A Case Study: CVS Health

Houston Texas – 10/3/2016

CVS Caremark changed its name to CVS Health in February 2014.  To show proof that this change was more than a branding exercise, and to show their commitment to customers’ health, they coupled the announcement with the controversial decision to eliminate tobacco sales.

The company warned the markets that they expected sales to drop as a result, by about $2 billion.  That dip in sales was minuscule (1.5% of $139 billion annual sales) compared to the hypocritical practice of selling health remedies alongside their ailments!  To CVS leadership, there was no controversy in their decision- it was a matter of being true to their purpose.

By eliminating the sale of cigarettes and tobacco products in our stores, we can make a difference in the health of all Americans.

CEO Larry Merlo

A year and a half later, CVS announced that what revenue was lost in tobacco (1.5%) has been more than made up for in their two leading, high margin revenue sources- pharmacy and beauty product sales (4%).  And, the company shows they’ve consistently added market share in both categories since the announcement.

Company Purpose

Culture- Building Tip

Put your company’s purpose front-and-center.  Every employee should understand and be able to relate to a company’s stated purpose.

When you come to a crossroads on a strategic decision, a clearly stated purpose provides seamless direction.

People don’t buy what you do, they buy why you do it.

Simon Sinek 

As a leader, make sure your firm’s purpose is clearly articulated, and repeated by leadership again, and again, and again.  Purpose attracts and motivates the like-minded, and repels the uninspired.  Purpose is the foundation for employee engagement, commitment, and customer loyalty.