Archive for February, 2015

CVS Kicks The Habit and Sticks to Selling Good Heath

February 25, 2015

Health and wellness are good for the mind, body, and soul, but they are also increasingly good for business. For a retailer like CVS, where pharmacy services are at its core, you’d think this sentiment would resound throughout the company; but a couple of years ago, CVS and its Senior VP of Corporate Social Responsibility, Eileen Howard Boone, realized the brand needed to reevaluate one prominent product on its shelves: cigarettes.

With cigarettes raking in nearly $2 billion in sales, and constituting 2% of CVS’s sales (as of 2012), it’s hard to imagine eliminating this revenue stream in a low margin business. However, in October of 2014, the company rebranded its corporate name to CVS Health and became the first major U.S. drugstore to remove tobacco products from its 7,600 stores.  “The decision to stop selling cigarettes was one that came with a financial risk. Eliminating $2 billion in sales is not something that is done every day by a Fortune 12 publicly-traded company,” Ms. Howard Boone told Forbes. While publically committing to reduce near-term revenue is a tough sell for a public company, Howard Boone and CVS Health considered other serious numbers, like the approximately 430,000 deaths that are attributed to cigarette smoking annually.

For CVS Health, the business case was clear.  Providing health care services and promoting health as a core purpose would not be sustainable while selling a product that so directly competes with that aim. To Eileen Howard Boone, it’s all part of innovating and reinventing the business for the benefit of the customers. “Despite this loss in revenue, we were willing to take that risk, to ensure a positive impact on the long-term health of our customers, clients and colleagues and to advance the dialogue on public health,” she explained. It is important to note that while some cities like Boston and San Francisco ban the sale of tobacco products in pharmacies, the decision by CVS Health was completely voluntary. But many interested parties were already advocating for pharmacies to stop cigarette sales, beginning with the American Pharmacists Association in 2010. Dr. Risa Lavizzo-Mourey, CEO of the Robert Wood Johnson Foundation, which focuses on public health, called CVS Health’s decision “a bold, precedent-setting move because it acknowledges that pharmacies have become healthcare settings,” and hopes it will serve as a model for other pharmacies to follow suit.

As Boone explained in a recent interview with Forbes, the company’s CSR strategy, appropriately dubbed “Prescription for a Better World,” is three-pronged: building healthier communities, protecting the planet, and creating economic opportunities. The decision to eliminate tobacco products is just the tip of the iceberg in building healthier communities. CVS has aligned themselves with community partners such as the American Lung Association’s LUNG FORCE a women’s support program to educate and promote awareness.  Like the many companies truly embracing the CSR spirit, CVS Health is ensuring its CSR initiatives go hand in hand with business strategy and key decisions that start at the top. “I’m very fortunate to have the example of our CEO, our board and our senior leadership team.  This year, they made a bold move that really showed me firsthand what it means to be a leader in the area of corporate responsibility.”

See Eileen Howard Boone speak at BRITE ’15 (March 2-3, NYC) and hear more about the the power of purpose and the strategic role of CSR as a business imperative.

BY JENNIE MILLER ’15

Under Armour Shows “I Will,” Becoming Nike’s Chief US Rival

February 18, 2015

On the last day of August 2014, NBA player Kevin Durant tweeted, “Excited and humbled to sign back with the swoosh.” This highly anticipated announcement came after months of courtship from both Under Armour and Nike, with each offering escalating bids for the coveted endorsement of the NBA superstar. Under Armour ultimately lost the bid to Nike – but its aggressive tactics left a big impression.

Under Armour CEO, Kevin Plank, stated, “If you have a deal, there’s no deal too big for us.” Under Armour topped Nike’s original bid of $200M, forcing Nike to increase its offer to $350M. “Do I take pleasure in that they paid $150 million more than they planned on paying? Absolutely.”

Though boastful, these words of confidence are rooted in business reality. In a world where Nike hasn’t faced significant challengers in US market share or endorsement deals, Under Armour is gaining momentum. At the end of 2014, Under Armour overtook Adidas and became No. 2 in US market share in the sportswear category. While Adidas’ sales fell 20-30% in apparel and shoes, Under Armour’s apparel sales grew 17%, and it’s relatively young line of shoes had a 34% bump in sales. Looking through the lens of brand strategy and marketing tactics, it is easy to see why.

Plank founded Under Armour to “build the better sports shirt” at a time when wicking materials were still rare in the category. The company continues to launch new products fueled by technological innovation thereby putting pressure on the competition. In the past few years, its portfolio has expanded to address more sportswear needs – launching shoes and a women’s line, for example. It also branded and incorporated its signature innovations (Infrared, Magzip) across its product portfolio. These efforts have created both clear brand differentiation and functional benefits to meet changing consumer expectations.

At the core of Under Armour’s brand lies its credo, a fierce, passionate call-to-action for competing and winning, encapsulated by its two-word tagline – “I will.” It has excelled at connecting its functional benefits to the emotional aspects of sports, and it developed a communications strategy that dripped with attitude and resonated with a well-defined consumer target.  Initially, this fierce image limited its appeal to a hard core male audience, but the company has ambitiously and effectively reached out to a wider base that includes women focused on fitness.

Its latest campaign, “I WILL WHAT I WANT,” has been a viral hit.  The ad features American Ballet Theatre’s Misty Copeland rehearsing while a voiceover reads a rejection letter she received at age 13 stating that she has “the wrong body for ballet.” Supporting the ad is a dedicated community website that allows women to post their fitness goals and share their progress with others.

In 2013, Plank also brought Under Armour into the fitness tracking marketplace — a category created, in part, by market leader Nike — with its purchase of MapMyFitness and its release of the Armour39 smart chest band. This January at CES, he formally launched Record, a fitness app designed to be device agnostic, extending the brand more widely into this arena. Working with HTC, the company plans to develop additional connected products for Record, but nothing formal has been announced. Plank is likely being cautious given Nike’s strategic move away from the Fuelband and additional hardware innovations.

Under Armour still has a way to go to challenge Nike, a brand that has also cultivated an image of power and achievement that resonates with athletes, both professional and amateur. On top of that, Nike demonstrated initial category leadership by developing technology enhancements and a social community of people focused on improving their fitness through Nike+. Some argue that Nike will remain unchallenged for years to come, but it is clear that the sportswear contest has shifted, and Under Armour has emerged as a powerful challenger.

BY NANCY LU ’16 and MATTHEW QUINT

%d bloggers like this: