Target Case Study:

Stay on Target™ + groceryRx™

Richard CarunchoAustin HewlettKeith KincaidAmit Ranchhod

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Agenda1.0 Background

2.0 Proposed Concept - Stay on Target™ + groceryRx™

3.0 Business Case and ROI

4.0 Closing

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BackgroundSection 1.0

3

Market Share within Retail Pharmacy

4Section 1.0 - Background

Company

2010Share of

Prescription Revenues

2011Share of

Prescription Revenues

Net Change

CVS 20.1% 20.7% 0.6

Walgreen Company 16.2% 16.5% 0.3

Wal-Mart Stores, Inc. 6.2% 6.4% 0.2

Target Corporation 1.1% 1.1% 0.0

Other Chains 14.2% 11.0% -3.2

Source: The 2010-11 Economic Report on Retail and Specialty Pharmacies

Target’s key competitors are already utilizing their expanded reach into healthcare by moving beyond traditional offerings.

5Section 1.0 - Background

Walgreens Publix Wal-Mart

Pharmacy Chat Free Medications Specialty Pharmacies

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groceryRx™

↑Grocery Sales

↑All-Store Sales

↑Market Share

Stay on Target™ ↑Medicatio

n Compliance ↑All-Store

Sales

Section 1.0 - Background

Proposed Concept groceryRx™ +

Stay on Target™ Section 2.0

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What is the Stay on Target™ Program?

Pilot: Health Education Classes

Certified pharmacist-led classes

Discuss general disease-specific information

Addresses the learning-desire of patients

Improves patient compliance and loyalty

A win-win program that creates additional opportunities for Target particularly in health management.

8Section 2.0 – Proposed Concept

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10

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What is groceryRx™?

groceryRx is a program that incentivizes patients to Stay on Target and eat healthy by discounting food items that are approved to promote positive outcomes for their specific disease state(s).

Empowers Consumers

To take a more active role in managing their health

To reach and sustain positive outcomes

To stay committed to healthy eating habits by offering discounts on specific grocery items that help optimize medication regimens

Empowers Pharmacists

To build stronger relationships with consumers

To offer suggestions on food alternatives

To educate consumers about scientifically-proven diets and potential interactions between their medications and certain foods/products

To help consumers Stay on Target®

12Section 2.0 – Proposed Concept

MedicationsGroceries

Health Education / Decision Support

Incentives / Integrated Health Continuum & Experience

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Why are programs like Stay on Target™ + groceryRx™ needed?

81% consumers see a connection between Food and Health

Many consumers use food as “preventative medicine”

14Section 2.0 – Proposed Concept

Source: IFTF National Survey 2007

Future Potential of Stay on Target™ + groceryRx™

15Section 2.0 – Proposed Concept

Target can become the primary customer touch-point to direct patients to the appropriate care channel and manage all health and wellness information, integrated with their other

health-related purchases and choices.

Disease Management

Tools

Wellness Applications

Clinical Research Management

Tools

Electronic Medical Records

Hospital or Health System

Rx and Dx Information

Primary Care Practice or Network

Purchase History Others / TBD

Television Mobile phone Computer

Key partnerships can facilitate greater consumer interaction

Health Management Platform

SWOT Analysis

16Section 2.0 – Proposed Concept

Strengths Weaknesses

• Follows Target® Core Values • Increases Medication Compliance• Increases All-Store Revenue• Builds Consumer Loyalty

• Cost of Implementation• Exclusivity• Privacy of Buying Patterns

Opportunities Threats

• Attracts New Pharmacy Patients• Brand Differentiation• More Educated & Healthy Consumers

• Competitive Market• Price Motivations in an Improved

Economy

Business Case & ROI

Section 3.0

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Estimated Program Cost

18Section 3.0 – Business Case & ROI

Estimated cost is conservative; utilization of internal Target employees and resources will decrease the overall cost of the pilot.

A. Per Diem Support

Item Hours Avg. Hourly Rate Total CostHourly Pharmacist(s) (Per Pilot Store) 108.0 40.00 4,320

3 hours per session (including pre/post prep) x 3 sessions per weekDiscount Program for groceryRx (To Be Discussed) N/A

Leverage current Target discount program; Additional % depending on Target's internal pricing strategy

Total Hourly Labor Expense     4,320

B. Capital Request

Item     Total Cost Health Education Desk / Section (Per Pilot Store) 5,000

Reconfiguration of available space into a health education desk/areaWebsite and Mobile App Development (Fixed) 15,000

Leverage internal Target IT resources(Source: Interview with IT Solutions Development Executive, January 9, 2013)

Capital Request - Subtotal     20,000

TOTAL COST (3-month pilot per pilot store)     $24,320

Estimated Program Benefit (Quantifiable)

19Section 3.0 – Business Case & ROI

Estimated quantified benefit is conservative; overall ROI can be further augmented via private and public grant opportunities as well as partnerships with insurance and other

private organizations.

