Why would a company stop selling somethign that brings in 2 Billion dollars a year, when they don't have to?
CVS' recent decision to stop selling tobacco products shouts out the message that their corporate purpose is not to generate revenue; their purpose is to play an important role in the delivery of healthcare to its customer. And if they fulfill that purpose well, they'll attract customers, generate revenue and make a profit.
Photo courtesy of the New York Times.
"Purpose" increases revenue and profitabilty through two sources:
(1) Customer Loyalty
I suspect a lot of non-smoking customers of Rite Aid and Walgreen will now cross the street to go to CVS instead, inspired by what they perceive to be a more genuine purpose. When a company shows a singular purpose, it tends to attact more loyal customers. And customer loyalty drives more revenue, and more profitable revenue.
(2) Employee Engagement
I also suspect that this more genuine purpose will attract and inspire a higher level of employee engagement because the new breed of employees want more than a job with a company that provides a paycheck and career path - they want to work for a company with a purpose.
According to the most recent Gallup survey on Employee Engagement, companies with higher levels of employee engagement have lower turnover, higher customer loyalty, faster revenue growth, and higher profitability (which was pointed out in this article.) Simply put, employee engagement drives growth.
Having a well-aligned, customer-focused purpose is just good business. And when the purpose is right, the customers will come, and gladly pay for it. The 2 Billion Dollars in lost revenue will surely come back - and then some.