A Solution to Amazon - CarePass

A Solution to Amazon: CarePass Introduction CVS Pharmacy had an issue with Amazon coming into the market space with their mail-order pharmacy, PillPack®. There were several issues that CVS had to solve that would allow the company to differentiate itself in the retail pharmacy space. To do this, CVS would have to follow a similar suit to Panera Bread's leadership, which faced a problem of a "mosh pit" of people waiting for their food that caused a decline in service. For Panera Bread to solve their issue, they had to critically think about their customers' needs utilizing the VUCA model to formulate and execute their plan to be agile with the market and consumer needs changes. Problem Competition is healthy to drive economic growth, but there is a troubling effect of industry consolidation on competition (Wessel, 2018). CVS needed a way to combat the growing market demand for home delivery of goods and services. Consumer spending habits changed from traditional brick and mortar locations into conveniences for items shipped directly to the home. Amazon's revenue for 2017 was $177 billion, and in 2018 its revenue grew to $232 billion, an increase of 30.93% (Macrotrends, 2021). During that same period, CVS's 2017 revenue was $184 billion, and in 2018 its revenue grew to $194 billion, an increase of 5.3%, which was still being outpaced by the growth of Amazon (Macrotrends,2021). To combat the growing market demands, CVS must solve for their consumer's needs. They entailed solving for value, services, and convenience, which Amazon brought to the table. Thinking Critically Clarity, conclusions, and decisions are the premise of Michael Kallet's Think Smarter: Critical Thinking to Improve Problem-Solving and Decision-Making Skills. CVS needed to solve increasing market share by shortening the purchase cycle, increasing the basket size, and appealing to a new consumer base, Millennials. According to Numerator's Retailer Snapshot, the average purchase cycle for CVS is 57.7 days, and the average basket size for CVS was $18. According to Statista, 49% of Amazon Prime customers make an Amazon purchase at least once a week. For non-prime members, that number drops to just 13% (Category Management Association, 2021). To increase basket size and shorten the purchase cycle, CVS needed to find a way to appeal to the largest generation, the Millennials. The conclusion that CVS came to be CarePass®. Capitalizing on Amazon's success with Amazon Prime, CarePass® offered a monthly or yearly membership fee that includes various goods and services to reduce the purchase cycle. These included $10 monthly coupons, unlimited free 1 to 2-day delivery to their home for thousands of items, 20% discounts on CVS Health items, access to 24/7 Pharmacist Helpline, among other perks (CVS Health, 2021).CVS decided to roll out with CarePass® in late 2019 after conducting tests for the program. The pilot found the following: shoppers were incentivized to go online and have another shopping session, members spent 15-20% more, which offset the additional costs of shipping and promotions associated with the program, and found that 20% of the enrollees were Millennials. Applying VUCA The business landscape for CVS is tricky as it has many business units that operate synergistically. Brick and mortar locations add value that online retails can't; Human Connection. However, consumer habits have moved towards online shopping habits with Millennials. The market changes forced CVS to appeal more to this population and the other populations it currently serves, such as the Baby Boomers, who prefer more in-store interactions. The ambiguity of having a more online presence was also something CVS had to address to focus on an area that was historically brick and mortar for goods and services. By focusing on building online goods and services in conjunction with CarePass®, CVS could capitalize by gaining market space in the retail sector. With the changes in the world today with COVID-19, consumers are looking for ways to save money, and CarePass allows that to occur. If a consumer is going to spend $5, why not get $10 out of it? This way of promotion of the program allows for increase spending as well as increased customer loyalty. As the first retailer to offer this type of program, others have noticed and investigated the program's successes and opportunities to capitalize. A watch out for CVS will be the response of Amazon. CarePass® has proven to be successful, and if Amazon wants to duplicate the success, Amazon may want to consider giving monetary rewards back to members. A move like this would cause CVS to adjust its CarePass® strategy and find a different way to capture market share. Conclusion To solve Amazon's move into the Pharmacy Space, CVS found a way to combat the growing market demand for home delivery of goods and services. Understanding the changes in consumer demand and needs, CVS successfully launched their CarePass® program to increase market share by shortening the purchase cycle, increasing the basket size, and appealing to Millennials. To stay relevant, CVS must continue to innovate and bring new ways of appealing to consumer needs continuously changing.