Not even high-frequency retail is immune from the retail apocalypse - US pharmacy retailer CVS, for example, has suffered from declining same-store sales as commodity spending shifts online. Far from going gently into that good night, however, the retailer tells DM News that it plans to turn around its flagging fortunes by focusing on those most important of assets: its best customers.
By Rick Ferguson
Like many retailers, CVS has been hammered hard by successive bad quarters; even as it reported a 3 percent net revenue increase in Q1 2017, it also dropped a 4.7 percent decrease in same-store sales and saw net income fall by 16.9 percent. Facing such declines, retailers are naturally tempted to take an axe to the marketing department - and very often, the first head to roll is the loyalty program.
Far from gutting its ExtraCare loyalty program in order to shore up costs, CVS is responding to this downturn by doubling down on ExtraCare in order to build strong relationships with the top 30 percent of its customer base who contribute 75 percent of CVS's margins. With approximately 80 million active members enrolled in ExtraCare, the retailer has ample opportunity to identify, understand, and influence the individuals who make up that 30 percent. Money quote from DM News:
"Generating repeat business can be difficult in a world where many of CVS's convenience products can be purchased on Amazon or from other retailers. For Michele Driscoll, VP of loyalty and personalization for CVS, the main differentiators for CVS are the brands that it carries in its stores - some of which are exclusive - and its customer shopping experience - an experience that it's able to personalize using data from its ExtraCare program."According to Driscoll, ExtraCare has more than 80 million active members. She also says that one out of every four households in the U.S. uses ExtraCare. CVS is able to mine these members' purchase and demographic data and pair it with internal research (e.g. online communities, surveys) to deliver personalized offers and marketing communications to its customers."'For us, personalization means that it's relevant to her,' she said at a CVS press event held in mid-April in New York."
Among the best practices displayed by CVS are personalizing communications and offers through analytical segmentation by purchase history, category preference, and demographic data. It has also fostered a sub-community, ExtraCare Beauty Club, to cater to its 15 million loyal and profitable beauty care customers. CVS has also integrated ExtraCare into its mobile app, which allows its 19 million users to download coupons and pay with ExtraBucks at the point of sale.
In addition to focusing on its loyalty program, CVS is also leveraging customer insight to help it redesign the in-store experience via a "discovery zone" pilot that is testing the retailer's ability to help in-store customers learn about new products and services. CVS's dedication to its best customers is both objectively admirable and likely to help reverse the retailer's fortunes. Every retailer has the opportunity to forge iron-strong relationships with best customers - and by doubling down on ExtraCare, CVS is demonstrating a commitment to those customers that will pay dividends.
Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group.