ExtraCare holds the key to personalization efforts
The ExtraCare loyalty program has grown to become CVS Health’s crown jewel. In 2015, the program — now in its 15th year — helped drive nearly $4 billion in savings for its roughly 70 million active cardholders. More important, it has emerged as the key engine driving CVS Health’s personalization efforts — a critical component of the company’s five-pillar strategy to reenergize its front-end business.
(To download Special Report: Double Down on Health, click here.)
The program, which first launched in 2001, made waves as the first loyalty card program at a national pharmacy retailer. Over the years, it has proven to be a treasure trove of data that is now enabling the retailer to respond to customers on a more individualized level and personalize the shopping experience with offers and rewards that are more relevant to them. Not only is it using the card as a lever to get its best customers to spend even more, it also is helping the retailer to get more business from less active shoppers.
“We work hard to use what we’ve learned from our most loyal customers to make a real impact on everything from what coupons and offers we present to our customers, to what products we carry and even the overall design of the store,” said CVS Health VP loyalty and personalization Michele Driscoll, who leads ExtraCare for the company. “These learnings not only benefit those most loyal customers, but also create a more enhanced experience for our customers that maybe only shop at CVS Pharmacy occasionally. As a result of that positive experience, we hope to see visits from them increase in frequency. Ultimately, we benefit when we can create the most meaningful engagements with all of our customers.”
With its sights set on customer-driven personalization, CVS Health is striving to drive higher sales and higher margin growth, especially among its “higher-value” customers. CVS Health’s “higher-value” customers represent 30% of its customer base and drive more than 80% of sales in the front store, CVS Pharmacy president Helena Foulkes noted during a meeting with Wall Street analysts in December.
One area in which the company has been particularly successful in driving more business from its best customers has been in beauty. CVS’s Beauty Club, an extension of ExtraCare, has attracted about 17 million members since its kickoff in January 2011. Through Beauty Club, members get $5 in ExtraBucks rewards for every $50 spent on beauty products and $3 ExtraBucks Rewards on their birthday.
“The ExtraCare Beauty Club has been a great addition to our ExtraCare Savings and Rewards program, as we understand that some customers see us as a beauty destination first and foremost,” said Driscoll. “We know those customers are passionate about beauty products and love to save money on specific brands.”
One key learning from the program, said Driscoll, is that beauty customers do not necessarily want the same types of coupons and savings as other customers. Oftentimes, they are more interested in being alerted when new products arrive from their favorite brands or categories. “Specific communications, like showcasing Allure’s Best of Beauty products, are most relevant to them and are an important element of attracting these customers,” Driscoll said.
The ExtraCare Beauty Club is helping the retailer re-imagine the beauty segment and get even closer to its goal of becoming a leading health and beauty destination.
“[Beauty Club] is a totally different experience,” Brian Owens, director of retail insights for Kantar Retail, told Drug Store News. “Vendors pay extra to be part of it so, as a result, there’s more of a partnership between the retailer and the brand to make sure it is effectively managed and the returns are higher. There is also a smaller number of people to target, [so] it enables them to be a little bit more strategic in terms of how they reach the consumer, and then, when you have a limited assortment, it is easier to curate the right products for them.”
The emphasis on health and beauty — along with its social responsibility initiatives, personalization efforts and digital innovations — also is helping position the retailer to better engage millennials, a top priority for CVS Pharmacy, said Driscoll.
“We understand [millennials] have unique shopping behaviors, and we want to provide solutions that resonate with them for a positive shopping experience. That’s why many of our new features that we are rolling out to support ExtraCare are digital and mobile-friendly,” she explained.
Earlier this year the company, whose long paper register receipts had become a target for scrutiny and fodder for late-night comedy show hosts, introduced optional digital receipts instead of printed ones. Showing a sense of humor and helping to humanize the announcement, Foulkes appeared on ABC’s “Jimmy Kimmel Live!” in May to introduce the paperless receipts.
In addition, ExtraCare members also are able to scan the card right from their phones, features that help “make the checkout process more convenient and faster for our customers, something shoppers from any generation can appreciate,” Driscoll added.
CVS puts its brand on innovation
This isn’t your parents’ private-label business any more. To be sure, the rules of the store brand game have changed over the years — price matters, but it certainly isn’t the only factor driving the growing consumer interest in private label that exists today.
