How Loyal are Your Customers…Really?

1. How Loyal are Your Customers…Really? Ken Dawson Director, Product Support McKesson – Extended Care Solutions Group Service Strategies Certification Showcase June 23, 2005 Boston, MA.

2. 2004 World Series Champions

3. Agenda • Who is McKesson? • SCP certification statistics • Customer loyalty analysis – the fundamentals • How was life before the new way?

4. Agenda (cont’d.) • The problem • The realization • The approach • Loyalty collection mechanism

5. Agenda (cont’d.) • Loyalty scale and definitions • Here’s how we do it • Courtesy call customer segments • Courtesy call preparation

6. Agenda (cont’d.) • Courtesy call possible actions • So that’s the process…what were the results? • Applicability to the SCP program • Recommendations

7. Agenda (cont’d.) • Comments & Questions

8. Who is McKesson? • SCP certification statistics • Customer loyalty analysis – the fundamentals • How was life before the new way?

9. Founded in 1833 • Headquarters in San Francisco, CA • Leading provider of pharmaceutical, medical supplies, care management, and health information technology products/services in the health care industry

10. World’s largest health care services company • 24,500 employees • Revenues of nearly $70 billion for last fiscal year • Ranked # 15 on Fortune 500 list • Touching the lives of more than 100 million patients each day in the health care setting

11. McKesson’s customer demographics • 50,000 healthcare facilities & physician practices • 5,000 hospitals • 25,000 retail pharmacies • 200,000 physicians • 10,000 long-term care sites • 600 healthcare payor organizations

12. McKesson business divisions • McKesson Pharmaceutical Solutions • San Francisco, CA • McKesson Provider Technologies • Alpharetta, GA • McKesson Medical-Surgical Solutions • Richmond, VA • McKesson Customer and Financial Operations • Carrollton, TX

13. Extended Care Solutions Group profile • Located in Springfield, MO • Industry: Healthcare Information Technology – Home Healthcare • Revenues: $55 million • 240 employees – 71 support employees • Product suite: • Web Physician Portal • Decision Support • Telehealth • Hospice • PDA point of care • Intake/patient registration • Financial operations • Patient and staff scheduling • Clinical management • Point of care • Telephony

14. Extended Care Solutions Group profile • 380 customers • 233 hospital-based • 147 stand alone • 210 hospice customers

15. Who is McKesson? • SCP certification statistics • Customer loyalty analysis – the fundamentals • How was life before the new way?

16. 18 McKesson Provider Technologies (MPT) support centers have achieved SCP certification • 60 SCP certifications have successfully been achieved since January 2001

17. Extended Care Solutions Group (ECSG) was the first MPT support center to achieve certification (certified in 2001, 2002, 2003, 2004 & 2005) • ECSG was also the first MPT center to be audited under the “surveillance” methodology (January 2005)

18. Who is McKesson? • SCP certification statistics • Customer loyalty analysis – the fundamentals • How was life before the new way?

19. Get past the idea that customer “satisfaction” is the same as customer “loyalty” • A customer loyalty collection mechanism must be in place • Based on analysis of collected loyalty data, develop a set of goals

20. Develop various measurement tools to gauge progress toward goals • Establish a mechanism to proactively communicate with your customer base

21. Who is McKesson? • SCP certification statistics • Customer loyalty analysis – the fundamentals • How was life before the new way?

22. Based on customer quarterly case volumes • Proactive courtesy calls were placed to customers who called the most and least each quarter • Results were recorded and appropriate action taken

23. The problem • The realization • The approach • Loyalty collection mechanism

24. Proactive courtesy calls were placed quarterly… • One-dimensional methodology… • No common approach… We were missing interaction opportunities due to the lack of frequency Only 1 factor considered “Individual” approach versus a common “Team” approach

25. The problem • The realization • The approach • Loyalty collection mechanism

26. The methodology needed to be expanded to include more business relationship considerations and allow the team to make more courtesy calls… but how?

27. The problem • The realization • The approach • Loyalty collection mechanism

28. Proactive courtesy calls are based on the combination of: • Monthly customer loyalty results and; • Monthly customer accounts receivable amounts • Two customer “segments” were developed based on loyalty and A/R data • Courtesy call “templates” were developed to establish consistency

29. The problem • The realization • The approach • Loyalty collection mechanism

30. Administered by Satmetrix • Collected monthly via case event survey • Survey generated approx. every 30 days • Sent to the customer contact associated with the closed support case (unless surveyed within the last 30 days) • First seven questions are specific to the support case itself and last three are specific to loyalty to McKesson

31. Thinking about the company in general, please rate your overall experience with McKesson. 1. Satisfaction with McKesson as a company. 2. If you had the opportunity, indicate the likelihood of recommending McKesson to a colleague or associate during the next 12 months. 3. If you were making a buying decision, indicate the likelihood to continue purchasing McKesson products.

32. Loyalty scale and definitions • Here’s how we do it • Courtesy call customer segments • Courtesy call preparation

33. Respondents rate the loyalty questions using a 7-point scale: 7: Extremely satisfied or extremely likely 6: Satisfied or likely 5: Somewhat satisfied or somewhat likely 4: Neutral 3: Somewhat dissatisfied or somewhat unlikely 2: Dissatisfied or unlikely 1: Extremely dissatisfied or extremely unlikely

35. Loyalty scale and definitions • Here’s how we do it • Courtesy call customer segments • Courtesy call preparation

36. Monthly Satmetrix loyalty results are imported into a local database and a “customer loyalty score” is derived • For ECSG customers, their loyalty data is combined with their A/R balances that are 61 – 90 or > 90 days past due for the same month • Based on combined data, two priority lists (customer segments) are defined and courtesy calls begin

37. Loyalty scale and definitions • Here’s how we do it • Courtesy call customer segments • Courtesy call preparation

38. Courtesy Call A-List • Top priority for the monthly courtesy calls • Customers that have any amount of A/R past 61 days • Two sort levels: 1st level: Customer loyalty category, low to high (Lost, Disappointed, Content, Promoter) 2nd level: Total amount of A/R past 61 days, greatest to least amount

40. Courtesy Call B-List • Second priority for the monthly courtesy calls • Customers that DO NOT have any amount of A/R past 61 days • Two sort levels: 1st level: Customer loyalty category, low to high (Lost, Disappointed, Content, Promoter) 2nd level: Customer loyalty score, low to high

42. Loyalty scale and definitions • Here’s how we do it • Courtesy call customer segments • Courtesy call preparation

43. Courtesy call A & B lists are printed and distributed • Courtesy call A & B list “templates” are printed and distributed

44. Customer Loyalty Category Customer A/R information Customer demographics Customer contact demographics

45. Customer Loyalty Category Customer contact demographics Customer demographics

46. A & B list template common fields

47. Courtesy call possible actions • So that’s the process…what were the results? • Applicability to the SCP program • Recommendations

49. Courtesy call possible actions • So that’s the process…what were the results? • Applicability to the SCP program • Recommendations

50. Impact on least loyal customers • Least loyal customers were identified • Six-month trial was implemented • The results?