CVS subscription program goes big to outdo Amazon Prime

Discussion
Source: CVS
Aug 06, 2019
George Anderson

CVS is going national with its CarePass subscription program, which offers free delivery on prescription medicines, over-the-counter remedies and other products sold by the chain with no minimum order, for an annual fee of $48 or $5 a month.

The program was successfully tested in the Boston, Philadelphia and Tampa markets before the decision was made to roll it out across the country.

“Initial customer response has exceeded our expectations with members utilizing the program’s full benefits and becoming more engaged across all of our digital offerings,” said Kevin Hourican, president, CVS Pharmacy, in a statement. 

Results from the pilot, shared by CVS, show that CarePass appeals to consumers across a wide swath of demographic classifications. Twenty percent of those who became CarePass members in the test phase were Millennials. The chain found that those in the program spend 15 to 20 percent more than before they were members.

When the drugstore chain launched the pilot for CarePass last fall, it was widely seen as CVS’ answer to Amazon.com’s PillPack acquisition and a way for it to take back lost sales from the front of the pharmacy. 

Amazon has been undercutting CVS’ pricing on comparable private label over-the-counter remedies. CVS’ prices were 20 percent higher than Amazon’s, according to a Jefferies Group report published in June of last year. CarePass subscribers receive a 20 percent discount on CVS-branded products.

Program members will also receive a monthly $10  promotional reward that can be used in the chain’s stores or on cvs.com. Rewards are automatically added to a member’s ExtraCare card at the beginning of each month.

Customer support is also an important element of the program, with CarePass members having 24/7 phone access to speak live with a pharmacist who has access to the prescription histories of those enrolled in the program.

Members are also eligible for free annual sports physicals at local CVS stores that include a MinuteClinic. The chain has said that it is working on offering other perks and services in the future. 

DISCUSSION QUESTIONS: Do you expect the results from CVS’ test of CarePass to be replicated on a national level? What impact do you think the launch of CarePass will have on other pharmacy operators when we look back in a couple of years?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"I see this going national and other retailers soon following because I find CarePass to be that good! "
"CarePass will drive more engagement, sales, and offer the value that their loyal customers are looking for."
"The program looks expensive for CVS, but may pay out in terms of increased spending per order and frequency among specific customer segments."

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21 Comments on "CVS subscription program goes big to outdo Amazon Prime"


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Art Suriano
BrainTrust

CarePass is a great program! With competition being as intense as it is, it shows that when you’re creative, you can still find ways to succeed. Many of us remember when the local pharmacy would deliver prescriptions. CVS has taken it one step further by offering discounts on their brand products as well as a monthly $10 promo reward. The $5 a month charge is a small price to pay for all the conveniences. I see this going national and other retailers soon following because I find CarePass to be that good! 

Mark Ryski
BrainTrust

This program simply makes sense, and the compelling pilot test results confirm it. I expect that this program will deliver great results when rolled out nationally. A subscription service is ideal for prescription drugs that need to be constantly re-ordered. And while pharmaceuticals can be purchased from Amazon, I believe that some consumers would prefer the extra confidence they have purchasing directly from a trusted pharmacy chain like CVS who has a well established reputation and pharmacists on staff.

Neil Saunders
BrainTrust

In some ways, CVS’s hand has been forced by Amazon’s entry into the market and the desire of consumers to have more of their drugs delivered. CVS needs to play in this arena. However, unlike Amazon, CVS has a massive number of stores and those stores are very reliant on the footfall of customers coming in to collect prescriptions. The expansion of CarePass has the potential to undermine that dynamic, especially as CVS has done very little to make its stores destinations in their own right. Over the longer term this could well erode value and cause problems. Once again, CVS’s failure to understand that it is a retailer as well as a healthcare business will be a source of woe.

Oliver Guy
BrainTrust

Super example of eliminating a pain for and on behalf of the customer. I imagine roll-out will be dependent on success or otherwise from financial and operational perpective. It will be interesting to see how other pharmacies respond – nationally and locally. But also a big question is, will pharmacy chains outside North America look to replicate this prior to Pillpack commencing operations in their country?

