In 1963, Consumer Value Stores was founded in Lowell, MA, providing customers with health and beauty products. The company name changed to CVS by the end of its first year in business, and by 1967, pharmacies began to appear within its stores. The brand focused on healthcare, and huge growth followed through multiple acquisitions and the establishment of new locations.
In the early 2000s, CVS Pharmacy launched ExtraCare®, its first loyalty program, and experienced much success in the loyalty space. By 2018, the brand acquired Aetna, and this development supercharged and accelerated CVS’ goal of helping customers with health and wellness goals. CarePass® — the brand’s premium program — was launched in 2019, driving loyalty efforts and creating more convenience for shoppers, and in December 2023, the brand scaled same-day delivery nationwide.
Mark Johnson, CEO of Loyalty360, spoke with Zach Dennett, Vice President of Loyalty, Omnichannel and Hispanic Formats, CVS Health, about the brand’s premium customer loyalty program tier, customers engaging with the brand digitally before shopping in-store, and how the customer experience should be personalized, but not overtly obvious.
Read the full article on Loyalty360 here: https://loyalty360.org/content-gallery/in-depth-exclusives/cvs-pharmacy-evolving-customer-loyalty-programs-and-creating-a-more-convenient-customer-experience
In 1963, Consumer Value Stores was founded in Lowell, MA, providing customers with health and beauty products. The company name changed to CVS by the end of its first year in business, and by 1967, pharmacies began to appear within its stores. The brand focused on healthcare, and huge growth followed through multiple acquisitions and the establishment of new locations.
In the early 2000s, CVS Pharmacy launched ExtraCare®, its first loyalty program, and experienced much success in the loyalty space. By 2018, the brand acquired Aetna, and this development supercharged and accelerated CVS’ goal of helping customers with health and wellness goals. CarePass® — the brand’s premium program — was launched in 2019, driving loyalty efforts and creating more convenience for shoppers, and in December 2023, the brand scaled same-day delivery nationwide.
Mark Johnson, CEO of Loyalty360, spoke with Zach Dennett, Vice President of Loyalty, Omnichannel and Hispanic Formats, CVS Health, about the brand’s premium customer loyalty program tier, customers engaging with the brand digitally before shopping in-store, and how the customer experience should be personalized, but not overtly obvious.
Read the full article on Loyalty360 here: https://loyalty360.org/content-gallery/in-depth-exclusives/cvs-pharmacy-evolving-customer-loyalty-programs-and-creating-a-more-convenient-customer-experience
Good afternoon, good morning. This is Mark Johnson from loyalty 360. Everyone's happy, safe and well. I want to welcome you back to another edition of our Leaders in Customer Loyalty series, where we speak with leading brands about what they are seeing and hearing on the front lines of customer and channel and brand loyalty. Today we have the pleasure of speaking with Zach Dennett. He's the vice president of loyalty, omni Channel and Hispanic formats at CVS Health. Welcome, zach. Thank you for joining us. Mark, great to be here and thank you for inviting me on.
Speaker 1:Absolutely thank you for taking the time to speak with us today. First off, can you tell us a bit more about yourself, your role with CVS and maybe a fun fact or passion you have outside of work?
Speaker 2:Sure. So personally, I live in New York with my wife and two kids and I'm calling to you from our New York office. Professionally, I'm at CVS for about a year and a half where I have the great privilege of working with, as you said, the loyalty team, the Omni Channel team and our Hispanic Center of Excellence. My background is a mixture of big company and startups. I was at one of the early employees at Jetcom, which was a lot of fun, and we grew that, and then Walmart acquired us. Was that Walmart? For a while. Then I left to be the US co-founder of a company called Joker where we were doing ultra rapid delivery 15 minute delivery for groceries in New York and Boston.
Speaker 2:Okay, excellent, fun fact, I guess. When I was a kid I always wanted to be an inventor and I really believed I was going to be a great inventor, and one of the things I was always trying to invent was conveyor belts, because my mom wanted me to clear the table and I tried to make conveyor belts so I wouldn't have to do it, but never worked, never had a successful conveyor belt. But it is pretty fun that now that I get to be in this world I have my name on a couple patents, and I'm getting to work every day with engineering teams and tech teams and loyalty teams which are actually doing things that are patentable. So it'd be kind of fun if I could go back and tell my little self that yes, actually you will be an inventor but not the conveyor belt.
