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What’s in a Name: CVS-Aetna Acquisition Brand Strategy

Posted by Amy Modini

Tue, Mar 20, 2018

merging.jpg

Earlier this month, shareholders approved the $69 billion CVS-Aetna acquisition, marking one step closer to what would be the largest health insurance deal in history—far exceeding Express Scripts’ 2012 acquisition of Medco Health and  the CVS-Caremark Rx deal of 2006.

The CVS-Aetna announcement could dramatically reshape the healthcare industry.

From a brand strategy perspective, this acquisition is interesting because it involves two distinguished brands in the healthcare space—CVS is the country’s largest pharmacy while Aetna is the nation’s third largest healthcare provider.

Two powerful brands coming together

There are many layers to mergers and acquisitions (M&A), but developing a sound brand strategy is one of the most critical components of any agreement—especially when it involves two mega brands like CVS and Aetna.

Aligning on a brand strategy is as important as sorting out financials, operations, logistics, and everything else that comes with the complexities of this kind of deal.

The tricky part is there’s no prescribed framework for the “perfect” M&A brand strategy. How CVS and Aetna plan to proceed is still unclear—whether they remain separate, combine names, or land somewhere in the middle.

But there are several best practices to consider when developing an M&A brand strategy.

Brand strategy must match the business strategy

Why are you merging/acquiring? Is it to expand a geographical footprint? To fill a product or service gap? Whatever the reason, the “why” (e.g., the business strategy) MUST inform your brand strategy.

Dig into each brand to identify what the intrinsic qualities are and let those distinct value propositions guide your strategy.

Account for your audience(s)

Internal and external brand communications must align and support the overall brand strategy and should be tailored to each brand’s audience(s).

In the CVS and Aetna case, both brands touch many constituents—patients, employers, physicians, etc. The brand strategy must account for all these touchpoints and create messaging and experiences that meet each group’s specific expectations and needs.

Bring everyone to the table

M&A is a unique opportunity for brands to refresh their image. However, developing a lasting strategy should include employee input and buy-in from the top down.

Be transparent about the chosen brand path—ideally employees should be privy to changes ahead of time so they can begin to internalize the new brand promise.

Especially in the CVS-Aetna case, employees on the frontline who interact with patients and customers every day need to understand the chosen brand path to ensure a smooth and successful branding transition.

The branding gist

Whether it’s a $69 billion acquisition or the merging of two “mom and pop” shops, building a brand strategy is an integral piece of the M&A puzzle.

There’s no “right” way to approach this, but keeping in mind the business strategy, impacted audiences, and employee input will help make the development and implementation of an effective M&A brand strategy much smoother.

Topics: brand health and positioning, healthcare research, insurance research, health insurance research

CMB Researcher in Residence: UPMC Health Plan's Jim Villella

Posted by Amy Modini

Tue, Apr 26, 2016

jim_upmc2.pngUniversity of Pittsburgh Medical Center Health Plan’s Director of Market Intelligence, Jim Villella, sat down with CMB’s Amy Modini to discuss the role of insights and market research at UPMC and the health insurance industry at large.

AM: Tell us a bit about your role as Director of Market Intelligence at University of Pittsburgh Medical Center (UPMC) Health Plan.

JV: I oversee all external and internal intelligence within the health insurance industry in our market. Our Insurance Services Division (ISD) includes a lot more than just health insurance. Within the ISD, there are health insurance products as well as a suite of workplace productivity solutions under the WorkPartners brand.  WorkPartners offers worker’s compensation insurance, employee assistance programs, wellness programs, and some business productivity solutions, such as FMLA and short-term disability. Primary research is obviously one of the services that my team offers to all of UPMC ISD. This research is often an assessment of where we are compared to our competitors as well as opinions and attitudes of our current members. We also manage our marketing relational database, which is built at the consumer and employer level, so that we can do targeted marketing campaigns. Overall, it’s a pretty broad list of responsibilities.

AM: It certainly is! As we know, it’s been a disruptive few years for the healthcare industry. Looking ahead, what challenges and opportunities do you see coming?

JV: One of the biggest challenges for many health insurance companies who don’t have a large direct-to-consumer business sector is the end of the extension of the allowance for small groups under 50 to keep the plans they had prior to the implementation of the ACA. When the allowance goes away in 2017, those groups are going to have to move to community-rated insurance plans. Many of those groups will have to evaluate their situation when rates change in 2018, so that’s a challenge that insurers will face: transitioning what happens with those groups. The insurance companies will have to meet that challenge and ensure that they continue to insure those same people, whether it’s through a group or through the individual process. 

