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BUS 400 Milestone Two
Business Model Canvas
Company: CVS Health
Last updated: June 4, 2023
Unique Value Proposition
CVS Health Corporation has implemented the Blue Ocean Strategy to set itself apart in the marketplace and gain a strategic advantage (Mourtzikou et al., 2019).
By leveraging its extensive network of retail pharmacies, clinics, and digital platforms
Cutting-edge technologies and data analytics capabilities
This integrated model positions CVS Health as a leader in the industry, providing comprehensive and convenient healthcare options while driving positive patient outcomes.
Their unique offering lies in their innovative healthcare delivery model, which combines traditional pharmacy services with advanced clinical care and digital health technologies.
CVS Health provides convenient access to a wide range of healthcare services.
They have also invested in cutting-edge technologies and data analytics capabilities, enabling them to offer personalized and proactive healthcare solutions (Das et al 2018).
By adopting the Blue Ocean Strategy, CVS Health has created a niche that differentiates them from traditional healthcare providers, attracting and retaining customers and transforming the healthcare delivery experience (Mourtzikou et al., 2019).
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Key Business Model Questions: The Customer
1. How do you acquire customers?
CVS Health acquires customers through retail pharmacies, digital platforms, and targeted marketing campaigns.
2. How do you deliver the product/service to the customer?
CVS Health delivers products and services through physical retail pharmacies, home delivery services, and digital platforms.
3. After landing a new customer, how do you plan to relate to a new customer and manage the relationship after landing a new customer?
CVS Health maintains customer relationships through dedicated customer service teams and digital engagement for personalized support and assistance.
Retail pharmacies, internet platforms, and targeted marketing initiatives are the primary channels via which CVS Health brings in new clients. CVS Health reports that their 50 million online customers spend 2.4 times more than their in-store customers (PYMNTS, 2023).
Consumers will soon have access to primary care, on-demand care, chronic disease management, and mental health services thanks to the introduction of a new virtual care service that is being rolled out by the retail pharmacy giant CVS (Landi, 2022).
CVS offers a customer chat where you can speak to your customer in real time. Also, the convivence of email or call where it is policy that all customers get treated with the upmost respect. By having this policy this shows our customer we care about their needs and also want to take care of them.
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Key Business Model Questions: The Customer, Continued
How will you charge your customers? What is your revenue model?
CVS Health charges customers for products and services through direct sales, insurance reimbursements, and co-payments.
How much will you charge your customers? Can you calculate your revenues for the next month, quarter, and year?
Revenues for CVS Health are determined by factors such as sales volume, pricing, reimbursement rates, and market conditions.
What key activities must you engage in to deliver your value proposition?
Key activities for delivering CVS Health's value proposition include:
Operating retail pharmacies.
Providing healthcare services.
Managing logistics for product delivery.
Leveraging digital platforms.
Engaging in marketing and customer outreach.
Maintaining customer relationships through dedicated support.
Key Business Model Questions: Assets, Partners, and Cost
Assets: CVS Health has a wide range of assets under its control, including a vast network of retail pharmacies and clinics, digital platforms and technology infrastructure, a strong brand reputation, a large customer base, and valuable data and analytics capabilities.
Key partners: CVS Health collaborates with various entities in the healthcare industry.
Cost structures: CVS Health incurs costs from many different verticals.
Assets: Over the course of the last ten years, CVS Health has significantly expanded its store count, going from 5,474 locations in 2005 to 9674 locations by the end of 2022; There are 1150 CVS MinuteClinic's around the United States, many of them are situated in close proximity to major urban centers.; CVS has a rating of 3.04 stars from 457 reviews, indicating that most customers are generally satisfied with their purchases; CVS has constructed the necessary technology infrastructure to provide assistance to patients exactly when and where they need it, allowing them to better control their illness and ultimately achieve better results (CVS Health, n.d.).
Key Partners: such as pharmaceutical manufacturers, healthcare providers, insurance companies, technology companies, community organizations, and government agencies.
Cost Structures: costs from pharmaceutical products, research and development, digital platform maintenance, marketing, and customer acquisition, operating retail pharmacies and healthcare facilities, regulatory compliance, patient safety and privacy, and data security measures.
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Business Model Canvas – CVS Health Improved Pharmacy Services
Key Partners
CVS Health has established solid agreements with several pharmaceutical suppliers, which allows for a consistent supply of drugs and other healthcare items.
Collaborations with insurance carriers help to speed the procedures of reimbursement and increase consumers' capacity to pay for their coverage.
The formation of strategic agreements with various healthcare providers allows for the provision of complete services and unobstructed referrals. with insurance providers streamline reimbursement processes and improve affordability for customers.
