The cvs beauty in real life campaign case PDF

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The CVS Beauty in Real Life Campaign Case

Author: Karen Robson Online Pub Date: January 02, 2019 | Original Pub. Date: 2019 Subject: Marketing, Advertising & Promotion Level: | Type: Indirect case | Length: 2483 Copyright: © Karen Robson 2019 Organization: CVS Health | Organization size: Large Region: Northern America | State: Industry: Retail trade, except of motor vehicles and motorcycles Originally Published in: Publisher: SAGE Publications: SAGE Business Cases Originals DOI: http://dx.doi.org/10.4135/9781526469281 | Online ISBN: 9781526469281

SAGE © Karen Robson 2019

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© Karen Robson 2019 This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes. 2021 SAGE Publications Ltd. All Rights Reserved. The case studies on SAGE Business Cases are designed and optimized for online learning. Please refer to the online version of this case to fully experience any video, data embeds, spreadsheets, slides, or other resources that may be included. This content may only be distributed for use within Queensland University of Techn. http://dx.doi.org/10.4135/9781526469281

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The CVS Beauty in Real Life Campaign

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Abstract CVS Health, one of the leading drug stores in the U.S. pharmacy industry, had recently announced their “Beauty in Real Life” campaign, which declares that the company would no longer use airbrushing in their beauty product marketing images. Images that had not been digitally enhanced would bear the CVS Health “beauty mark” label, signaling their untouched nature. By 2020, the company plans to have all marketing images of beauty products sold in their store—including those by other brands—labeled in such a way as to signal whether they were digitally altered or not. This move, inspired by the company mission to promote health, set CVS Health apart from other competitors in the industry. In this case, students are asked to evaluate whether the use of airbrushing on beauty product marketing images constitutes deceptive advertising, as well as to evaluate the “Beauty in Real Life” campaign itself.

Case Learning Outcomes By the end of this case study, students will be able to: • understand the difference between puffery and deception in advertising; • evaluate the “Beauty in Real Life” campaign and its potential impacts on CVS Health; and • assess whether competitors of CVS Health should adopt similar policies regarding the use of airbrushing in promotional materials.

CVS Company Background The first Consumer Value Stores (CVS) opened in Lowell, Massachusetts in 1963, selling health and beauty products. A few years later, in 1967, the company began including pharmacy departments in some of their retail stores. In the years that followed, the company saw rapid growth and expansion, particularly in their pharmacy business. CVS achieved USD 100 million in revenue in 1974, USD 1 billion in 1985, and more than USD 100 billion in 2011. Until 2014, the company operated under the name CVS, at which point the company changed its name to CVS Health to better reflect company commitment to healthcare (CVS Health, 2014). In 2017, the CVS Health product mix could be divided into two main categories: pharmacy services and general retail. Pharmacy services included a wide range of pharmacy benefit management activities, such as designing pharmacy benefit plans for insurance companies and employers. In this role, CVS Health operated as a third-party administrator of pharmaceutical insurance plans. General retail activities included the sale of prescription drugs, as well as “front-end sales,” which consist of the sale of personal health and beauty products, convenience foods, greeting cards, and seasonal merchandise to individual consumers. Pharmacy services accounted for a larger proportion of annual company revenues than general retail; for example, net revenue for pharmacy services and general retail in 2017 were USD 130 million and USD 79 million, respectively. In 2016, these were USD 199 million and USD 81 million, respectively (CVS Health, 2017a). Selected financial data for CVS Health are presented in Figure 1.

Figure 1. Selected CVS Financial Information, 2007–2017

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The CVS Beauty in Real Life Campaign

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Source: Adapted from CVS annual reports, 2007–2017. In 2015, CVS Health acquired all of Target’s pharmacy and clinic businesses, and by 2017 the company had 9,800 retail outlets, which was more than any other pharmacy chain in the United States (CVS Health, 2017a). Page 4 of 9

The CVS Beauty in Real Life Campaign

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In addition, CVS Health stores are typically located in easy to access locations; nearly 70% of Americans live within three miles of a CVS store (CVS Health, 2017a). The company currently employs more than 30,000 pharmacists, who had more than 140 million consultations with customers in 2017 (CVS Health, 2017a).

