Back in February of this year (2014), we wrote about the decision of pharmacy chain CVS to stop selling cigarettes – a move that erased $2 billion dollars from its annual top-line. We predicted that the courageous move would work out well for the chain, due to several reasons that you can read about here.
Though it’s early, the approach does seem to be working out for CVS. In an article written on 9/26/14, Investors Business Daily reports that competitors Walgreen and Rite Aid “have kept on ringing up cigarette sales, (but) they’ve been setting off earnings alarms.” Conversely, CVS recently boosted its profit forecast despite the huge sales hit from eliminating cigarettes. You can read the article by clicking here.
Especially in times of slow economic growth, a strategy like this that attempts to boost results by narrowing focus appears counter-intuitive. But many principles of success are not obvious.
As we write in Chapter 7 of The Accidental Marketer, bold targeting can actually grow your business. How? In a world of me-too products, concentrating on an important segment produces value propositions that are more tailored and unique than those of unfocused competitors.
This concentration not only helps you be dominant in your target segment, it tends to “magnetically” draw in business from other non-target segments. In The Accidental Marketer, we explain how this works for Apple and others.
We’ll continue to follow the CVS story and other Magnetic Effect of Focus strategies in future posts.