There are a lot of constraints on insurance companies with the Affordable Care Act (ACA). There are limitations on profitability and also on mitigating risk, so it’s a little bit harder to make a profit. And, as you can see in some markets, some of the more profit-driven public entities have chosen to take themselves out of the individual market in many areas because they’re finding it hard to have a viable business model in the current environment. There’s a lot of uncertainty in the market about who’s going to be there to provide the insurance solutions that are part of the ACA. 

AM: Do you think being part of an integrated system puts UPMC in a different position than other carriers that are just health insurance companies?

JV: Yes, I do. Because we’re an integrated delivery system, we have a lot more dialogue between the provider and the payer, which gives us more opportunities to intervene and identify solutions that will help people get better and stay healthy. Different payment models also emerge out of this position, which allows us to move away from a situation in which someone is paying providers for a service and move toward compensating them based on the effectiveness of the care. That’s much easier to do in an integrated system where we have direct relationships with a big portion of our provider-base. 

AM: What role do you believe healthcare insights, in particular, could play with some of the challenges and changes in the industry you mentioned?

JV: At the end of the day, much of what we deliver in the insurance business is somewhat commoditized. You have to offer things, in addition to paying claims and providing access to doctors and hospitals that members want, so that they remain with you when they have the opportunity to evaluate options in open enrollment periods. Research helps us immensely in identifying those unmet needs or identifying how well we can meet their needs that go beyond the basics of health insurance. 

Carriers have to move toward having one-on-one relationships between themselves and the individuals that they cover. In the past, carriers have had more of a relationship with a group that covers hundreds or thousands of people at a time, so the model is narrowing to an individual-level, much like auto insurance. You don’t really have employer-sponsored auto insurance. Every one of those carriers is dealing with each individual person one at a time, and that’s what the future of health insurance appears to be moving rapidly toward. The employer model is still the foundation for most U.S. health care, but if the health insurance exchanges continue to be successful and maintain competition and lower premiums—depending on who’s elected—it could continue to become more of an accepted way for Americans to obtain health insurance. 

AM: Let’s shift gears a little bit. Let’s talk about the market share analysis work we’ve done with you over the past couple of years. Can you talk a little bit about this work, and why it’s so important now?

JV: The rapid change in market share, year over year, is something we need to assess as quickly as possible, and the secondary sources we rely on to give us our definitive market share take several months to report. So, when we want to know in January what the market share shift has been, waiting for our secondary sources until July is simply too long. We partner with CMB so we can get a very quick, but accurate, assessment of how much the share has changed. The change in market share used to move at a glacial pace, but now it changes several percentage points for some carriers in a single year. We need to know about those changes as quickly as possible. We also use that study to assess perceptions and opinions of brands as well as what’s important to decision-makers, which helps us do some strategic planning for marketing purposes. 

AM: You’ve already touched on this a little bit, but how does this work play into your larger insights strategy?

JV: It helps us position ourselves and try to identify which areas of the geography we’re in that we could potentially focus on more. We get a more robust view of that at the county level from our secondary source in July. If we were to find opportunities or weaknesses in that share data—such as gaining or losing to a particular carrier in a particular region—we could react to that. It also helps us understand where the national competitors have gained traction—which ones are winning out and where. We need to be able to respond and understand who our competitors are as quickly as possible. 

AM: As you think about the next challenges for your organization, tell us what you look for in an insights partner.

JV: Several things:

  • Experience with our industry is helpful if not essential. Health insurance is a very complicated industry. I think it’s very difficult to partner with a research vendor that has no familiarity with the business. Even the terminology is difficult, so it would be hard to have to explain things about the industry over and over again.
  • A partner that does independent preparation and doesn’t rely exclusively on us to provide everything because they’ve done their homework.
  • Good problem-solving skills. Marketing and market research is basically just problem solving, and that manifests itself in even trying to design a research study. We need a partner that’s constantly asking: what’s the best way to do this?
  • Creative sample design. We sometimes have difficulty reaching certain audiences because we’re limited by our geographic footprint in western PA. So, finding a partner that can suggest alternatives for reliable ways of getting the same level of information is a huge component of what we need in a partner.
  • Visual interpretation of data is another one. That’s an art and a science, and partners who know how to show you information in a visual way are extremely helpful because that’s usually how it gets delivered to senior management, which is much easier to access than large, detailed crosstabs. 