Pharmacy and Drug Store Industry in the United States There are two main activities undertaken by drug stores. First, drug stores engage in sales of medications and provide advice regarding medications (both prescription and over-the-counter). Second, drug stores sell basic consumer goods and miscellaneous items. Thus, industry revenue can be divided into five major streams: revenue from medicines, personal health supplies, food items, supplements, and other (which include tobacco, housewares, and cosmetics). Of these, sale of medicines generates the largest proportion of revenue (77%), followed by other (13%), personal health supplies (4%), food items (4%), and supplements (2%) (Market Share Reporter, 2017). In general, front-end items, such as snacks, magazines, or personal grooming products, do not attract new customers or offer competitive advantages to pharmacy retailers; instead, industry players compete mainly on prescription medication sales (IBISWorld, 2018). The wide variety of offerings provided by drug stores mean that drug stores cater to a wide range of customers. In addition, most individuals in the United States have easy access to a drug store, as nearly all Americans live within five miles of a drug store of some kind. Overall, however, the industry serves mostly customers who are middle aged or older. Only 11% of customers are aged 17 or younger, with 28% between 18 and 44 years old; 36% are between 45 and 64, and 26% are 65 years of age or older (IBISWorld, 2018). CVS Health is one of the major drug store chains in the United States, alongside Rite Aid and Walgreens. In 2017, CVS Health captured 29% of the market share in the United States, with Walgreens and Rite Aid capturing 32% and 6% of the market share, respectively. The balance of the market share was captured by a variety of providers, ranging from small independent pharmacies as well as big box retailers such as Walmart and Costco. Of the three major players in the industry, Walgreens is the only one that no longer operates a pharmacy benefit management program. Despite this, the company is experiencing steady growth, and in 2017 acquired nearly 2,000 stores from competitor Rite Aid (IBISWorld, 2018). Industry analysts project a positive outlook for the industry, noting that the industry is expected to increase annual revenue at a rate of approximately 4.6% per year, driven by factors such as an aging population, higher rates of insurance coverage, and rising per capita disposable income (IBISWorld, 2018). However, the industry is highly dependent on government regulations, as consumers typically only pay a portion of their prescription medication bills with the rest being paid for by either insurance companies or government entities. As such, changes to the regulatory environment could have a drastic impact on all companies operating in the industry.

The “Beauty in Real Life” Campaign In April 2018, CVS Health initiated its “Beauty in Real Life” campaign, which committed to using only unaltered images in beauty product marketing images. In a press release, the company stated We will not digitally alter or change a person’s shape, size, proportion, skin, or eye color or enhance or alter lines, wrinkles, or other individual characteristics. We want our beauty aisle to be a place where our customers can always come to feel good, while representing and celebrating the authenticity and diversity of the communities we serve. (CVS Health, 2018a) The campaign was intended to include all marketing images, regardless of whether they appeared in digital or print formats, on social media, television, or outside advertising. To signal that an image had not been airbrushed, CVS Health would put a “CVS Beauty Mark” label on images (Figure 2). The company stated that these labels would begin appearing on photos of beauty products produced by CVS Health later in 2018.

Figure 2. Comparison of Digitally Altered Versus Original CVS Health Images

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The CVS Beauty in Real Life Campaign

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The CVS Beauty in Real Life Campaign

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Source: CVS Beauty Mark Downloadable Resources. Available at: https://cvshealth.com/newsroom/cvsbeauty-mark-downloadable-resources CVS Health was not in control how other beauty product brands sold in CVS Health stores, such as Revlon, L’Oréal, Maybelline, and Johnson & Johnson, dealt with the issue of digital enhancements of marketing materials. The company had asked these other brands to participate in the campaign; however, ultimately this decision would be made by each individual brand. CVS Health hopes to be able to label all beauty product related images by the end of 2020.

Criticisms and Regulation of Airbrushing in Advertisements The motivation for the Beauty in Real Life campaign is related to health. Helena Foulkes, Senior Vice President of Retail Operations for CVS Health, stated The thinking is that we’re a big healthcare company, but also an important beauty retailer, and we see those two parts of our business as connected from the consumer view…. Having an unrealistic body image is a significant driver of health issues. (CVS Health, n.d.) The idea that unrealistic body images in advertising had negative impacts on consumers was not a new one. Research showed that exposure to images of tall, thin models led to women’s feelings of dissatisfaction with their own figures and had a negative impact on their eating behaviors, such as food restrictions or, in some cases, eating disorders (Grabe, Ward, & Hyde, 2008). As a result, airbrushing in advertising had come under increasing scrutiny in recent years. CVS Health noted this in a press release regarding the Beauty in Real Life campaign, stating, “The connection between the propagation of unrealistic body images and negative health effects, especially in girls and young women, has been established” (CVS Health, 2018b). Some regulatory bodies began taking action against the intense use of use of airbrushing techniques in marketing materials, arguing that the use of airbrushing or other digital enhancement techniques was a form of deception, which regulators of advertising did not allow. The regulatory watchdog in the United States—the Federal Trade Commission (FTC)—stated that “advertising must tell the truth and not mislead consumers” and that “claims must be substantiated” (Federal Trade Commission, n.d.). Furthermore, in the United States the Lanham Act prohibited false advertising, and defined deception in advertising as any promotional material that “misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities” (Lanham Act, 1946). In contrast to deception, puffery in advertising is widely accepted as an ethical practice. Puffery is defined as “advertising or other sales presentation that praise the product or service with subjective opinions, superlatives, or exaggerations, vaguely and generally, stating no specific facts” (Preston, 1975). Puffery therefore includes innocent exaggeration, or the use of outrageous claims which consumers would know better than to take literally. For example, claims that a product or service was “the best in the universe” or would lead to “superhuman strength” would be considered puffery. In 2011, the regulatory organization for advertising in the UK, the Advertising Standards Authority (ASA), banned ads for cosmetic products by L’Oréal featuring Christy Turlington and Julia Roberts (BBC, 2011). At the time, the ASA ruled that the ads were misleading and said, “On the basis of the evidence we had received we could not conclude that the ad image accurately illustrated what effect the product could achieve, and that the image had not been exaggerated by digital post-production techniques” (BBC, 2011). However, the FTC has yet to regulate the use of airbrushing in advertising, and in the United States the same images of Christy Turlington and Julia Roberts were not deemed deceptive. In 2014 Congress introduced the Truth in Advertising act, which proposed that the FTC be able to regulate the extent to which airbrushing could be used in advertisements. As of 2018 there had been no decision on the issue.