Speaker 2:So you think you're going to be doing.
Speaker 1:Okay, interesting, great to have your name on a couple patents. That's something to be very proud of. For sure, when you look at CVS, everyone's familiar with CVS. But for those who may not be familiar, can you give us a brief overview of CVS where you were founded, how, the focus, maybe the vision, for the organization going forward?
Speaker 2:Sure, absolutely. And, mark, it's funny as I was a year and a half in CVS. As I was coming on I actually read and listened to a lot of the stuff you guys have done. So you probably could do the history of the loyalty program at CVS at least as well as I can, but I'll take it a stab and you correct me if I get anything wrong. So CVS started as the consumer value store, and that was in 1963. A year later they shortened it to CVS and it's been CVS since. It wasn't until a couple years later, actually, that CVS started with the pharmacy.
Speaker 2:So 1967 pharmacies came around Next couple decades, huge growth as CVS, as a pharmacy and focused on healthcare, started growing and then, right around early 2000s, we launched ExtraCare, our loyalty program, and that really was, I think, a wild success and quite early in the loyalty space. I can maybe a couple of the other key things to highlight won't do the full history, but 2014 to 2016, cvs removed tobacco. I think we're extremely proud of the fact that as a healthcare company, we are taking ourselves seriously and not selling tobacco. 2018, we acquired Aetna and that really kind of supercharged and accelerated our goal of helping customers on their health and wellness mission and really trying to figure out how do we drive health and wellness. And I guess, on loyalty, 2019, carepass was launched. That was our paid loyalty program and really drove and helped with convenience. So you know kind of super fast forward through it. You know many decades, a couple of things to keep in mind and that'll be the last couple of months, because I like that history a lot.
Speaker 2:Cvs, I think, is really focused on health and convenience and when you think about it over the multiple decades, cvs has really reinvented what it means to be convenient over and over. So when I launched, having a local store that could do what you needed right there. That was extremely convenient. And then we've since continued to iterate and figure out how do we make things more and more convenient for our customer as they're managing their health. And then just a couple of weeks ago, beginning of January, we merged all of our loyalty programs. So now, rather than having lots of names, we're down to one name with two tiers. So there's extra care and now CarePass is called extra care plus.
Speaker 1:Okay, excellent. So when you combine these programs I know you recently announced that, as you mentioned how have you evolved the loyalty program, based on consumer feedback, to create these two membership tiers? How do you evolve it? How do you look at the program now that you've made some of the changes? Yeah, mark, it's a good question.
Speaker 2:So at one point we actually had four different names for the loyalty programs. There was Beauty Club, there was Pharmacy Health Rewards, there was Extra Care and there was CarePass.
Speaker 2:And it actually made a lot of sense with what we were trying to do at the time. But come kind of 2023, we started hearing that customers were finding a lot of value. But when you say, all right, the kind of the simplest way that we can really make it clear to customers is to put as much as we can all of the free programs, we'll just call Extra Care, and then the paid program we'll call Extra Care Plus. Okay, and while we were at it, we said let's make the programs a little better. So Extra Care, we said, all right, you now will earn your rewards at the pharmacy faster. We accelerated the earnings there. And Extra Care Plus we added free same-day delivery.
Speaker 1:So when you look at the kind, of evolving of the program. It's a big focus within our member community. Looking at the customer value proposition, looking at the tier proposition, are the rewards of content, the engagement, right? So how did you go through this process of understanding or, sort of say, looking at the program as it existed and developing the attributes or benefits that would make it more relevant, more engaging with the customers?