These are all things we have working with you, and of course, we’ve had many years working together, so you know us very well and that familiarity is very helpful.

Got a market research question that you're just dying to have answered? Ask our Chief Methodologist and VP of Advanced Analytics, and he might tackle your question in his next blog!

Ask Dr. Jay! 

Topics: healthcare research, health insurance research, Researchers in Residence

South Street Strategy Guest Blog: Healthcare Reform: Who's Looking out for the Small Guy?

Posted by Rachel Corn

Tue, Jul 30, 2013

 

stethoscopeIn early 2012 we did some research on healthcare reform predictions. At the time, there was a pretty strong consensus that large groups, most of which were already insured, would experience little impact. The uncertainty lay around small businesses (<100 employees) offer rates: the Robert Wood Johnson Foundation predicted pretty much neutral effect, but RAND predicted an overall increase in offerings. So where do we stand now?We have found most analysts are pretty shy when it comes to forecasting new numbers. For the overall market (all sizes) the International Foundation of Employee Benefit Plans (IFEBP) reports that 94% of employers are definitely or very likely to continue employer-sponsored health care. That’s a pretty good indication of no major drop outs compared to 2012, when only 46% were certain that they would continue sponsorship.

But expanded health insurance coverage will come at a cost, and small employers particularly are vulnerable. As a result, they are implementing cost control tactics: encouraging healthy behaviors and wise usage that reduces costs, entering private health exchanges, offering self-insurance for small groups, and reducing the number of full timers.

For insurance companies, reform opens up new opportunities to serve the small business market. Small businesses today are treated as a uniform group with similar needs. As reform unfolds, the market will fragment into: those who truly believe in providing insurance to their employees and will continue to do so, those who cannot afford to pay increased premiums but are still interested, and those who simply opt to exit the market. Smart and creative insurers will look for ways to serve the middle segment with unique offerings, whether those are self-insurance, stripped down plans, voluntary products, or others. The insurers that will move first by matching deep customer knowledge with creativity and innovation will have a leg up in this rapidly evolving market.

Rachel is a Director at  South Street Strategy Group, she specializes in finding growth opportunities in new market segments, new products and businesses and innovative business models.

South Street Strategy Group, an independent sister company of Chadwick Martin South Street Strategy GroupBailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

 

Topics: South Street Strategy Group, strategy consulting, healthcare research, health insurance research

Myth-Busting Customer Centricity In Healthcare

Posted by Jennifer von Briesen

Tue, Jul 16, 2013

Target consumer or accountHealthcare in the US has been a hot media topic, and the Affordable Care Act’s next key provision that goes into effect on October 1 will bring about profound change in the health insurance industry. Consumers looking to buy individual health insurance will be able to enroll in subsidized plans offered through state-based exchanges with coverage beginning in January 2014.Regardless of the politics and adoption hurdles surrounding the subject, it’s crystal clear that health insurers will need to change the way they approach the market in the coming years. Challenging as it may be, this change represents opportunity as well. Not only will this regulation open up channels to sell direct to new customer segments that have previously been underserved or never served, but the shift to a more retail-oriented business model will push customer-centricity to the forefront of health insurers’ strategy.

So, what does customer centricity actually mean for insurers? It’s not something I have hard and fast answers to yet, but we’re collaborating with our clients to help define a path forward. Here are my top-level thoughts on some of the myths that need to be put to rest in order to build a successful customer strategy in the space:

MYTH: The consumer matters more than the ecosystem.
FACT: Up to now, consumers have generally been “extended stakeholders” in the health insurance ecosystem, and they are definitely an audience that insurers should be learning about and listening to more given the change on the horizon. However, serving the consumer well means also understanding how other players—employers, brokers and providers—are preparing for change. Be careful not to develop blind spots toward traditional stakeholders.

MYTH: If you build technology, the customers will come.
FACT: No doubt today’s consumers are open to social tools, apps and other tech solutions that will help them learn about and interact with companies. But in order for a new technology to really matter to consumers, it has to solve a pain point.  Without a deep understanding of what customers need, and a willingness to address root-level issues (such as consumer trust), a new technology is just a shiny object.