(To download Special Report: Double Down on Health, click here.)
“Our customer’s expectations of our store brand products have changed,” Cia Tucci, VP store brands and quality assurance at CVS Pharmacy, told Drug Store News. “It’s no longer just about value, it’s about creating an offering that resonates on quality and trust — products that work, delight and fill an unmet need,” she said.
By that measure, CVS has upped its game in private label over the last several years, with store brand penetration up from about 17% in 2010 to more than 22% today. According to Tucci, the goal is to continue to push the boundaries on brand growth. More than 45 million households have at least one CVS Health private-label product in their medicine cabinet. And the company’s 6,000 private-label SKUs are growing more than two times faster than the overall industry private-label average, according to research from Kantar Retail.
“Our ability to increase penetration in the [short time] starts with an internal focus. There’s a commitment at CVS to driving store brands,” Tucci said.
CVS Pharmacy’s commitment to store brands goes beyond a simple discount to brand equivalents, though the CVS Health brand does offer prices ranging 20% to 40% lower than comparable national brands. Quality and innovation are two other key factors associated with today’s CVS Health brand.
“Our mission overall is to deliver products that not only meet needs of affordability and efficacy, but also delight her with innovation,” she added. “This is where exclusive brands really play a part in our portfolio — products that deliver a unique promise to our customer and may not fall within our CVS Health umbrella brand.”
Over the years, CVS Health has introduced several successful exclusive brands, from the premium Radiance Platinum line of preservative-free dietary supplements to such beauty brands as Makeup Academy and Skin+Pharmacy. “These types of products would normally be sought after in specialty or prestige [channels], and we’re able to offer them to our customers at a more affordable price,” Tucci said. In some cases, these exclusive products also are helping CVS to deliver on its Elevate Beauty strategy, positioning CVS stores as a destination for higher-end beauty products typically only found in specialty or prestige stores.
CVS’s commitment to store brands also dovetails with another of the company’s key strategic pillars for re-energizing sales growth in the front-end of its stores — something it calls “Better Health Made Easy.” Consumer health has been a key focus for CVS store brand development. In May, the company launched more than 2,500 health-and-wellness SKUs across 19 categories with the CVS Health brand. “The company is committed to transforming our stores into premier health and beauty destinations by bringing more high-quality and innovative products to our shelves,” Tucci said.
That commitment has enabled CVS Pharmacy in some cases to identify white space opportunities, where no brands have staked any claims, and deliver real product innovation under its own store brand.
A strong example, in time for this year’s cough-cold season, the company introduced a liquid cold remedy packaged in a single-serve cup, combining the convenience of a single-brew coffee maker with the benefits of a soothing warm beverage to ease cold-and-flu symptoms.
“The innovation we bring to the portfolio is a big source of pride across my team,” Tucci said. “We spend a lot of time talking to, listening to and gaining feedback from our customers,” she added. Those insights in many cases are helping Tucci and her team deliver first-to-market innovation.
Another example of the changing nature of today’s store brand business is the role CVS’s suppliers are playing to help cocreate innovation.
“Our brand growth starts with this internal focus, but without our supplier partners, we wouldn’t be able to achieve the growth that we have,” Tucci explained. “In some cases we have the insights, and we look for suppliers who can help deliver the product. In other cases, we have suppliers who come to us with insights and an opportunity for points of differentiation, whether it’s a form difference or or a new line of products.”
Looking forward, expect more innovation from Tucci’s store brands team. This fall the company will launch Health on the Go — a new line of product exclusives that will be merchandised at the pharmacy counter and will feature many common OTC ingredients that typically are either the most common pharmacist-recommended products or products that most often are sold in conjunction with some common prescription therapy.
“The packaging is really what’s great about this,” Tucci said. “‘On the Go’ means it’s in a smaller pack size” containing anywhere from a one-week to a two-week regimen, Tucci said. “And there’s a great locking device on the package that makes it child-proof.”
It is just another example of how CVS Health is leading with innovation in store-brand development — and another example of how it continues to ratchet up growth for its own brands.
Driving customer engagement with digital
Digital engagement is an integral part of CVS Health’s growth strategy, and for good reason. The digital customer at CVS spends 4.5 times more and engages with the CVS brand six times more than non-digital customers do.
