A few forward-thinking retailers have adopted predictive analytics in their loyalty programs. Among the few to use this tool today are Sam’s Club, CVS and Kroger. These programs offer both Convenience and Price advantages to individual customers. It is a true break-through innovation.
The Sam’s Club program provides a good illustration. Sam’s named this program eValues. This program offers bargains tailored to each Sam’s Club member. The member must be part of Sam’s Club “Plus” program. These “Plus” members may print out individually tailored eValues offers at a kiosk at the entrance to the store or by email or by visiting the Sam’s Club web site. Sam’s Club prepares these individualized offers by drawing on the purchasing history of the individual “Plus” members. Their purchasing history predicts what bargains and product combinations will attract the individual customer.
This eValues program is both a Convenience and a Price innovation. (See StrategyStreet.com/Diagnose/Products and Services/Customer Cost System) It is a Convenience innovation because it helps the customer find and choose products more quickly within the store. It is a Price innovation because it offers discounts on products the customer typically buys, or might buy. eValues is highly effective. The average coupon brings a response rate of 1% to 2%, but the eValues program results in customers getting the discount on 20% to 30% of the products where discounts are offered.
The stores’ loyalty programs become more relevant to their most important customers and the stores’ sales per customer visit increase. Clearly a win win situation.
Showing posts with label CVS Pharmacy. Show all posts
Showing posts with label CVS Pharmacy. Show all posts
Monday, July 19, 2010
Monday, November 23, 2009
The Wrong Customer
CVS Caremark is struggling. The Caremark side, which is a pharmacy-benefit manager, is bleeding losses and major customers. The company picked the wrong customers.
CVS is one of the country’s premier retail drug store chains. The company has grown through acquisitions over the last several years. On the retail drugstore side, these acquisitions have been a great success. Not so, on the pharmacy benefit side. (See the Perspective, “Buying Share, Not Sand” on StrategyStreet.com.)
A couple of years ago, CVS beat out Express Scripts, a competing pharmacy-benefit manager, to win Caremark. The other competitors in pharmacy-benefit management are independent companies, focused strictly on the wholesaling of drugs to large companies and institutions.
CVS has trodden another path. As a retail druggist at heart, CVS developed innovations aimed at the retail, rather than the wholesale customer. For example, the company offers the Maintenance Choice plan that lets pharmacy-benefit management patients pick up 90 day prescriptions in its drug stores at the same low price they would pay through the mail. Of course, this helps CVS sell more products through its drug store chain. It does not, however, help the wholesale customer who makes the pharmacy-benefit management buying decision. (See “Video #34: Types of Product Innovations That Reduce Customer Costs” on StrategyStreet.com.) But there is even a downside for the retail customer, the employee of the wholesale customers. These retail customers must use a CVS drugstore to fill their prescriptions or see their drug co-pays rise to 50% rather than 25%. Hear loud protests off-stage.
Trouble started early in this acquisition. The wholesale customers have been unhappy for some time. In fact, last year CVS offered lower prices to more than half of its pharmacy-benefit management customers in order to keep them from defecting. A few other clients simply left,
discouraged by the fact that CVS seemed to be focused more on the retail, than on the wholesale, customers.
Of course, the Medco’s and Express Script’s are delighted to be picking up such easy share from the failures of CVS Caremark. (See “Audio Tip #35: How Does a Company “Fail” in a Market?” on StrategyStreet.com.)
CVS is one of the country’s premier retail drug store chains. The company has grown through acquisitions over the last several years. On the retail drugstore side, these acquisitions have been a great success. Not so, on the pharmacy benefit side. (See the Perspective, “Buying Share, Not Sand” on StrategyStreet.com.)
A couple of years ago, CVS beat out Express Scripts, a competing pharmacy-benefit manager, to win Caremark. The other competitors in pharmacy-benefit management are independent companies, focused strictly on the wholesaling of drugs to large companies and institutions.
CVS has trodden another path. As a retail druggist at heart, CVS developed innovations aimed at the retail, rather than the wholesale customer. For example, the company offers the Maintenance Choice plan that lets pharmacy-benefit management patients pick up 90 day prescriptions in its drug stores at the same low price they would pay through the mail. Of course, this helps CVS sell more products through its drug store chain. It does not, however, help the wholesale customer who makes the pharmacy-benefit management buying decision. (See “Video #34: Types of Product Innovations That Reduce Customer Costs” on StrategyStreet.com.) But there is even a downside for the retail customer, the employee of the wholesale customers. These retail customers must use a CVS drugstore to fill their prescriptions or see their drug co-pays rise to 50% rather than 25%. Hear loud protests off-stage.
Trouble started early in this acquisition. The wholesale customers have been unhappy for some time. In fact, last year CVS offered lower prices to more than half of its pharmacy-benefit management customers in order to keep them from defecting. A few other clients simply left,
discouraged by the fact that CVS seemed to be focused more on the retail, than on the wholesale, customers.
Of course, the Medco’s and Express Script’s are delighted to be picking up such easy share from the failures of CVS Caremark. (See “Audio Tip #35: How Does a Company “Fail” in a Market?” on StrategyStreet.com.)
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