The development of digital platforms and efficient operations is bolstered by the contributions of technology partners.
Key Activities
Operating retail pharmacies and clinics.
Providing healthcare services such as prescription dispensing, vaccinations, and chronic disease management.
Managing logistics for product delivery.
Key Resources
A vast network of retail pharmacies, clinics, and internet platforms are all part of this operation.
Value Proposition
The primary value proposition is to provide healthcare solutions that are easy to use and integrated, with the goal of bettering patient outcomes and the well-being of the population as a whole.
Customer Relationship
CVS Health provides dedicated customer service teams for prompt assistance and support.
CVS Health engages with customers through digital platforms, offering personalized health recommendations and access to resources..
Channels
Customers get access to goods, prescriptions, and healthcare services via CVS Health's network of physical retail pharmacies, which act as a gateway for consumer access.
Online ordering, prescription refills, virtual consultations, and access to tailored health information are just some of the digital services that may be accessed via CVS Health's digital channels, such as their website and mobile app.
Customer Segments
High-earning members of Generation X (those aged 41 to 56) and Baby Boomers (those aged 59 to 77).
healthcare for conditions associated with aging, such as those affecting the immune system, the nervous system, the skeletal system, the circulatory system, and the digestive system.
Cost Structure
The most important costs with the new venture would be those fixed costs and variable costs that are associated with this new service.
Fixed Costs: Assumptions: Facility and equipment expenses, with the number of facilities this cost could get excessive, employee salaries with this new services we would need to hire more employees to facilitate this service, insurance costs with this new service our policies would need adjusted and with that an increase in the premium.
Variable Costs: Assumptions: Cost of goods sold, marketing and advertising expenses from our marketing team, customer support costs.
Revenue Streams
Direct Sales: Assumption: CVS Health generates revenue by directly selling products and services to customers through retail pharmacies and digital platforms.
Insurance Reimbursements: Assumption: CVS Health earns revenue through reimbursements from insurance providers for healthcare services and prescription medications provided to customers.
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Consider Your Business Model
Based on the BMC chart, proceeding with this new product/service makes sense for several reasons. Firstly, CVS Health's integrated healthcare delivery model, combining traditional pharmacy services with advanced clinical care and digital health technologies, offers a unique value proposition in the marketplace (Trinh & Begun, 2019).
However, there are risks to the business model that should be considered. One risk is the dependency on insurance reimbursements, which can be subject to changes in reimbursement rates, regulations, or shifts in insurance-provider relationships (Trinh & Begun, 2019
CVS Health should consider a few changes to strengthen the business model and reduce its risk
This differentiation provides a strategic advantage and enhances the overall customer experience. Secondly, the revenue streams from direct sales and insurance reimbursements demonstrate the potential for sustainable revenue generation.
Maintaining the right relationships with suppliers and partners is crucial for effectively delivering the value proposition. Any disruptions in the supply chain or strained partnerships could impact the business model's success.
. Diversifying the revenue streams beyond insurance reimbursements, such as exploring additional direct payment options or partnerships, can mitigate the risk associated with dependency on a single revenue source (Trinh & Begun, 2019). Building strong relationships with multiple suppliers can also protect against potential disruptions and ensure a reliable supply of products and services. Conducting regular SWOT analysis and actively addressing weaknesses and threats will help identify areas of improvement and strengthen the overall business model.
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[Delete this slide once your have completed the table on the next slide.]
The assumptions regarding CVS are based on commonly observed practices in the healthcare sector (Das et al 2018). Direct sales through retail pharmacies and digital platforms are well-established methods for generating industry revenue.
Insurance reimbursements are a common source of revenue for healthcare providers, including pharmacies, where they provide services and prescription medications to customers covered by insurance plans(Das et al 2018).
While these assumptions are generally applicable, it is important to note that specific financial and operational details of CVS Health's business model would require access to their internal information or official sources for accurate verification.
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Clarify Your Business Model Assumptions
| BMC Chart Item | This Is a Fact. (Evidence) | This Is an Assumption |
| Key Partners | X | |
| – Pharmaceutical Manufacturers | Assumption | |
| – Insurance Companies | Assumption | |
| Key Activities | X | |
| – Operating Retail Pharmacies | Assumption | |
| – Digital Platform Management | Assumption |
Clarify Your Business Model Assumptions Cont.
| BMC Chart Item | This Is a Fact. (Evidence) | This Is an Assumption |
| Customer Relationship | X | |
| – CVS Health targets individuals seeking convenient access to healthcare products and services | Assumption | |
| – CVS Health seeks alliances and contracts with insurance providers | Assumption | |
| Cost Structure | X | |
| – Fixed Costs | Assumption | |
| – Variable Costs | Assumption |
Preparing to Meet Customers: Materials and Sales Process
Customer presentation
Website
Marketing plan
Sales process description
Acquisition of customers
The sales process for example: website sales)
Pricing options: single-priced product or service versus multi-tier pricing
Update Your Documentation
The product/service targets individuals seeking convenient access to healthcare products and services, including prescription drugs, over-the-counter products, and personalized care.
