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[12 comments]

CVS customizes data in a big way

March 14, 2014

Earlier this week at the IRI Summit in Florida, Judy Sansone, senior vice president merchandising at CVS, provided some excellent insights as to the priorities of using customer data. She emphasized that 30 percent of the company's marketing spend is now being allocated to targeted marketing efforts and increasing each year, leveraging the world's largest loyalty program that boasts 70 million active card holders. CVS's formula for success seems rather simplistic in its approach:

  1. Understand the needs of the customer;
  2. Create solutions that support those needs;
  3. Ensure that the offers and messages work in concert (which she noted was the most difficult step of the four);
  4. Measure and refine, continuously.

In addition to mining customer data, CVS does extensive additional market research using traditional surveys, but also eye-tracking, shop-alongs, focus groups and virtual shopping sessions.

The combination of this comprehensive approach to the customer has enabled CVS to become very customized in its approach to stores, assortment and layout. The chain currently has over 80 store clusters and 8,500 different plan-o-grams all based upon its passionate use of customer data. While it still prints 45 million mass circulars each week, CVS knows its average shopper buys only eight of the over 300 items advertised. This knowledge has led the drugstore chain to launch "My Weekly Ad," a customized version, which can be accessed at CVS.com and through the CVS mobile app.

FINANCIALS:     [NYSE:CVS] [ ]

Discussion Questions:

What is the most impressive aspect of CVS's approach to crunching customer data? What lessons are there for other retailers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How does the sophistication of CVS's customer data approach compare to other large food, drug and mass chains?

Comments:

All excellent points by Judy Sansone, who in my opinion, is one of the most capable executives in the chain drug industry. I especially like the notion of combining today's technology with an old school approach; using eye-tracking, shop-alongs, focus groups and virtual shopping sessions. The one area of caution that I continually advise my own clients, be they manufacturers or retailers is that no two customers are exactly alike. Be careful not to generalize or stereotype your consumer, or the retail customer. Data can be dangerous if it leads you down a narrow path.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

With CVS, the targeting area is impressive. We have many retail marketing ops out there that are still in the collect and spew marketing approach. The more that a retailer - or any business - tunes to targeting, the more gains for all - especially the shopper.

GO CVS!

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

To me, it's the fact that they keep on testing their approach that is most impressive.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

I was at the IRI summit and heard Judy speak. In addition to their data mining, she happens to be quite an impressive leader. As a frequent CVS shopper, they do a good job at pushing offers that are specific to the items I purchase, but wish they allowed more time to actually use the offers as they expire very quickly.  Looking at it from their point of view, I understand how they would want to give short windows to use them.

As I work with many CPG companies that want to do more with mining the CVS data, a big area of frustration is how difficult they make it for manufacturers to access their data. If they fix this, CVS will be difficult to catch, at least in the drug channel.

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Zel Bianco, President, founder and CEO, Interactive Edge

It's hard to argue with any of Judy's initiatives. The retailer with the most relevant message wins.

For example e-mail still offers the best ROI, best converting tactic that most retailers have. But there is a huge gap between retailers who segment or customize their lists with relevant messages, and those that just spray and pray a single message to everyone.

The vehicles for delivering those messages may continue to evolve, but if you know the most about your customer, you are always in the best position to delivery relevancy at any touchpoint.

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Jason Goldberg, VP Commerce Strategy, Razorfish

CVS sounds like the analytically driven retailer of the future. They have the individual pulse of their shoppers pretty well nailed and are using it to deliver a recognizably more custom and personal shopping experience. The contrast with less data-driven retailers is pretty stark which must certainly help CVS "sell" the value of engaging with their programs and continue to grow that list of 70 million loyalty members. Walgreens is similarly data driven and I wonder to what extent the competition between these two is driving them to perform at such a high level in this way. Less progressive retailers probably look at the scope of what CVS is doing and find it overwhelming with simply too many dials and switches. I would think CVS has quite a nicely laid out plan for how all the different aspects of their efforts roll up to a strategy endorsed and supported by all their executives. That's probably the number one factor in becoming a more data driven retailer.

 

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Gib Bassett, Global Program Director for Consumer Goods, Teradata Corp.

CVS is showing incredible focus while keeping open the possibilities of adaptations and new learning. Restating what I believe differentiates their approach from many retailers is that they measure and refine continuously, but with the goal of creating solutions that support their customers' needs. The fact that CVS uses a broad base of measures illustrates their commitment to their mission; no short cuts here.

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Joan Treistman, President, The Treistman Group LLC

The ability to offer the right product to the right person at the right time is the real end game. Easier said then done, but CVS, Walgreens and Kroger are three of the best I know at accomplishing just that.

All three are always interested in acquiring new customers, but they are more interested in optimizing their core customers. That is the real lesson for other retailers. New customer acquisition is far more expensive than finding ways to get your core customers to shop 1 or 2 extra times each year or add 1-3 items to their basket on each visit.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

It sounds like they are extending the impact of the data beyond marketing. This is very important and not always easy to do, as it requires strong internal collaboration and alignment among the leaders.

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Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

The most difficult thing is being simple! I am all in favor of this approach, which appears simple yet rigorous and comprehensive. There is no one single way to beat the competition and I believe the measure and refine part is aimed at this. Way to go!

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AmolRatna Srivastav, Asst. General Manager, Analytics and Insights, Tata Consultancy Services

CVS has done a good job of presenting the personalized offers to shoppers on the web portal in a user friendly manner - allowing for easy selection and load to card.

Shoppers Drug-Mart in Canada has been doing this successfully for some time via email - a weekly message that combines both personalized coupons and a set of personalized TPR notifications. This program is 100% personalized, and is made possible by highly automated targeting supplied by a 3rd party service provider.

Robert Cohen, Consultant, Duma

The most impressive aspect of CVS's formula for success is #3, the step that the pharmacy retailer's Judy Sansone has identified as the most difficult ensuring that the offers and messages work in concert.

More important than the amount of data collected is how it is collected, how it is used and how it is shared. Most consumers - 77 percent - do not feel they are receiving any benefit from sharing their personal information, according to a recent LoyaltyOne survey. Yet 63 percent of the same survey respondents said they would give MORE personal information if companies sent them relevant products and service offers in return. Consumers expect something of value in return for their information - using inaccurate data is worse than using no data at all. That's the main lesson in the CVS success story for other retailers.

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Bryan Pearson, President and CEO, LoyaltyOne

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