Speaker 2:Yeah, we spend a lot of time thinking about not what do customers want out of their loyalty program, but what do customers want out of their shopping, out of their experience with the retail. And then how can we like, where does it make sense for us to use the loyalty program to help with that? So, if you think about it, one of the things that the CVS customer really wants is convenience. So we thought really hard about which are the areas where we can lean into and make sure that we are helping with convenience. So that is the personalization, that's the right coupons, that search, that knows you, et cetera. We can talk more about that in a second. Then, obviously, with ExtraCare Plus, when you think about convenience not having to leave your house, getting things delivered for free same day that's pretty convenient and obviously ExtraCare has huge amounts of incremental value as well.
Speaker 1:So we thought a lot about all right.
Speaker 2:The customer wants convenience. How can we add convenience? We think a lot about the customer wants value and obviously I mean you know super well how we're using the personalized coupons, the personalized deals to really drive value in the loyalty program. And then one of the things that we're working on really hard at the moment then we'll be sharing more is the CVS customer is interested in managing their health and wellness journey and we are thinking very hard about how can we help them manage their health and wellness journey and how can they manage their health in a way that they want with the loyalty program. So think about kind of health, health authority, convenience and value and then we figure out what can we do in the loyalty program to make those. Does that answer that question?
Speaker 1:Yeah, absolutely, and I think it's an interesting idea. Many brands are focused on sustainability, accountability. They want to be the best version of themselves for their customers, and focusing on health and wellness is one of those areas that brands have a laser focus on. But measuring health and wellness can be somewhat of a challenge. Right, I know there's some grocery programs out there that reward you for buying healthy products or services. How do you look at measuring the health and wellness journey? Because, at the end of the day, even with those Zempik and some of the other drugs that are out there, we still have a very health challenged society. I think it's growing more and more health challenge correct. So how do you use the program to drive that behavior change in the program that everyone needs?
Speaker 2:Yeah, and let's be very clear we want to partner with customers on their health journey.
Speaker 2:We don't want to somehow be some sort of figure who's telling you how to live. So my goal is not to tell you that you're making bad decisions. My goal is to help you and power you on the decisions you want to make, and CVS is in a pretty great place to do that, obviously with our heroes of health and not just. You know, when you think CVS, don't think just CVS front store, but also think some of our new programs, like Oak Street, our senior clinics, think some of our in-home, some of our in-home medical systems. But the question is how can we, kind of moving back to the front store, how can we really help you with the content we're able to deliver digitally, with the authority we're able to generate and how we merchandise and how we think about products and how we bring trends, even products, to market? How can we really help you on your health journey? And then we're also constantly playing with ideas that may or may not be good, but we're testing and seeing what customers are.
Speaker 1:And a lot of that too can be potentially leveraged with the CPG community as well, because obviously they want to have healthier customers, so the right products and the right channel to the right customer could help as well, correct?
Speaker 2:Yeah, it's a good point you make. Health is one of those that's a win-win-win Like. There's no stakeholder who's saying we want less healthy customers, right? So, yeah, we need to partner with CPGs. I think everyone is obviously no one is opposed to health. It's a great point, absolutely.
Speaker 1:Okay, when you look at the ExtraCare Plus, the premium tier for the programs, many programs are looking at or considering launching a subscription or premium loyalty program. What motivates customers to join at the premium level? How do you keep those customers engaged in the long term and what are some of the differentiating values for that additional tier?
Speaker 2:Yeah, it's funny. Again kind of anecdote from the store. I was in a store in North Carolina and I was at the front desk and listening to one of the colleagues there a great colleague telling people about the pay loyalty system and he was saying to the customer you know it's great.
Speaker 2:It's $5 a month, you get free same-day delivery, you get free prescription delivery, you get 20% off your CVS HealthBand products and you get $10 a month and extra bucks to spend at the store. And the customer kind of looked at him and said, like that sounds too good to be true. Are you sure you got all of that right? Yeah, no, that's it. So when you think about that value proposition that I just said, anyone who is kind of making a rational decision immediately thinks that value props amazing, right For $5, I have $10 to spend at the store, I get free delivery, etc.
Speaker 2:So the paid program, in terms of the actual benefits we've been able to put in, really really keeps customers engaged. If your face old expression is asking me all right, are you sure that this was a good idea? Because it sounds too good to be true, the answer is yes and what we see is that customers who have this get more and more engaged in the CVS ecosystem and as they get great experiences and as they get the value that they're getting and the convenience, it's this nice virtuous cycle where they shop more because they're happy and they stay and they become a very valuable customer. So the customer lifetime value works out quite nicely.
