Benefits That CVS ExtraCare Customers Acquire From the Program

CVS Case

Headquartered in Woonsocket, Rhode Island, CVS Caremark is the number one provider of prescriptions in the United States, with over 6,200 locations in forty-four states

across America. CVS/pharmacy serves the health care needs of its customers by providing convenience and a high overall perceived value.1

Along with its pharmaceutical products, CVS “front store” retail sales include health and beauty products at affordable prices. CVS has a large selection of upscale cosmetics with the latest advances in skin care and has expert beauty consultants on staff.

In 2006, CVS launched their in-store Photo Centers, offering customers fast, convenient, and high-quality image processing. CVS/pharmacy now has the largest distributed photo printing network of any retailer in North America.

CASE

In 2001, CVS/pharmacy was financially strong, with number one market share positions in major drug store markets such as Boston (28.8%), Chicago (51%), and Houston (36.9%).

Competition, however, was becoming increasingly fierce from rivals such as Walgreens, Osco, Rite Aid, Eckerd, and Kroger.2

Specifically, Walgreens posed a serious threat to CVS in 2001— aggressively expanding in key growth markets such as Houston and Chicago where CVS had enjoyed a leading market share.3

CVS’s loyal customers were now being tempted to switch to the competition by Walgreens’ low prices and 24-hour service. CVS needed to devise a new marketing strategy to retain its loyal customers.

CVS MAKES ITS MOVE

In February of 2001, CVS launched a new customer loyalty program called ExtraCare® in its 4,100 stores. Customers could sign up for a CVS ExtraCare card and receive 2% back on their purchases in the form of a coupon printed at the bottom of their receipt. It also rewards customers with $1.00 to spend on front store merchandise for every two prescriptions filled.

ExtraCare customers may choose to disclose personal information, such as their home address and phone number, but it is not

1 CVS/pharmacy website http://www.cvs.com.

required. A customer may still receive in-store discounts even if they have only provided a name. Customers who do provide an address receive mailings with special offers and coupons, and information about new products tailored to their shopping habits.

In August of 2001, year-to-date same store pharmacy sales increased by 14.7% and overall store sales increased 10.9%.4

SUMMARY AND CONCLUSIONS

In addition to the substantial investment in technology required by the ExtraCare program, CVS continues to invest in growth through acquisition. In 2005, CVS/pharmacy integrated 1,200 Eckerd drugstores in markets such as Texas and Florida. In 2007, CVS integrated 700 Sav-on and Osco drugstores in the California markets.

In 2008, ExtraCare has become a successful customer loyalty program, with more than 50 million cardholders in the United States. Through cardholder transactions, CVS has improved their ability to respond to customer needs, based on the information collected through card sales. The ExtraCare program also enabled CVS/pharmacy to maintain its market share, despite the discounting efforts and fierce rivalry of its competition.

Today, customer relationship management software and other improvements in information technology have enabled

marketers to better understand the needs of customers on a one- to-one basis. Similar value card programs are evident in many different industries. Consumers receive rewards for purchasing virtually every type of product—from grocery stores to drive- through coffee retailers.

ANSWER

Benefits That CVS ExtraCare Customers Acquire From the Program

ExtraCare customers are provided with a coupon (composed of 2% of their total purchases), whenever they make purchases at CVS ExtraCare outlets. The coupons enable the customers to purchase more products and acquire value for their money. CVS also rewards ExtraCare customers with $1 for spending on merchandise, for every two prescriptions acquired. Customers receive mail with special purchase coupons and offers on new CVS/pharmacy products. The members of the program are also able to earn and save rewards on the purchases of household goods and beauty products. Family gifts and health products are also provided. ExtraCare coupon points are spread out throughout the US. Customers can scan their program cards at these points before shopping for any goods, to enable them to receive offers only available for ExtraCare members. They also receive free CVS money, for extra purchases, and other benefits such as coupons.

Another benefit that ExtraCare customers acquire is the CVS publication, myWeekly Ad. The circular contains information on latest ExtraCare deals and contains well-organized weekly offers. Customers can, therefore, create shopping budgets and lists simply, as all the offers are organized in one publication. CVS/pharmacy also offers a Beauty Club to ExtraCare members, where members get $5 rewards for every $50 spent on beauty products. They also get advice on beauty and receive $3 rewards on their birthdays. CVS’s ExtraCare Pharmacy program rewards members with a $5 gift for every ten prescriptions they get. The participants also get rewards such as free immunizations and free email refill reminders.