(To download Special Report: Double Down on Health, click here.)
Charged with driving digital growth and innovation for the company is Brian Tilzer, SVP and chief digital officer for CVS Health. “[We’re] dedicated to making health care convenient, personal and affordable, and digital tools are key to delivering this experience,” Tilzer told Drug Store News. “Over the past few years, we have been focused on investing in and developing cutting-edge digital services and personalized capabilities to support our corporate strategies.”
“We know that 1-out-of-3 CVS Pharmacy customers use at least one or more digital tools,” Tilzer said, and many of them are tools deployed by CVS Health. “[As many as] 18.8 million people have enrolled in text messaging, and in 2015, CVS sent 300 million prescription text message reminders to customers,” he added. That digitally driven engagement generates 13 million mobile visits per month and accounts for 3 million weekly visits on average.
As part of its digital strategy, CVS Health is focusing on innovation areas including mobile, personalization, connected health and digital therapeutics in an effort to develop future-looking healthcare solutions, ranging from beacon capabilities that deliver customers in-store pharmacy reminders, to applications that turn mobile phones into remote diagnostic tools.
According to Kantar Retail ShopperScape, CVS’s app boasts the highest engagement levels among drug store operators, with 20% having used the app in the prior four weeks. In the past year, more than 12.2 million CVS shoppers have downloaded the app, representing growth of 67%. “Unbeatable pharmacy experience, personalization and loyalty; next-generation convenience and expert digital tools — that’s the new strategy,” said Brian Owens, director retail insights at Kantar Retail. “[Suppliers] have to invest here.”
To help drive that innovation from concept to real-world application, CVS Health’s digital division has engineered partnerships with leading digital health venture fund RockHeath and start-up accelerator MassChallenge. Last year, CVS opened its Digital Innovation Lab in Boston. The goal of the lab is to embody the CVS Health digital team’s mission to run like a start-up, accelerating speed-to-market and impact of digital innovation across the enterprise by using the resources of the lab to rapidly test, improve and implement new programs.
And it’s working. “Over the past year, the Digital Innovation Lab has brought to market a number of new digital tools that make shopping at CVS pharmacies easier and more convenient, [such as] launching CVS Curbside, or letting our customers hold their place in line at MinuteClinic through our app,” Tilzer said.
CVS announced in September it will be offering curbside pickup at more than 4,000 locations, or roughly half of all CVS Pharmacy locations, following a successful pilot launch in San Francisco; Charlotte, N.C.; and Atlanta.
“The response and adoption of CVS Curbside from our customers has been very positive,” Tilzer said. “We actually saw CVS Curbside as an added convenience and way to create more visits to our store. Through our pilot testing, we found that on average, basket purchases were larger through online delivery and curbside pickup versus in store.”
“We see this service as another way for customers to have access to the products they want — anywhere and any way they would like,” added Judy Sansone, SVP front store business and loyalty and chief merchant for CVS Health. “So they shop our store, or on CVS.com, and they now have another way to shop via mobile or web,” she said. “Whether the kids or pets are in the car, or [they] have a mobility challenge, … we are providing access — anywhere, anytime — to make the shop most convenient.”
CVS Health also recently introduced CVS Pay, the company’s exclusive mobile payment solution that integrates the entire digital CVS experience. Customers can link their ExtraCare card with CVS Pay, meaning a single scan at checkout will process all ExtraCare deals, earn new rewards and handle payment for the transaction.
Creating an exceptional digital shopping experience across the front of the store is one way to capture today’s digital-savvy consumer, but CVS Health also is leveraging its digital solutions to help improve such health metrics as medication adherence.
For example, the CVS Pharmacy mobile app includes a tool called MedRemind that helps customers stay on track with their medication schedules by enabling them to customize medication reminders.
“CVS Health digital tools allow for easier access to programs that help people start and stay on their prescriptions while reducing healthcare costs for clients of CVS Caremark, the pharmacy benefits manager of CVS Health,” Tilzer said. “Research from the CVS Health Research Institute shows that those patients who enrolled online at CVS.com, Caremark.com or CVSspecialty.com were more likely to fill their prescriptions and adhere to their medications. Among CVS Caremark members with common chronic conditions, such as hypertension, 10% more members improved their medication adherence to optimal levels after enrolling online at Caremark.com compared [with] members who did not enroll.”