Speaker 1:Okay, absolutely. When you look at the voice of the customer, it seems to have an integral role in the kind of the journey you're going through as a brand right being able to listen, to understand what the customers may or may not have an interest in. And how do you develop some of those offerings from a content or offer optimization or personalization perspective? How do you envision continuing to use the voice of the customer approach for the program going forward?
Speaker 2:Voice of the customer is really important, but at CVS we take it pretty seriously and we have a real focus on making sure that voice of the customer is not a group in the corner that's going to do something else, but instead voice of the customer is really integral for how we do everything. How do we do that? How do we actually execute that we?
Speaker 2:obviously have a huge amount of data, 18 million pieces of feedback or something of that nature from a Rondalia platform each year, a huge amount of information from the call center, from the colleagues, and then we all in the merchandising team make a big point of working in stores because you can read as much as you want, but it is really important to actually talk to customers, and the anecdotes and talking to an individual customer really helps you get the color and reinforce what you're seeing in the data.
Speaker 2:There's another thing that we do on my team. For a while I had the call center pulling a call every week and maybe it was generally a bad call that had an opportunity or something we could do better, and we would start Monday morning by listening to that call as a group. So by the time you're looking at the data and you're in store and you're listening to actual specific calls that we pulled, you really start understanding what the customer is asking. And it's hard, of course, because the CVS customer is all of America. We basically have a large percentage of the total households shopping at our stores.
Speaker 1:Okay, when you look at technology, it plays a big role in the customer loyalty landscape, both for the customer internally, the number of different stakeholders, and we actually have an analyst process similar to the other two entities out there, a little different, but brands are really challenged. Brands are moving from provider to provider now or they're looking for an agency to help them understand technology. So, when you look at extra care and extra care plus, how are members leveraging different technologies CVS pharmacy app to potentially create unique engagement with them, because technology is front and center in this customer engagement. Customer experience discussion.
Speaker 2:Yeah, so with EP. What's interesting, of course, is as we think about technology. The CBS app has gotten dramatically better over the last year and a half. The tech teams did an amazing job of free platforming and the app really looks quite nice. Make sure you have the latest versions, because we're rolling out some pretty exciting new changes. But when you talk about technology, you're talking about the customer experience, correct.
Speaker 1:What Making that seamless correct? So having that seamless customer experience can be a big challenge, correct? Because having the technology work in a way that allows personalization to scale that whole idea knowing me as a customer, which we hear is that euphemistically is very important today Getting that to work can be an Augean challenge for sure. Yeah, now, mark, it's a good place to point you, mark.
Speaker 2:So maybe a couple of thoughts. When I joined the company, I was told my title was going to be on the channel. I said, oh, I thought I was joining as digital. And they said, no, no, no, it's on the channel, make sure you get that right. And as I started learning, I actually understood why.
Speaker 2:So the digital P&L at CBS is quite big and growing really fast and super important.
Speaker 2:These are customers who check out on the app and buy things digitally, but it actually is tiny compared to the percentage of customers who are using our digital assets to enable their shopping, and a really stunning percentage of our total sales come from customers who are engaging with us digitally before they come shop, and whether that is to figure out what's on sale, to look for personal coupons, to look for details about the store, etc.
Speaker 2:What we find is that we have an incredible influence from the app, from the web, in terms of what happens in store, and we track that pretty carefully. Actually, when we look at our financials as an army channel and loyalty business, we're actually able to track a lot of the digital, the front store sales as directly a link to people who were on the app. The key thing that we think about is making it as easy as possible, because if what we're really trying to do is push convenience and Mark, you have to log in and say you forgot your password, and you have to do that. You're never going to do it. So we really really are focused on how do we remove every barrier. So it's just an absolute joy to use. Okay.
Speaker 1:Excellent. So when you look at personalization, mentioned that it's very important for our brands today being able to do it at scale. When you look at personalization for CVS, how important is leveraging the insights and data that you have to impact personalization and you see potential changes from customers on how they want to be communicated with. That may impact your personalization efforts.