Ways of Countering Competition and Improvement Recommendations

If a competitor of CVS starts a value card program like ExtraCare, CVS will have to address the competition that will ensue. One way of addressing the problem would be minimizing the costs of enrolling in the ExtraCare program. Bringing down the cost of enrolling in the program and acquiring a members’ card would encourage more customers to subscribe to the program, as the subsidized cost would boost its marketability. Customers who are attracted to the program but are unable to subscribe to it will have the ability to do so, with the lower cost set. CVS may also increase the number of discounts, coupons, and offers provided to existing ExtraCare customers, to ensure that they remain in the program and are not lured by the rival company’s program. For instance, Beauty Club provides a $5 reward for every $50 purchase. This may be sweetened by making the reward larger, say a $5 reward for a $35 purchase of beauty products.

I would also recommend the linking of the ExtraCare program card to banking facilities. Customers should be able to use the money rewards acquired at CVS in the purchase of other goods, besides CVS products. Customers should also have the ability to use money from their bank accounts directly, through the ExtraCare cards. This move would entice millions of new customers, and ease purchase transactions.

The Merits and Demerits of Personal Information Non-requirement in the ExtraCare Program

The advantage of not demanding for personal information of customers in the ExtraCare program is that it avoids any ethical issues that may come up with the disclosure of patient names and personal data. CVS/Pharmacy deals with healthcare products and prescriptions. Unintended disclosure of the personal information and data on which customers purchased what products may be a reason for some customers keeping off the program. Some customers highly safeguard their identities and personal information. The non-requirement to disclose this information encourages such customers to enroll in the ExtraCare program. The customers can go about their medical purchases and prescription filling without the worry of disclosure of their personal information.

The disadvantage of not demanding for personal information in the enrollment into the ExtraCare program is that customers may use falsified information to acquire regulated products. Some customers may even register more than once, to get more ExtraCare cards for transactions. This makes it difficult to ascertain the actual number of ExtraCare subscribers in the United States. Since provision of personal identification documents is not necessary, an individual may register using the details of another individual. Follow-ups on prescriptions may, therefore, be cumbersome. Also, tracing of lawbreakers who may have used medicinal drugs or products in the committing of a crime is difficult. Provision of personal information who hasten any tracing needed by law agencies.

Ethical Issues to be considered before Requirement of Customers’ Addresses and Phone Numbers

CVS needs to factor in ethical issues that may arise if their ExtraCare program requires personal information of its subscribers. First, they need to assure the customers of the security of their personal information. A security feature needs to be put in place, to prevent any information leak. Many people are afraid that giving their personal information to a company will end up in their information getting, somehow, into the wrong hands. The assurance that any information given will be safe from unintended recipients is therefore necessary. For instance, female customers are reluctant to give their contacts to male customer service attendants. This is because most of these attendants end up becoming a bother to the ladies, using their contacts for unofficial business.

Confidentiality is of paramount importance in this case. Customers need to know that they can trust CVS/Pharmacy with their addresses and contacts. Religious convictions should also be analyzed, to avoid any problems with customers. Some religions prohibit the use of certain medication. The customers in such religions would not be pleased on received mailings with offers and information about the medications prohibited by their religion. Some customers would prefer people not knowing that they use certain medication or products. The issue of confidentiality comes up again here. Policies in different states may also pose ethical dilemmas. For example, medical assisted abortion or physician-assisted suicide.  These too should be looked into before requiring peoples’ personal information in the ExtraCare program.

References

EBSCOhost article: Drug Store News March 5, 2001.CVS gears up for chainwide launch of ExtraCare loyalty card program.

CNN article: http://money.cnn.com/2018/01/15/news/companies/cvs-beauty-photoshop-images/index.html

The Wall Street Journal article: https://www.wsj.com/articles/PR-CO-20180220-909107

The Wall Street Journal article: https://www.wsj.com/articles/PR-CO-20180208-911223