Pharmacy Service Improvement at CVS

Alexis Saint-Jean | Liz Herd | Riffat Lakhani | Susan Marinelli

Problems facing CVS

CVS has experienced growth, but sales are muted Customers are having negative customer experiences during pharmacy transactions Lost of repeat customer sales, totaling $2.5B in lost revenue in 2002

Pharmacy Customers

Pharmacy Customers

Fulfillment Process

Drop Off

Data Entry

Production

Quality Assurance

Pickup

DUR

Insurance Check

Fulfillment Process: Problem

Drop Off

Data Entry

Production

Quality Assurance

Pickup

- No Refill Allowed (6%) - Partial or complete - DUR Hard Stop stock shortage(17%) (20% 2%) - Insurance Issue (17%)

SWOT - Strengths
Location - over 4,000 stores Growing firm Buying power, which can translate to lower prices for customers Pharmacy information system connects all customer information Quality assurance (QA) procedures and safety standards Drug Utilization Review (DUR) allows for careful review of the drug and patient profile Dedicated team of pharmacists Convenient drop-off: either in-person or over the phone

SWOT - Weaknesses
On-demand prescriptions are often delayed Refill system is inefficient

Little communication with customers about their order

Delays in communication with doctor Formulary and refill limitations

Low employees motivation and high employee turnover

Untrained front-line staff (technicians)

SWOT - Opportunities
Aging U.S. population Customers perceive poor pharmacy service Improve the prescription fulfillment process Focus on the heavy use customer Provide additional services Acquire and learn from other pharmacies systems

SWOT - Threats
Competitors educating customers about switching policies More stringent controls by insurance companies Mail prescription services

1. Increased Visibility 2. Strategic CRM & VIP Program 3. The Status Quo

Options

Option1: Increased Visibility

Process
Inform customer (call, SMS, email) Inform about progress made hotline for more information

1
Outcome
Customers are better educated Better experience at the counter

Result
Understanding of the problem Increased visibility of CVS actions No surprise at the counter

Option1: Blueprint
CUSTOMER CONTACT PERSON (Back Stage) (On Stage) PHYSICAL EVIDENCE

1
Leave Store Come Back to Store Take Order & Pay Leave Store

Arrive at Store

Give Prescription

Line of Interaction
Pick Script & Return Time Give Bag & Take Payment

Line of Visibility
Put Script In Box Data Entry Production Quality Assurance Put Order in Sealed Bag

SUPPORT PROCESS

Line of Internal Interaction

DUR Insurance Check Payment System

Option1: Blueprint
CUSTOMER CONTACT PERSON (Back Stage) (On Stage) PHYSICAL EVIDENCE

1
Leave Store Receive Information

Arrive at Store

Give Prescription

Waits until Issue is Resolved

Come Back to Store

Take Order & Pay

Leave Store

Line of Interaction
Pick Script & Return Time Give Bag & Take Payment

Line of Visibility
Put Script In Box Data Entry Contact Customer Production Quality Assurance Put Order in Sealed Bag

SUPPORT PROCESS

Line of Internal Interaction

DUR Insurance Check Payment System

Customer Database

Option1: Service Recovery

Apologize Explain what happened
No refill allowed Conflict with other prescriptions for patient Insurance issue Obtain correct refill amount for the future Explain safety precautions taken for customers by DUR Confirm patients insurance before they leave Input any previous service problems into information database so can follow-up and make sure same issue does not persist.

Provide a solution

Follow-up

Option1: Increased Visibility

PROS:
Internal Solution Increased customer education Better counter experience

CONS:
Not a company strength (hotline) Lengthy implementation (HR, IT) Does not really try to resolve issues

Option 2:

Strategic CRM & VIP Program

What does it take? Improve technician customer service training Customer focused HRM VIP program: exclusive check-in for heavy users Customization/personalization Kiosks, online portal, text messages Streamlined operational processes Decrease stock shortages that delay Rx fulfillment

Option 2:

Strategic CRM & VIP Program

PROS: o More satisfying experience through customization bonds in store via VIP program o Platinum segment customers are happier due to decreased order delays o New operational processes improve repeat-customer conversion to increase ROI per customer CONS: o Increased upfront costs (staffing, technology, delivery) although there might be a decrease over the long-term o Main issues of the process occur in data entry and are not addressed

Option 3: The Status Quo

Pros: o No monetary cost o CVS has a profitable business even with a loss of customers, ~$13B from Rx revenue o Customers perceive switching pharmacies to be difficult Risks: o Continued customer loss at a higher rate o Another pharmacy emerges with extremely enhanced customer experience

Next Steps

Proposal & Implementation: Best Next Steps

Recommendations:
Option 2

Reasons
Short-term v. long-term implementation Relies on core strength Focus on key customers
$500 $450 $400 Revenue ($M) $350 $300

Sensitivity Analysis: Revenue Saved through Process Improvement

$250
$200 $150 $100 $50 $0 60% 70% 80% 90% 100% Process Improvement

Light Users Heavy Users

Long Run Plan: CVS CLEAR Initiative

Option 2: Strategic CRM & VIP Program & Option 1: Increased Visibility

CC

Set expectations: signage/brochures Empower customers to help with the process Drop off kiosk Keep clients updated Hotline employees to help with common issues Clearly about Customer service Clearly about Visibility Clearly about Safety

CVS Clear Initiative

Build a trusting relationship and create a customer for life!

Long Run Plan:

Impact on Relationship Bonding

CC

Option 1: Increased Visibility

Option 2: CRM & VIP Program