Opportunity     Total RevenueIncrease sales per transaction (10%) + Penetration Rate (10%)(Based on increased purchase frequency and increased purchase of higher priced items) $55,921 Increase new customers and/or frequency of visits due to new value-added program TBD

TOTAL REVENUE (3-month pilot per pilot store)     $55,921

ASSUMPTIONS a) 2010 Median weekly sales per supermarket ($466,011) b) 2010 Sales per customer transaction ($26.78) c) 2010 Average number of customers per week (17,401 per supermarket) d) 33% All customers 'strongly agree' that they actively look for healthy food and beverages e) 30% Average price premium of organic fruit and vegetable (over conventional products)

Sourcea, b, c: fmi.org; Accessed January 9, 2013d: IFTF Future of Health and Food Retailing, 2008 e: CBS News, 2009

Other Program Benefits (Non-Quantifiable)

Address an increasing concern over customer acquisition and retention

Offer a service focused on reducing the spiraling health costs that burden customers and payers

Capture a growing segment of the population interested in healthy lifestyles

Offer this program to Target employees in order to reduce the cost of insurance claims and improve employee productivity

Create partnership opportunities with other organizations

20Section 3.0 – Business Case & ROI

ClosingSection 4.0

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Target is positioned to add to the provision of care in two of the three areas currently served by primary care physicians.

22Section 4.0 - Closing

Wellness Examinations

Primary Care

Physician Practice HAND OFFHAND OFF

• Prescription Management

• Food Purchase/Intake Advice

Oversight of Chronic Disease Management & Prevention via Health

Education

Practice of Medicine

Target is well-positioned to provide these services through its health education and effectively leveraging

its access to key consumer information/data.Stay on Target® SeminarsgroceryRx™

As healthcare becomes more patient-centric, companies that have strong connections with consumers will play a vital role.

23Section 4.0 - Closing

Leverage pharmacists that are “remarkably underutilized given their education, training and closeness to the community…”

Target’s access to millions of customers can be leveraged to create greater value by vertically integrating its assets.

• Strategically emphasize food and household essentials

• Brand strategy focusing on ‘value’ – “expect more, pay less.”

• Healthcare market growth • Access to prescription, grocery, and general

consumer data

Unique opportunity to be the primary customer touch-point for wellness and disease management education.

Questions?

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References Ammerman, Alice, DrPH, RD, Michael Pignone, MD, MPH, Louise Fernandez,

PA-C, RD, MPH, Kathleen Lohr, PhD, Alissa Driscoll Jacobs, MS, RD, Carla Nester, MD, Tracy Orleans, PhD, Nola Pender, PhD, Steven Woolf, MD, MPH, Sonya F. Sutton, BSPH, Linda J. Lux, MPA, and Lynn Whitener, DrPH, MSLS. "Counseling to Promote a Healthy Diet." Ncbi.nlm.nih.gov. National Center for Biotechnology Information, 30 Apr. 2002. Web. 1 Nov. 2012. http://www.ncbi.nlm.nih.gov.lp.hscl.ufl.edu/books/NBK42768/.

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"The Future of Health and Wellness in Food Retailing Map & Memo." Institute For The Future. Iftf.org, 17 Oct. 2008. Web. 6 Nov. 2012. http://member.iftf.org/node/2134.

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"Information for Pharmacists | CCGP." Information for Pharmacists | CCGP. Commission for Certification in Geriatric Pharmacy, 15 Nov. 2012. Web. 15 Nov. 2012. http://www.ccgp.org/boardcertification/pharmacy.

Lamberts, Egbert J., PharmD, MBA, Marcel L. Bouvy, PharmD, PhD, and Rolftive P. Van Hulten, PharmD, PhD. "The Role of the Community Pharmacist in Fulfilling Information Needs of Patients Starting Oral Antidiabetics." Research in Social and Administrative Pharmacy 6.4 (2010): 354-64. Print.

Longley, Robert. "Census Offers Statistics on Older Americans." About.com US Government Info. About.com, 15 Nov. 2012. Web. 15 Nov. 2012. http://usgovinfo.about.com/od/censusandstatistics/a/olderstats.htm.

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References (Cont’d.) Network, CIO. "The Big Value In Big Data: Seeing Customer Buying

Patterns." Forbes. Forbes Magazine, 25 Sept. 2012. Web. 17 Nov. 2012. http://www.forbes.com/sites/ciocentral/2012/09/25/the-big-value-in-big-data-seeing-customer-buying-patterns/2/.

Saramunee, Kritsanee, MSc, Janet Krska, PhD, Adam Mackridge, PhD, Jacqueline Richards, MA, Siritree Suttajit, PhD, and Penelope Phillips-Howard, PhD. "How to Enhance Public Health Service Utilization in Community Pharmacy?: General Public and Health Providers' Perspectives." Research in Social and Administrative Pharmacy 8.5 (2012): 355-486. Print.

Tordoff, June, Shih Yen Chang, and Pauline T. Norris. "Community Pharmacists' Perceptions of Services That Benefit Older People in New Zealand." International Journal of Clinical Pharmacy 11096-012-9612-8 34.2 (2012): 342-50. Springerlink.com. Springer Link, 11 Feb. 2012. Web. 10 Nov. 2012.

"Trends in Health Care Costs and Spending." The Henry J. Kaiser Family Foundation. Kff.org, 1 Sept. 2007. Web. 10 Nov. 2012.

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