs, Price added.
Notably, none of this important work or the insights that drives it all could exist without the commitment of CVS Caremark’s vendors, Sansone said. “Our vendors have been great partners in both the development of ExtraCare and our growth in terms of how we have delivered personalization through ExtraCare.”
Again, while she is reluctant to single out any one of its vendors or a single program it has partnered on, Sansone told DSN why so many of its suppliers have invested in the program over the years. “They get a great ROI from working on personalization by the very nature of personalization — it’s very relevant to the individual customer,” she said. “ExtraCare allows the ability for brands to develop loyalty and long-term value to the brands, and … for suppliers it is so much more efficient to build long-term value with a customer than it is to constantly have to acquire [new customers]. Constantly acquiring new customers is expensive. So… they continue to work with us very aggressively to grow the program.”
Of course, all of this is pretty sophisticated work, Sansone told DSN. “Our suppliers really need the kind of tools and resources to first understand the information and then understand how to use it,” she said. To help foster closer collaboration with its vendors, CVS Caremark this fall unveiled a new information gateway, which it developed in conjunction with IRI. The information gateway enables its vendors to use and plan from the same data used by CVS’ own category manager and buying teams.
These kinds of customer insights create an added incentive beyond just selling more merchandise, for suppliers to invest in ExtraCare, Price added. “It’s not just an engine for efficient promotion; it’s also an engine for insight, whether its new product launches or new product design, or communications, etc.”
And just as CVS Caremark can personalize its communication to the customer level, it also has the ability to target efforts at the store level. That means a vendor doesn’t have to be in all 7,700 stores to have meaningful participation in ExtraCare — an important consideration for smaller companies who may not think they have the bandwidth to commit to the program.
“By it’s nature, ExtraCare is about personalization,” Sansone said. “We can personalize it to customers, and we can personalize it to stores,” she said. “So, for limited distribution products, we can deliver offers in stores that carry those products specifically. There are large and small suppliers that see tremendous benefit — in fact, many small suppliers have actually shifted most of what they do with us into the personalization vehicles because mass [media] isn’t necessarily the best way for them to deliver their messages. By doing it in this personalized way, they are actually building loyalty for their small brands in our stores.”
Recent news magnifies ‘Power’
It’s been a busy month for news about CVS Caremark, as DSN raced to compile the special report on the company that appears in this issue. Each of the announcements only serves to amplify our “Power of One” theme.
Take its new joint venture with Cardinal Health, which will negotiate prices and source generic drugs for both companies.
Prior to the deal, CVS Caremark had already counted purchasing power among its key advantages. Now CVS Caremark picks up even more scale in the thick of the generic wave — $30 billion worth of brand-name drugs are expected to go generic in the next two years.
Then, there was CVS Caremark’s $2.1 billion acquisition of the Coram specialty infusion business. Specialty pharmacy already is a huge business for the company — estimated to reach more than $20 billion in 2013. With Coram, CVS Caremark is a major player in one of the fastest-growing segments of specialty pharmacy. The $11 billion home infusion services market is growing at about 10% a year.
And then you had the news about Helena Foulkes, who as of Jan. 1, officially takes the helm of the company’s retail business. While it may be slightly more difficult to quantify Foulkes’ value to the business, consider this: ExtraCare, Pharmacy Advisor and Maintenance Choice are three of the most innovative and game-changing programs the company has introduced in the past two decades; Foulkes has played a critical role in the development of each. She has made a career out of designing programs around the needs of the consumer, and DSN expects a lot of excitement to come out of the stores under her leadership.
Rob Eder is the editor in chief of The Drug Store News Group, publishers of Drug Store News and DSN Collaborative Care magazines. You can contact him at firstname.lastname@example.org.
RetailNet shares Amazon insights
WALTHAM, Mass. — Amazon is on a course trajectory that will see the online juggernaut command 30% of all online sales by 2016, according to a RetailNet Group projection shared by Keith Anderson, VP digital strategy, during a recent webcast on GMDC Connect, powered by Telepresence.
As part of a session titled “Amazon in Focus,” Anderson provided a comprehensive understanding of Amazon’s complex business model in one hour.
What’s most important to Amazon’s success is that shoppers perceive the retailer sells virtually everything that is available. Amazon has positioned itself as the go-to for product research, Anderson noted. “Amazon now is the preferred starting point for product research for around 30% of those researching products online, which is [more than] double the percentage that start with Google,” he said.
The AmazonFresh expansion could change the economics of same-day delivery with high-frequency deliveries on Amazon trucks, as opposed to Fed-Ex or UPS, plus 200,000 general merchandise SKUs. “Somewhere between a half dozen and 20 markets, everywhere from New York City to perhaps Dallas, Denver, Phoenix … are under consideration for expansion next year.”
“… AmazonFresh really represents in the end the ability, we believe, to offer same-day delivery … profitably to as much as 80% of the population,” Anderson suggested. “More realistically over the next 18 to 36 months, 50% of the population.”
To watch the video, click here.