CVS and Walgreens are both in the line of fire having direct competition between

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1 Brittany Beatty Shanita Akintonde Consumer Behavior Wednesday 9:00 AM September 30, 2011 CHAPTER 2 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 (51.1%,) and Houston (36.9%). Competition, however, was becoming increasingly fierce from rivals such as Walgreens, Osco, Rite Aid, Eckerd, and Kroger. 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. 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 and Walgreens are both in the line of fire having direct competition between each-other. Together they hold over two-thirds of the total market shares. In 2011, CVS Caremark Corporation s market value was $46,886.8 million dollars. They were ranked the most valuable by the U.S. Food and Drug Retailer report. Second on the list was Walgreens with $36,025.8 (Most Valuable). I think its important to know who and how your direct competition operates to find a better sense on how you can grow your own company. Now that we know CVS and their direct competition better, we can dive into improvements in CVS ExtraCare Card program. I ve found that primarily its main revenue comes from pain medications, which accounted for nearly $955 million in sales. The second highest spot is nutritional supplements with $838.3 million sales. Next, would be CVS adult cold remedies with over $800 million in sales. Following cold remedies was women s hair coloring products with almost $600 million in sales. Beatty 1

2 Lastly, facial products were the next highest with $531 million in sales (Drug Stores). By taking into account where CVS strong suits are, CVS should continue to give high promotion to such items and tie these to CVS ExtraCare Card coupons. All of the highest selling products are of utilitarian value. As stated in the Consumer Behavior book a utilitarian value is, derived from a product that helps the consumer solve problems and accomplish tasks that are a part of being a consumer. The book also gives a definition of hedonic value as, the immediate gratification that comes from experiencing some activity. CVS offers a range of different items found in both of these categories. The utilitarian items that CVS offers include anything from household cleaning items to health and beauty items. The hedonic items that CVS offers would include; movies, CD s, lottery tickets, and much more. Now that we know CVS highest selling items are utilitarian items we can focus how the ExtraCare Card works and how we can implement these items in offers to attract consumers back. CVS s ExtraCare Card program entails many incentives. The first being ExtraCare rewards. These rewards include, Extra Bucks. You can earn Extra Bucks when shopping at CVS/pharmacy stores physically or online using your ExtraCare card. By using your card in-store or online you earn 2% back with every purchase. You can also receive one Extra Buck for every two prescription purchases. To receive your Extra Bucks they will either print at the register on your receipt every three months or you can go online to print these. The other savings extend to instant savings on featured items. There also additional special offers that print on in-store receipts throughout the year. Also additional savings are sent online when signing up for offers. You can Beatty 2

3 also turn your everyday purchases into a program called, Upromise, which is for college savings. By having this card CVS distinguishes itself from Walgreens who does not have a ExtraCare program. Instead, Walgreens focuses on hassle free returns, rebate offers, instant value coupons, online promotions, special offers by using AARP card, printable manufacturing coupons, Register Rewards program, and many sale/clearance items. The Register Rewards program gives instant coupons on certain items at the register printed on the receipt, thus meaning they do not get any demographic information from the consumer at all. The difference between the programs are that CVS ExtraCare program focuses on customer relationship management by using the rewards program. If the consumer wants they can provide all demographic information including; birth-date, phone number, address, and . I personally thought when I signed up for the ExtraCare Card that all of that information was required. So, I went online again and found it only asked for an address and your name as required information. There was more information you could include but not required such as birth-date and gender. In my opinion I feel like CVS is targeting for either type of consumers, ones who don't mind sharing information and those who do not want to share. I believe this is helpful because a lot of rewards cards require information to get the card. Therefore leaving many people, who are loyal customers, out of the programs. On the other hand, it is a disadvantage when it comes to a marketing side only because we are not able to track purchases from a specific person or know any of their demographic information. I don't believe at any point CVS should require the information only Beatty 3

4 because it may leave out a large amount of people who do not like sharing that type of information. The one market that I feel that does not like sharing that information is the senior citizens. I feel like my generation has grown up on sharing information to get reward cards at multiple places so it is not a big deal to us to get another card to receive instant savings. On the other hand, most of the senior citizens population do not like sharing any information whatsoever. In 2030, seniors are to make up double the population as they do now giving a significance to customer based drug stores (Drug Stores). This number helps us get a better understanding of the top consumer s in the future but also should help us come up with tactics targeting that age group specifically for the ExtraCare card. I believe if CVS started requiring this type of information it would turn away a lot of people in this age group. On the competitors side, Walgreens focuses simply on instant rebates and call to action receipts. The receipts give a offer on a specific item that you bought within your initial purchase hoping that you will return to buy that item again. So, like I ve said earlier CVS should tie in the ExtraCare Card with promotion of heavily purchased items along with coupons that tie into past purchases. When comparing to a local grocery store CVS has competition as both the ExtraCare Card and grocery store card programs are similar. They both track all purchases made on the cards and give distinct offers depending on what was purchased. To improve the Extra Care program CVS could be more strict on the card usage. I know from personal experience I ve seen store clerks use a Master card when someone said they didn t have a card, but still wanted to receive the discounts. They really need to enforce the card more often by helping consumer s look up their Beatty 4

5 card if they did not bring it or give them the information to sign-up. As discussed in class, never assume, therefore this should always be taken into account. CVS devised a new plan to try and help get into the minds of their shoppers. CVS released an advising board for improving the Extra Care program. Anyone can become a CVS Advisor Member and submit feedback to the company. My advice would be to make sure people are reviewing the site and taking steps into improving situations if they are a reoccurring concern. The goals of the Advisory Member would be to help CVS; evolve ExtraCare offers and programs, make circular more appealing, valuable, readable, adjust product mixes in stores, better meet customer needs, alter procedures in pharmacy, develop new and exciting CVS brand products, and lastly create more user friendly Photo department. To compile the new marketing strategy CVS would need to organize all of these goals. We can then tie specific goals into different strategies to execute them. I would suggest before requiring any personal information it would be in the best interest to ask the CVS Advisor Member board how they felt about it. CVS can get a better understanding of issues. I would say they could also try checking competitor stores (Walmart, Walgreens and Krogers) to help get a better feel of what other stores are doing different. If what the other stores are doing differently is positive to consumers, CVS could try and implement it. Lastly, CVS could dive deep in secondary research. This is a great step to improving the program, because the best step is listening to your audience s needs. Beatty 5

6 Work Cited Babin, Barry and Eric Harris. Consumer Behavior 2. Mason: South-Western Cengage Learning, "Drug Stores and Proprietary Stores." Encyclopedia of American Industries. Online Edition. Gale, Reproduced in Business and Company Resource Center. Farmington Hills, Mich.:Gale Group galenet.galegroup.com.emils.lib.colum.edu/servlet/bcrc "Most Valuable U.S. Food and Drug Retailers, 2011." Financial Times, FT 500 (annual), June 24, Business Rankings Annual Gale, Reproduced in Business and Company Resource Center. Farmington Hills, Mich.: Gale Group, June Beatty 6