MYTH: You’ve got the right data…and it’s Big.
FACT: Insurers have a lot of data. But it’s primarily based on claims and transactional data, with very little gleaned directly from healthcare consumers themselves about wants, needs, and interaction pain points. The industry’s legacy of being claim-oriented continues to drive consumer dissatisfaction and distrust, so it’s not the ideal source for data that will build customer intimacy.

What other myths need to be busted in order for insurers to be truly customer centric? We’d love to hear from you and promise to share our thinking as it evolves.

Jennifer is a Director at  South Street Strategy Group. She recently received the 2013 “Member of the Year” award by the Association for Strategic Planning (ASP), the preeminent professional association for those engaged in strategic thinking, planning and action.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

Topics: South Street Strategy Group, strategy consulting, healthcare research, health insurance research, big data, customer experience and loyalty

Key Questions for Insurers in Wake of Supreme Court Decision

Posted by Amy Modini

Mon, Jul 02, 2012

Obamacare and health insurersAlong with millions of Americans-patients,doctors,lawyers and, politicians-health insurers also waited with bated breath for last week's Supreme Court’s ruling on health reform. Now that the Supreme Court has upheld the basic provisions of the law, health insurers face the challenge of understanding how traditional markets will be impacted by the individual mandate and implementation of health insurance exchanges.  

Even with the ruling, there is still much that remains unknown about the law’s impact, and significant uncertainty about how the law will be enforced in each state.  But there are still critical questions insurers must consider now as they adapt to a new era in health reform, including:
  • How will this ruling and the establishment of exchanges impact company revenue and profitability?  Are there ways to take advantage of this ruling and increase company margins and revenues?

  • How do we compete effectively in an open exchange?  If price is the key criteria to consumer decision making, is there a way to minimize its influence and yet be successful?

  • Is there a need to re-examine the existing client base beyond the traditional demographics? Will an alternate classification help create a competitive advantage?

  • How do we move beyond the traditional employer sponsored channel?  How can we take advantage of technological shifts?

  • How relevant is the present communication strategy? Is there an opportunity to approach the future in a new, cohesive way that complements the product and distribution strategy?

Addressing these questions and mitigating the coming challenges will not be easy; surviving and flourishing in a changing market requires a truly new and innovative approach. We believe insurers must:

  • Reconsider how they approach product development – the insurers who will be successful in this new reality will be those who are able and willing to stretch boundaries of what insurance products look like to meet the needs of the customers, including offering supplemental insurance, wellness programs, incentives and monetary gains for meeting health goals, etc.

  • Go beyond traditional ways of looking at the market – motivations, attitudes, goals, and behaviors will become as, if not more, important to understanding and effectively messaging to insurance customers. Alternate classification of consumers could help insurance companies underwrite consumers in a more effective and efficient manner.  This could be especially advantageous for smaller insurance companies that cannot compete solely on price; perhaps it is time to start looking at a niche strategy. For a more detailed look at alternative market segmentation for health insurance, read our white paper: A New Approach to Segmentation for the Changing Insurance Industry.

  • Embrace the leaps in technology – insurers must explore the possibility of reaching consumers directly (internet, smartphone, etc.), and simplifying the purchasing process.  A simple product lineup with an easy buying process can go a long way in increasing an insurer’s favorability rating.

  • Consider a new messaging strategy – the health industry’s transition is a great time to consider resetting the existing image. Great products and great service need great messaging.  What are the goals people are trying to achieve? What is it that truly motivates them? What is it that truly sets us apart and does it add value to our customers’ lives? Is there a need to have specific messages to specific groups of consumers? Think about the answers to these questions. Insurers in the end must be able to convince consumers that they are partners in this journey and are mutually dependent on each other’s success.

Amidst all the uncertainty insurers are facing, we believe that to mitigate the uncertainties of the reform landscape, insurers will have to go back to the drawing board, rethink how they look at the market, engage in product development and address the fundamental goals of their customers. Insurers must recognize and leverage core capabilities that others cannot replicate. Competitive advantages stem from not one but from a series of strategic decisions. The correct mix of product, distribution, message and market coupled with inherent operational strengths (e.g., knowledge of a local market, ability to underwrite at low costs,  relationships with existing customers) can set insurers apart from competition and pave the way to long term success.

Posted by Amy Modini. Amy is an Account Director for CMB’s Healthcare Practice, when she gets the time she loves going to the beach with her two kids.

Topics: healthcare research, product development, health insurance research, market strategy and segmentation