In the May issue of Risk Management, I wrote about CVS Caremark’s bold move to ban the sale of cigarette and tobacco products in its 7,600 pharmacies nationwide. At the time, CEO Larry Merlo said, “We’ve come to the decision that cigarettes have no place in an environment where health care is being delivered.
” The decision came with a hefty price tag of up to $2 billion in projected lost sales, but the company was clearly betting on long-term gains from fulfilling the promise of brand reputation.
Today, CVS announced it had officially pulled all tobacco products from stores, beating the anticipated Oct.
1 deadline by almost a month.
“Every day, all across the country, customers and patients place their trust in our 26,000 pharmacists and nurse practitioners to serve their health care needs,” CVS/Pharmacy President Helena B. Foulkes said in a statement. “The removal of cigarette and other tobacco products from our stores is an important step in helping Americans to quit smoking and get healthy.”
Further, the company changed its corporate name from CVS Caremark to CVS Health to reflect “our broader health care commitment.”
“The rate of reduction in smoking prevalence has stalled in the past decade. More interventions, such as reducing the availability of cigarettes, are needed,” the company explained in the press release. With the early strike and brand new name, CVS is stepping up to the challenge, and doubling down in its bet on brand reputation for long-term success – and long-term sales from healthier customers.
“CVS is now one of a small group of companies that have realized that their reputation is the most valuable asset they have and that building a stronger reputation by avoiding risks to that reputation can create a significant competitive advantage,” Paul Argenti, professor of corporate communications at Dartmouth’s Tuck School of Business, wrote in a column for the Harvard Business Review when the company’s initial plans were announced. “From the White House to the American Lung Association, CVS has received kudos for what seems to be a focus on shared value with society rather than the reckless pursuit of revenue at any cost.
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Check out the initial story for more on CVS’ brand reputation strategy.