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<\/p>\nCVS Health\u2019s ExtraCare\u00ae loyalty card program leverages advanced data analytics to drive value creation for over 70 Million front store and pharmacy customers.\u00a0 As a former CVS employee, I had the privilege to be able to meet with the directors of the ExtraCare\u00ae program to understand how they leverage algorithms to drive value for customers and the company.<\/p>\n
CVS Health is a Fortune 10 Company with services ranging from the front store (where you buy shampoo and deodorant), the pharmacy (where you pick up prescription drugs), the Pharmacy Benefits Management arm (which provides prescription services to your employer or insurance company) and MinuteClinic\u00ae (where you go to get flu shots).\u00a0 CVS Health generates ~$140 billion in revenue and ~$4.6 billion in net income on an annual basis in its pursuit of helping patients on their path to better health.<\/p>\n
ExtraCare\u00ae manifests itself as ExtraSavings\u00ae coupons that can be redeemed for specific items or categories ($4 off any $10 purchase of Gillette razors!), and Extrabucks\u00ae, which is \u201cfree\u201d CVS money that customers can use on any purchase ($2 reward (expires in like 4 days!)).\u00a0 Customers can access these coupons online (by printing or \u201csending\u201d to card), by using the coupons on their four foot long receipts, or by scanning their cards at portals in the store that will print out their customized offers (also four feet long).<\/p>\n
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Value Creation:
\nThe ExtraCare\u00ae programs creates value for front store and pharmacy customers by providing them with customized coupons for relevant products based on past purchases.\u00a0 For example, if you purchase diapers and baby formula, you will likely get a coupon for baby wipes.\u00a0 In this way, customers can receive a discount on products that they are likely to purchase anyway, given their basket of goods.\u00a0 CVS uses various algorithms that leverage the frequency of shopping, the number and category of items in their basket, the volume and price per item, and hundreds of other variables to determine the products that will be offered (they are constantly regressing multiple variable to understand the most predictive ones).\u00a0 Based on subsequent behavior they will determine if a test group, versus a control group, purchased more items or were up-sold on a higher margin CVS brand item.\u00a0 For its email incentives, it runs repeated tests using these algorithms to test various hypotheses (A-B matching tests that will offer similar profile customers a $3 off $15 or a $4 off $20 or $5 off $25 coupon to determine coupon conversion, total basket, and yield).\u00a0<\/span><\/p>\n