Patricia Vekich Waldron
Staff

This is a thoughtful and systematic approach to engage and retain consumers in a category where Amazon is not already #1. All demographics care about and need HABA products and related care/services from a trusted source.

Phil Chang
BrainTrust

CarePass is a wonderful program that was thoughtfully crafted. Did CVS do this because Amazon forced its hand or because it was being innovative? Time will tell. Pharmacies stopped doing deliveries because it wasn’t profitable, so the tricky part here is how far CVS pushes the marketing and basket building that inevitably comes with a program such as this. Having said that, great program!

Dave Wendland
BrainTrust

Absolutely it is a GREAT idea to roll CarePass out nationally. Contributing to its success is its stickiness. In other words, remaining engaged with their patients and offering real value are two of its key ingredients. Congratulations to CVS for once again recognizing the value in building relationships and focusing on those areas most important to its core consumers.

Brandon Rael
BrainTrust

CVS’s physical retail footprint has become ubiquitous and offering the CVS CarePass program will only add value and enhance the customer experience. Customers are already saving with CVS’s existing rewards program which encourages more spending to drive additional discounts. CarePass will drive more engagement, sales, and offer the value that their loyal customers are looking for.

CVS already has a very loyal customer and the in-person pharmacy experience matters, especially for follow-up questions, counseling, etc. What will ultimately come out of this experiment is an enhanced customer experience, and positioning the CVS brand at the top of the consumer’s mind when it comes to pharmacy needs.

Dave Wendland
BrainTrust

Well said, Brandon Rael. I echo your comments!

David Weinand
BrainTrust

Well thought-out program. Incentive to buy CVS branded products, incentive to come in-store (as Neil pointed out, there is currently no real incentive to be in a CVS!), and addressing the national trend of home delivery of “everything.” If the basket size also increases for every delivery, it may actually be profitable!

Steve Montgomery
BrainTrust

CarePass may well fall in the “damned if you do and damned if you don’t” category. CVS, like all chain drug stores, certainly feels the pressure of Amazon’s entry into their historic lines of business. The reported 20 percent difference in prices was not going to go unnoticed by its customers.

However, while the results appear to be positive in impact, long term this could be problematic. A member gets $10 a month to spend on selected CVS branded products, while paying no more than $5 to be a member, get a discount of 20 percent on CVS branded products and free delivery. Definitely a win for their customers but I’m not so sure that it is for CVS.

Rich Kizer
BrainTrust

I believe that CarePass will be extremely beneficial for CVS. They will still drive traffic with the incentives, so foot traffic should not be expected to drop that much, especially if the in-store experience is loaded with unexpected surprises on items and prices. However, my concern is that CVS has immediately distributed prescriptions to customers who went into the store. Now, with this new program, will the wait for delivery of perhaps one to two days for the prescription be an issue when the store is just down the street? Maybe to some. I guess the option always exists to just walk in. That’s a win also. Bottom line: with the new program and incentives included, it’s a win.

Gene Detroyer
BrainTrust

Why do we always have to talk about going against Amazon? This is a good program in itself. Easy peasy! It is customer-oriented and that is where all programs should start. It either makes sense for CVS customers and CVS or it doesn’t. Amazon should not be part of the equation.

Mel Kleiman
BrainTrust

Nice play if they can get rid of the image of being overpriced. The 20 percent discount just reinforces the message to non-members that they are paying too much for CVS brands when they buy them in the store.

Evan Snively
BrainTrust

Interesting that this write up, and others I have seen on the topic, called out Millennials as making up 20 percent of program participants … wouldn’t that seem like an under-representation when looking across all generations of economic importance? Just an observation.