The type of value our product/service delivers is a comprehensive and integrated healthcare experience, combining traditional pharmacy services with advanced clinical care and digital health technologies.
Our product/service is unlike others because it provides an intergraded and customer focused service .
This unique combination allows us to deliver personalized care, streamline access to medications and healthcare information, and provide a holistic approach to improving overall health and well-being.
This value proposition aims to improve health outcomes, enhance convenience, and empower individuals to take control of their well-being.
A seamless and integrated healthcare solution.
Bridging the gap between retail pharmacies.
Healthcare services.
Digital platforms.
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Updated Business Model Canvas Chart
Key Partners
Pharmaceutical Manufacturers: Assumption: CVS Health forms partnerships with pharmaceutical manufacturers to ensure a reliable supply of prescription medications and negotiate favorable pricing.
Insurance Companies: Assumption: CVS Health collaborates with insurance companies to establish preferred provider networks, negotiate reimbursement rates, and facilitate seamless customer claims processing.
Key Activities
Operating Retail Pharmacies: Assumption: CVS Health operates retail pharmacies for customers to access medications and healthcare services.
Digital Platform Management: Assumption: CVS Health manages digital platforms (website, app) for online ordering, virtual consultations, and health information.
Key Resources
CVS Health relies on its extensive network of physical retail pharmacies as a vital resource to provide convenient access to healthcare products and services for its customers.
Value Proposition
Assumption: CVS Health's main value proposition is providing comprehensive and convenient healthcare solutions that combine traditional pharmacy services, advanced clinical care, and digital health technologies to enhance patient outcomes and improve overall well-being.
Customer Relationship
CVS Health targets individuals seeking convenient access to healthcare products and services, including prescription drugs, over-the-counter products, and personalized care.
CVS Health seeks alliances and contracts with insurance providers that reimburse healthcare services and medications to serve their members and deliver cost-effective healthcare solutions.
Channels
Retail Pharmacies: Assumption: CVS Health utilizes its network of retail pharmacies as the primary channel for delivering products and services to customers.
Customer Segments
High-income Gen Xers (41-56) and Baby Boomers (59-77): Assumption: CVS Health targets these age groups' high-earners who want convenient healthcare. Older persons with health issues: Assumption: CVS Health serves elderly folks with diabetes, dementia, back pain, arthritis, respiratory ailments, and cancer.
Cost Structure
Fixed Costs: Assumption: CVS Health incurs fixed costs such as facility and equipment expenses, employee salaries, and insurance costs.
Variable Costs: Assumption: CVS Health faces variable costs including the cost of goods sold, marketing and advertising expenses, and customer support costs.
Revenue Streams
Direct Sales: Assumption: CVS Health generates revenue by directly selling products and services to customers through retail pharmacies and digital platforms.
Insurance Reimbursements: Assumption: CVS Health earns revenue through reimbursements from insurance providers for healthcare services and prescription medications provided to customers.
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References
CVS Health. (n.d.). Digital Tools Using Technology to Support Optimal Outcomes, Deliver Cost Control. Retrieved June 3, 2023, from
Das, J., Woskie, L., Rajbhandari, R., Abbasi, K., & Jha, A. (2018, May 21). Rethinking assumptions about delivery of healthcare: implications for universal health coverage. BMJ, k1716.
Landi, H. (2022, May 30). CVS Health rolls out virtual primary care service. Fierce Health. Retrieved June 3, 2023, from
Mourtzikou, A., Stamouli, M., & Emmanouil, D. (2019, April). Implementation of the Blue Ocean Strategy in Healthcare. International Journal of Reliable and Quality E-Healthcare, 8(2), 36–49.
PYMNTS (2023, May 3). CVS Health Says 50 Million Digital Customers Spend 2.4X More Than In-Store Shoppers. PMNTS. Retrieved June 3, 2023, from
Trinh, H. Q., & Begun, J. W. (2019). Strategic Differentiation of High-Tech Services in Local Hospital Markets. Inquiry : a journal of medical care organization, provision and financing, 56, 46958019882591. https://doi.org/10.1177/0046958019882591
