CVS Case Study: Beauty 360

In Mike Bloom’s video explanation of the “Beauty 360” product differentiation strategy, Mr. Bloom talks about how CVS has decided to expand on their marketing of beauty products to include premium products and premium quality service. The concept for CVS’s “Beauty 360” campaign was the labor of over ten years extensive planning and research to deliver high quality beauty products to women in convenient locations (Bloom, 2009).

Without actually saying the words, Mike Bloom touches on several ideas that would have been identified in a S.W.O.T. (Strengths, Weaknesses, Opportunities, and Threats) analysis. He talks about CVS’s core strength being their real estate assets. With a multitude of already placed convenient locations CVS has the ability to offer these products in the manor the organization would like. Bloom mentions that their main weakness in regards to their “Beauty 360” initiative is the current brands they carry and the marketing plan they use to sell those products. The current marketing strategy wouldn’t be able to translate into the premium market (Bloom, 2009). Bloom states that, “We needed to create a space that would allow each individual brand to maintain its own integrity and we knew that we couldn’t make this work within the current four walls of our current store” (Bloom, 2009). Bloom doesn’t go on to elaborate on how they decided to make this work yet states they are currently testing out ideas at two different California based locations (Bloom, 2009).

Bloom talks about opportunity in the current recessionary market for beauty products being quite good. He references several typical high dollar cut backs that women will tend to make during recessionary times and makes a point that cosmetics tend to at least retain their overall level of sales. Due to their relatively low cost, according to Bloom, women are more likely to spend more money on beauty products as sort of a cost effective way to treat themselves (Bloom, 2009). The major threat Bloom cites is the state of the economy. He mentions that essentially all retail locations are hurting for business yet he feels the premium beauty products will help bolster CVS’s image and overall business.

In relation to Porter’s Five Forces Model, CVS could stand to do well or get completely burned with this push for high quality cosmetics. Porter’s Five Forces Model talks about potential competitive threats to potential product profitability. These five forces are; new competitors, substitute products, bargaining power of buyers, bargaining power of suppliers, and degree of rivalry between existing competitors (Strategy - analysing competitive industry structure). CVS shouldn’t have to worry about a slew of new competitors all of a sudden flying into the market of the premium priced products they want to carry. These items are expensive making endeavors into the market more difficult for the average entrepreneur. This leads into the buying power of CVS. As a large corporation, CVS should be able to easily leverage their suppliers into giving them their required merchandise at a discount, especially with the amount of capital they’re putting into their own retail sales efforts. Substitute products could be a concern. There may not be an actual substitute on the market for the premium items but there are plenty of cheap, generic versions that are widely sold at all of CVS’s competitors, as well as many middle of the road products. This all comes down to what is defined as a “substitute” in the eyes of the consumer. Many customers would easily forgo the premium prices and purchase the cheaper products. There are also many consumers who would not. As far as competitors and substitutes go, there are a large number of business that sell cheap to moderately priced cosmetics, several are in fierce competition with CVS, but few sell the premium product. CVS will almost certainly find themselves competing with the non-premium brands.

Clearly this is CVS’s attempt at product differentiation. CVS is trying to offer a high quality product to women in a location that is perceived as more convenient than the traditional department store. In an older article found in the Marketing News titled “Product Differentiation is not for everyone,” the author discusses several reasons why a business would not want to differentiate their products from their competitors. Among the reasons are unruly cost, homogenous products, and products where consumers are not readily involved in the purchasing decisions (Peterson, 1985). I would add to the authors list by stating that a company should not spend the effort differentiating a product that does not fall into its primary focus of existence. CVS, like its main competitor Walgreens, has carried convenience items for as long as it has been in business. CVS as an organization is a pharmacy. Spending efforts that attract from their primary mission seems to be an extraneous waste of the company’s funds. CVS has done some wonderful things with the medical side of their business by adding the Minute Clinic service to many of their locations. If I had to do a S.W.O.T. analysis for CVS I would suggest that their biggest strengths are their locations, the brand recognition they’ve achieved for their pharmacies, and their large selection of low cost convenience items.

The idea that a consumer is going to go out of their way to visit a pharmacy to by premium cosmetics seems about as likely as a consumer paying them a visit for designer shoes. It’s not what they do. They are not a premium fashion boutique and despite their best efforts, without taking the company back to the drawing board, they will never be. Mike Bloom says it best himself in the quote I used above. In order to market these products they would have to do it outside the realm of CVS. All you have to do is pay a visit to beauty360.com. It’s a fancy, high fashion, flash based webpage filled with glamorous models and music, but when you click on the “shop now” link, you are very slowly redirected to CVS’s clunky red pharmacy site. Once on the CVS site you are instantly ripped out of the world of high fashion and glamour and thrown back into the world of corner store convenience. Yes, the products are top shelf, but if you were to visit the CVS site as an uneducated consumer, you’d probably just be turned off by the prices.
It is of my opinion that CVS should not pursue this project despite their already hearty investments. I find it hard to believe that anybody would be convinced by Mike Bloom’s passionless attempt to integrate what seems to a be hip shot marketing gimmick to try and persuade the demographic women that shop at his stores to spend a little more of their hard earned money.

Works Cited:

Bloom, M. (2009, 02 13). The Issue: CVS Goes Upmarket. Retrieved 01 25, 2010, from Business Week: http://www.businessweek.com/managing/content/feb2009/ca20090213_670826.htm

Lewis, P. S., Goodman, S. H., Fandt, P. M., & Michlitsch, J. F. (2007). Management: Challenges for Tomorrow's Leaders. Mason: Thomson South-Western.

Peterson, R. T. (1985). Product Differentiation Is Not For Everyone. Marketing News , 19 (3), 1.

Strategy - analysing competitive industry structure. (n.d.). Retrieved 01 25, 2010, from Tutor2u.net: http://www.tutor2u.net/business/strategy/porter_five_forces.htm