CVS GOES CHAINWIDE WITH LOYALTY INCENTIVES

STEPHANIE LOUGHRAN

NEW YORK -- An integrated loyalty program targeted to top-tier shoppers, and a focus on specialty pharmacy are being pursued by Woonsocket, R.I.-based CVS, one of the nation's two largest drug retailers, to increase front-end sales and prescriptions.

Thomas Ryan, chairman, president, and chief executive officer for CVS, laid out a plan here to shore up customer loyalty during the Credit Suisse First Boston Food and Drug Retailing Conference this month. The incentive program includes the ExtraCare loyalty card, Extra Bucks, and UPromise. The latter is geared toward helping families save for their children's higher education.

"The issue here is targeted marketing, getting closer to your top 20% of customers so [you're less immune to customers leaving you for the competition]," he said.

"I wanted to stop giving away gross margin dollars to people who weren't expecting it," said Ryan.

CVS has been testing the loyalty card program in a number of markets for the past two years, and "it's been extremely successful."

The program went chainwide yesterday, according to a written statement.

Extra Bucks builds customer loyalty by giving CVS dollars back to customers who spend a certain amount at the drugstore over a period of time.

According to Ryan, the UPromise program sets up a college fund for customers by using their Extra Bucks. With the help of other corporate sponsors, an average customer can accumulate $25,000 in 15 years.

"We think it's pretty unique, and it's another reason for customers to not only stay with CVS but also come to CVS."

The drug chain has also targeted the specialty-pharmacy segment as a high growth area. Last year CVS acquired Pittsburgh-based Stadtlander, a specialized distributor of HIV/AIDS, transplant, mental health and fertility drugs.

It's specialty pharmacy division ProCare is poised to "diversify the mix and gives a nice balance" to providing care for chronically ill customers afflicted with specialized diseases, said Ryan.

ProCare is part of the $14 billion business that focuses on specialty diseases like AIDS and cystic fibrosis, according to Ryan.

He said they have exclusive distribution of drugs such as Tikosyn, produced by New York-based Pfizer, and Cystagon, produced by Mylan Pharmaceuticals, the generic division of Mylan Laboratories, Pittsburgh.