I’m not sold that this structure is going to be the right move long term.
For those with recurring Rxs they fill at CVS I see this making immense sense, but not so much for other consumers. The roadbumps of pulling foot traffic away from stores, not being able to fulfill “need it now” medicine (perhaps that is what the $10 monthly credit is meant to incentivize?), and competing with other delivery options with wider product selection make me concerned the test results won’t necessarily translate to larger, sustainable success.

Mark Price
BrainTrust

CVS seems to be acting to stem the bleeding of revenue and volume to heavy Amazon customers. One piece of research that would be useful to know is the percentage of the CVS program customers who had been utilizing Prime for similar products. In other words, does the CVS program steal share from Amazon or insulate a different set of customers from thinking about Prime for CVS products?

The program looks expensive for CVS, but may pay out in terms of increased spending per order and frequency among specific customer segments.

I expect the other pharmacy brands to offer similar benefits, probably by the end of the year. By going virtual, CVS could steal share where they lack physical presence and that is just too big a risk for the competitors to take.

Shep Hyken
BrainTrust

This is a smart way to compete with the “online big-box stores” like Amazon, Walmart, etc. CVS has the size and the penetration in the local market to “own their mile” (metaphorical – It’s whatever their local market is). They also have the ability to be more locally focus. Combine that with a delivery program and you may be able to hold onto the customers that they have. It’s important to do this sooner than later. The goal is to keep customers by building a sticky experience; an experience so good they don’t want to leave. In short, make the case to the consumer that there is value in the form of dollars and convenience of doing business and they will stay.

Camille P. Schuster, PhD.
BrainTrust

I just got off a call to the CVS pharmacy customer care line before I saw this article. Their digital system does not work well. There is a company digital system and a store digital system that do not talk with each other. The store closest to me has a medicine on a long back order with no end in sight while the CVS a few miles away, that is in another district, filled the prescription 2 1/2 months ago and is filling it this time after the closer store promised to have it the next day only for me to see another email saying that the medicine can not be filled for a long time. Do I think CarePass is going to work? Not until CVS gets their technology to work correctly and promote communication between the store and company systems and between stores (even if in another district).

Jane Sarasohn-Kahn
Guest

To best position vis-a-vis both Amazon and retail pharmacies (in grocery, chains and big box channels) CVS can (should) leverage CarePass back to the HealthHub concept to extend continuity of care beyond “the pill” and Rx to the home. Health consumers, now health care payers, are seeking convenient and delightful experiences — streamlining our fragmented health care delivery processes will help to delight that consumer-patient with an eye on price, a key driver for consumers even in health care. A key to making this work will be investing in a health care data platform that can capture all of the consumer’s data in these encounters (whether CarePass, brick and mortar retail, HealthHug, pharmacy, et. al.) ensuring open APIs that can mash up with data in other clouds (like my Fitbit activity tracking, Withings digital scale, health apps, and so on). I’ll be staying closely tuned to this evolution…

Ken Morris
BrainTrust
Ken Morris
Retail industry thought leader
7 months 28 days ago

CVS has taken a big step towards distinguishing itself from the competition — and fending off Amazon — by offering additional benefits to its loyal customers. The monthly fee is a small price to pay for prescription delivery and the other benefits. I believe this will take off with other pharmacy operators following suit as prescription delivery becomes more mainstream. To stay ahead of the competition CVS should be analyzing and utilizing the data they are gathering from CarePass users to further personalize product offerings and promotions.

Kai Clarke
BrainTrust

Where is the real value that CVS will offer over Amazon? Amazon prime members pay nothing more to get 20% lower prices on prescriptions, plus free 2nd day delivery. CVS is only offering their products at a 20% lower price, which doesn’t help for all of the national branded prescription drugs! CVS needs to understand that as a retailer, it must offer better prices, availability and ease of use for all customers and all products to beat out Amazon.

wpDiscuz
Braintrust
"I see this going national and other retailers soon following because I find CarePass to be that good! "
"CarePass will drive more engagement, sales, and offer the value that their loyal customers are looking for."
"The program looks expensive for CVS, but may pay out in terms of increased spending per order and frequency among specific customer segments."

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