CVS tests fee-based membership program in Boston

Dive Brief:

CVS on Wednesday announced it’s piloting a fee-based membership program in Boston dubbed CarePass that carries a set of perks beyond its ExtraCare rewards, centered mostly on pharmacy and health care, according to a company press release.
For $5 a month, or $48 a year, CarePass members get free one- or two-day delivery via the U.S. Postal Service on most medications and purchases without a minimum, access to a 24/7 pharmacist hotline, 20% off all CVS Health brand products and a monthly $10 CarePass reward good towards nearly all purchases in-store and online. That coupon brings down the membership cost, but must be used by the end of each month or it expires.
Customers can enroll in CarePass at more than 350 participating CVS Pharmacy locations throughout Greater Boston, or online at CVS.com/carepass. The drugstore retailer is also taking signups from those outside the area as it expands.

Dive Insight:

Ever since it ditched tobacco sales four years ago, CVS has bolstered its position as a healthcare company, amid intense competition in the pharmacy space and a turbulent market for consumers. The drugstore retailer recently got the regulatory green light to acquire health insurance giant Aetna.

The perks outlined in the CarePass pilot aren't exactly earth-shattering. "The discounts on general non-prescription health products are helpful, but this only really brings CVS prices into line with Amazon, which is already cheaper even without the Prime service," Neil Saunders, GlobalData Retail Managing Director, told Retail Dive in an email. "Above and beyond the discounts and the monthly promotional award there is not much to the service to drive take-up – not when compared to the myriad of benefits Amazon offers with Prime."

But they don't have to be in order to appeal to its target, which is older consumers, according to Daniel Black, strategy consultant at brand strategy firm Vivaldi. "In fact, the program’s exact benefits have kept mom ‘n pop pharmacies afloat for decades," he told Retail Dive in an email. "These pharmacies know that it’s important not to understate the human element in their business, and that a competitive advantage lies in accessibility, often through technology, but not always."

Considering Amazon's acquisition of online pharmacy PillPack and its Prime membership, this could be seen as a defensive move to "lock in customer loyalty before Amazon makes a full assault on the pharmacy market," Saunders said.

CarePass is a challenge to rivals beyond Amazon, according to John Sarich, VP of strategy at VUE Software, a firm that helps insurance companies automate. "CVS is setting the price bar at a level that will make it tough for Amazon, and at $48 bucks a year it is a great deal," he told Retail Dive in email. "Also, remember that Aetna, which is CVS owned, is going direct with low cost medical. One area that should be considered is, what are Walmart and others going to do to respond to CVS? "

It's difficult to know how competitive CarePass might be because it's not clear how Amazon will ultimately leverage its store fleet, strategic hires, Prime program or logistics network for any health business, Black said.

CVS has an edge over Amazon with its nearly 10,000 locations, another advantage in reaching Baby Boomers, according to Black. But the company has undermined that by neglecting front-of-store operations, Saunders warned.

"That may not seem like an issue on the health side but making shops places where people want to come for both advice and products ultimately helps to protect the healthcare division of the business," he said. "Unfortunately, CVS has never really made that connection because competition in the health space has been weak – but now those dynamics are changing it needs to revisit its assumptions."