For CVS Caremark, It’s Positioning over Profits

no smoking

Would you walk away from $2 billion a year in revenue that your business has already acquired? The question is unusual- most of the time marketers expend their energy in a quest to amass revenue. If you are going to forego significant revenue, you had better have good reason… right?

A Clear Decision

One company confronted this very question and concluded that the best interests of its business was served by answering “yes” and exiting a product category worth $2 billion in annual sales. The company is CVS Caremark, and it recently announced that it would discontinue sales of tobacco products in its 7,600 CVS stores by October of this year. The decision translates into $2 billion in revenue, or about 3% of the company’s total sales. Despite the magnitude of revenue CVS Caremark stands to lose, discontinuing tobacco sales was a clear decision to make. Why? Company management knew that in order to be true to the brand promises CVS Caremark makes as an advocate for wellness and a healthy lifestyle, its merchandise strategy has to be congruent with the overarching mission of the business.

Two Questions to Ask

Brand positioning is one of the most important marketing decisions you will make. Why? It draws a line in the sand as to how a brand is unique, different, or superior to competition. Without a clearly defined brand position, you are doomed to mediocrity, if not failure. It sounds like a dire prediction but think about it- when a brand lacks clarity in its meaning and does not articulate a point of difference, it can be perceived as a commodity that is easily interchangeable with other products. A brand is vulnerable to being rendered irrelevant when it lacks a clear point of difference that conveys its value proposition to the market.

The decision to position is easy; the approach taken to position a brand is not so clear cut. The good news about brand positioning is that a marketer has many options from which to choose to create a positioning basis. The bad news is… well, the bad news is the same as the good news- the number of possibilities for positioning a brand can be overwhelming. How do you decide what differentiation point is most viable as a positioning basis? You need to ask two questions when evaluating a potential brand position:

  1. Is the point of difference real? A brand position has to be a legitimate proof point that exists- not a puffery claim or slogan. For CVS Caremark, positioning as a brand associated with a healthy lifestyle would be harder to achieve if it continued to sell tobacco products in its stores.
  2. Is the point of difference relevant? Possessing a point of difference is one thing; possessing one that matters to your customers is something quite different. Judging from feedback posted on CVS’s Facebook page about the decision to end tobacco sales, many customers and non-customers alike believe it was the right thing for the company to do. It elevates the credibility of CVS Caremark as a lifestyle brand.

Be True, not Popular

While many consumers and health professionals have lauded CVS Caremark for its decision to discontinue tobacco sales, the decision was not embraced universally. Many CVS customers that buy tobacco now say they will take their business elsewhere. Other people have chided CVS Caremark for not removing other products with questionable effects on health such as beer, wine, soda, and snacks (such complaints do not appear to be an apples-to-apples comparison with cigarettes, but I will leave that debate for other people in other forums). These examples of negative feedback is a reminder that you will always have detractors- “haters gonna hate.”

In the end, it is more important to be true to your brand values than making decisions you believe will be popular. CVS Caremark has taken a bold stand to be consistent with its brand promises. While some people might see it as an expensive stand to take, it is one that CVS Caremark believed it could not afford not to take.

Share and Enjoy

Author: Don Roy

Marketing educator, blogger, & consultant- Having fun with all of the above!

Leave a Reply

Your email address will not be published. Required fields are marked *