Don’t Sacrifice Goodwill for Good Data

CVS recently ran an experiment that’s generating a lot of buzz online. Unfortunately, it’s not the kind of customer reaction retailer likes to get.

The drugstore giant chose the week of July 12 to deviate from its usual offer of special coupons or promotions in printed circulars. They were betting that what they gained in data insight for the week would be worth the price of alienating some customers.

However, CVS management may have underestimated just how much that alienation could cost the retail chain—not just in sales for the week, but in the loss of goodwill. Shopper response to the lack of promotions ranged from bewilderment to disappointment to some expressions of anger. They let CVS know how they felt in the stores, on the phone and on social media.

One cashier told me that customers called demanding access to the specials, and one yelled at her when she said there were none. She said the same hostility came up in other CVS locations. While she was on the phone with a manager, six customers walked out when they discovered there weren’t any circulars.

Reaching Out on Social Media

As CVS reaches out a great deal on social media channels, it would have made sense to give a heads up to customers. Instead, they began venting their frustration on Twitter and Facebook, and got the following response: “In order to continuously bring you great value, we may occasionally alter our promotional activities at select stores on a weekly basis. Rest assured that this is not permanent, and weekly sales will resume at your local store next Sunday.”

That kind of reassurance doesn’t satisfy people who come in regularly to the store to stock up on sale items. For example, Mashup Mom, one of the blogs devoted to finding shopping bargains, posted the following:

“Let me preface this by saying: You guys know how much I love CVS: I’m there every week, sometimes multiple times a week. … But I’m not setting foot in CVS this week.

“My love for CVS makes this week’s “test market” fiasco especially disappointing.”

The question is: Why did CVS launch such a test? Would CVS be foolish enough to try out the “no sales” approach that proved a failure at JC Penney?

I think that what they’re really after is tracking the impact of promotions on individual customers, rather like a supermarket chain Dean Abbott told me about in a recent interview. (Abbot is the co-founder and chief data scientist at SmarterHQ and author of Applied Predictive Analytics: Principles and Techniques for the Professional Data Analyst.)

As CVS extends sale prices and rewards only to customers who use their loyalty card, the retailer already has a detailed history of what individual shoppers buy and how frequently they come into the store. Comparing that historical data to a control week in which there are no promotions can pinpoint which customers will keep to their schedule of purchases even without sales. On that basis, CVS can tailor promotions only to those who need an incentive to come in and not offer promotions to customers who don’t need an incentive.

When Abbott told me about that application of data analytics, I pointed out that though there are shoppers who are loyal to brands and who would buy particular items even without a promotion, they would not be happy to learn about a store that rewarded their loyalty with a loss of savings. He agreed that retailers have to know just how far they can push a customer before they lose the goodwill they worked so hard to build.

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