Speaker 2:One of the key things we think about on personalization is that it should be personalized. But it shouldn't hit you over the head that it is personalized. So let me give an example. If I search for toothpaste on CVS, crest should show up first because I buy Crest 3D white radiament. That's the toothpaste I buy, right? So that should always show up first. If my brother searches, he should get cold gate optic white because that happens to be the one he uses. And neither of us should see a flashing light that says like congratulations, this is a personalized search. We both search for toothpaste. Similarly, with the offers when you shop, you should get offers on the receipt, post transaction on your card that you say, wow, cvs has amazing deals on the things I want and we don't need to hit you over the head with these are for you.
Speaker 2:It's that. So, yeah, we have. I think actually the team that the personalization team is doing really a great job of using the shopping data, using our understanding of each individual customer To be able to throw it into the machine learning algorithms and really actually do quite a tailored job of getting that personalized. Okay, we also we also, of course, let the customer decide. So we are really intent on customers can opt in and out for what they want. They can really control how we use the data. We need to show them value for what we're doing in terms of how we use the data. We never, ever, sell it to third parties.
Speaker 1:Okay absolutely, and I think being a steward of data is very important. We did a research paper last year on privacy, driven by the brand community. It's very interesting how brands are looking at privacy, how they're impacting, or how it could impact or is impacting, their customer marketing efforts. So that's a concern as well not only being stewards but making sure you're compliant with the ever changing landscape of legislation that's kind of going on throughout the organization, the country should, I say.
Speaker 2:Yeah, we're, yeah, great with you. We are strongly, strongly, strongly of that view that we need to be great stewards, and we look at other programs.
Speaker 1:Are there other programs that you admire from a customer loyalty perspective? What do you like about their offerings? Potentially, and are there elements of those programs that you would like to include into the CVS customer loyalty program?
Speaker 2:Yeah, we got some research back recently and I'm curious if you've seen the same where customers were asked what's your favorite loyalty program, and one of the ones that was popping towards the top was a grocery store that does not have a loyalty program. And what we realized quite quickly is that when people maybe with like airlines and hotels, people think about it as a loyalty program, but I think for most retailers customers don't really distinguish between the loyalty program and the shopping experience. So I think anyway interesting note that I was surprised my favorite loyalty program is a store that doesn't have a loyalty program. So I'm a cyclist and Mark is a bike store near me. It's called Master Bike, it's on 72nd Street.
Speaker 2:I walk in and, without a doubt, I'm warmly greeted hey Zach, my friend, how are you? And without a doubt, they, in a really quick way, figure out what I need. Oh, I see the problem. Yeah, we could fix that. No problem for you. Yeah, we have what you need right here, and when I check out, pricing is always fair. They know me. I tend to pay in cash. I get a really good deal. So it's not a formal loyalty program, but what does it have? It's extremely convenient, right? I never wait in line, I'm always greeted, it's personalized, they know me and I'm getting great value. So I think what we're trying to do with our loyalty program across 7500 locations and across the whole store is make each one feel like that standalone bike store or like that standalone shop that is really able to greet you warmly, know exactly what you want, give you a price that feels really good for you.
Speaker 1:Makes perfect sense, as it's actually the cheers methodology correct, where everyone knows your name, and the small restaurant right when you go. You may have got engaged with your soon. For another, where they know you right, they have that history. So they don't necessarily have to leverage technology, because the whole idea of a loyalty program or a loyalty focus, a customer loyalty focus, is to create that unique engagement with the customer that technology sometimes can encumber.
Speaker 2:Yeah well, yes, I agree with you, but we really see a way to use technology to enable that same feel. So when the digital experience is so seamless that it feels like they know you, when the digital experience is so convenient that it works, then you actually are able to get a similar emotional connection to the brand, to CVS, as you would with the. Everyone actually knows you. So that's, of course, the answer. How can we be completely personalized for so many 4 million people?
Speaker 1:Excellent. When you look at your team. What can loyalty 360 do to help you and your team at CVS with their customer loyalty journey, with your customer loyalty efforts?