A Purpose-Led Company CVS Health has a vision of improving the quality of human life and states that their mission is to “provide Page 7 of 9

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expert care and innovative solutions in pharmacy and health care that are effective and easy for our customers.” The company claims that all their operations begin with their company purpose, which is to help people on their path to better health (CVS Health, 2017b). Since 2008, the company had published an annual report on corporate social responsibility that detailed the yearly efforts towards this company goal. Referring to the Beauty in Real Life campaign, Foulkes said “As a purpose-led company, we strive to do our best to assure all of the messages we are sending to our customers reflect our purpose of helping people on their path to better health” (CVS Health, n.d.). Yet, this was not the first time CVS had taken a stance on issues that were important to the company. In February 2014, the company stopped selling tobacco products – a move which no other major pharmaceutical retailer in the United States had undertaken. At the time, CVS Health CEO Larry Merlo had stated that “cigarettes have no place in an environment where healthcare is being delivered” (Davis, 2014). By September of that year, CVS Health had removed all tobacco products from its stores and had launched a national smoking cessation program. CVS Health estimated that existing the tobacco category would cost the company roughly USD 2 billion in annual revenues, calculated as a lot of USD 1.5 billion in sales from tobacco products specifically and another USD 500 million in additional purchases that would have been made alongside tobacco products (CVS Health, 2014). Ultimately, the CVS Health Beauty in Real Life campaign was a move intended to align company operations with the company purpose of promoting health. While good intentioned, the impact of the campaign moving forward was unclear. Would the campaign be successful in fostering good health? Was this level of transparency desirable for consumers? And how should industry competitors react? Many questions remained unanswered.

Discussion Questions • 1. What is the difference between puffery and deception? Where does the use of airbrushing in beauty product advertising fall? • 2. What would a successful outcome of the Beauty in Real Life campaign entail? • 3. Should other major drug store chains, such as Walgreens and Rite Aid, adopt similar policies?

Further Reading Brooksbank, R. (1994). The anatomy of marketing positioning strategy. Marketing Intelligence & Planning, 12(4), 10–14. Knox, S. (2004). Positioning and branding your organisation. Journal of Product & Brand Management, 13(2), 105–115. Poulter, S. (2011). Because Julia Roberts wasn’t beautiful enough: Star among celebs whose ads were banned over airbrushing. Mail Online, 27.

References BBC. (2011). Airbrushed make-up ads banned for ‘misleading’. Retrieved from http://www.bbc.com/news/ uk-14304802 CVS Health. (n.d.). CVS Beauty Mark downloadable resources. Retrieved from https://cvshealth.com/ newsroom/cvs-beauty-mark-downloadable-resources CVS Health. (2014). 2014 annual report. Retrieved from http://investors.cvshealth.com/financial-information/ annual-report-archive CVS Health. (2017a). 2017 annual report. Retrieved from http://investors.cvshealth.com/financial-information/ annual-report-archive CVS Health. (2017b). Corporate social responsibility report. Retrieved from https://cvshealth.com/sites/ default/files/2017-csr-full-report.pdf CVS Health. (2018a). Introducing the CVS Beauty Mark. Retrieved from https://cvshealth.com/about/ourofferings/cvs-pharmacy/cvs-beauty-mark CVS Health. (2018b). CVS pharmacy makes commitment to create new standards for post-production Page 8 of 9

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alterations of beauty imagery. Retrieved from https://cvshealth.com/newsroom/press-releases/cvs-pharmacymakes-commitment-create-new-standards-post-production Davis, S. (2014, February 6). CVS’s decision to dump tobacco delivers on its brand. Forbes Magazine. Retrieved from https://www.forbes.com/sites/scottdavis/2014/02/06/cvss-decision-to-dump-tobacco-deliverson-its-brand/#ffdf6674d3c4 Federal Trade Commission. (n.d.). Advertising and marketing on the internet: Rules of the road. Retrieved from https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road Grabe, S. , Ward, L. M. , & Hyde, J. S. (2008). The role of the media in body image concerns among women: A meta-analysis of experimental and correlational studies. Psychological Bulletin, 134(3), 460. IBISWorld. (2018). Industry report 44611: Pharmacies & drug stores in the US. New York, NY: IBISWorld. Lanham Act, 15 U.S.C. § 1125 (1946). Market Share Reporter. (2017). Revenues for the drug store industry, 2015. In R. S. Lazich (Ed.), Business insights: Global (27th ed.). Farmington Hills, MI: Gale. Preston, L. E. (1975). Corporation and society: The search for a paradigm. Journal of Economic Literature, 434–453. http://dx.doi.org/10.4135/9781526469281

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