Speaker 2:Yeah Well, first I would thank you in loyalty 360, because we like you guys a lot. We learned a lot from you. We listen a lot. We're pretty excited about the offering we have In so far as you have the chances to be telling people about our amazing what sounds too good to be true value prop on extra care and extra care plus, by all means, do that. We're also constantly looking for ways to innovate and improve. So, in so far as you or any of your listeners have ideas around, what can we do better? What's something we should pilot? We're always looking for ideas, so please funnel them to us. We love to hear crazy, wacky ideas, because Adam and Mara and the team love to pilot things, they love to test, they're incredibly scrappy and it's a fun place to be.
Speaker 1:That's good. Now we have the wonderful quickfire questions. We'd like to get a one word response or short phrase. I get electric shocks from the content group, which I'm not a huge fan of. That's a joke. First off, what is your favorite word? Accountability, excellent. What is your least favorite word?
Speaker 2:Any three-letter acronym that somebody uses without knowing what it means.
Speaker 1:Malaprop, I think they call it that Word. But yes, I agree. What excites you?
Speaker 2:Helping and developing colleagues would be number one, and then solving problems for our customers would be number two.
Speaker 1:What product is always on your CVS shopping list?
Speaker 2:I'm lactose intolerant, so it would be the CVS health brand. Lactase Pills 125 counts.
Speaker 1:What is the favorite book recommendation you have or you make to colleagues?
Speaker 2:That one's hard to do in such a few number of words because I actually end up recommending a lot of books. Recently, actually, I have it on my show over here there's a book called Smart Brevity that we had the team read, and that's about how do you communicate using fewer words. I recommend that one really strongly. There's also a book that helps understand e-commerce quite well that Jason Del Rey came out with recently, called Winner Sell-A-Home.
Speaker 1:I know I found short answers. I don't know. I'm a big behavioral science geek. If I had to agree eons ago when I was in college, I would definitely have been. One of my three degrees would have been in that. Magic Words by Jonah Berger from Wharton School. It's amazing with regard to how you phrase things, how you use caveats, what words you should use, shouldn't do. It's a really interesting word. I find myself trying to live a lot of that. I recommend that.
Speaker 2:It just came out, I think December of last year, but great book Magic Words is one that our chief merchant, Gustav Red, has been recommending to a lot. I read it recently and really enjoyed it.
Speaker 1:I agree with you Great recommendation on that one Perfect when you look at what profession would you like to attempt versus the one you're in now.
Speaker 2:I like my profession. I think I'm in a great place and I have no desire to change In many decades. I think I'd be interested in being a professor.
Speaker 1:What do you typically think about at the end of the day?
Speaker 2:I go to sleep each night with gratitude on my mind. I think about how lucky I am for what happened in the day and how lucky I am for what I have.
Speaker 1:Who inspired you to become the person you are today.
Speaker 2:I would say that we're all a combination of a huge number of people. I would say my parents, my family, my grandparents, teachers, coaches, professors, lots of mentors, lots of managers. Really, I think we're all a conglomeration of combination of a huge number of different influences.
Speaker 1:Excellent. And last question how do you want to be remembered by your friends and family Maybe for bringing joy.
Speaker 2:If I can be remembered as someone who brought joy, I think that would be pretty good.
Speaker 1:Okay, perfect, Well, Zach thank you very much for taking the time to speak with the state. It was great getting to know you and also it was even more interesting to hear about some of the things that you're doing with regard to the program how you're evolving at, how you're being a steward of the customer data, but also bringing in the technologies and processes that can create enhanced personalization, using that great voice of the customer insight that you have attained.
Speaker 2:Great Well Mark thank you. We really appreciate everything you do and we love reading about it, and I hope that we have convinced you to join ExtraCare Plus to get your free same day delivery. Send me a photo of your first order and let me know how it goes and let me know what I can do better.
Speaker 1:We'll do that for sure and perfect. I will do that. I'll join. Thanks everyone for taking the time to listen. Make sure you join us back for another edition of our Learison Customer Loaded series soon. Until then, have a wonderful day.