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

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

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

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

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

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

9. Founded in 1833 Founded in 1833 Headquarters in San Francisco, CA Headquarters in San Francisco, CA Leading provider of pharmaceutical, medical supplies, care management, and health information technology products/services in the health care industry 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 World’s largest health care services company 24,500 employees 24,500 employees Revenues of nearly $70 billion for last fiscal year Revenues of nearly $70 billion for last fiscal year Ranked # 15 on Fortune 500 list Ranked # 15 on Fortune 500 list Touching the lives of more than 100 million patients each day in the health care setting Touching the lives of more than 100 million patients each day in the health care setting

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

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

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

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

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

16. 18 McKesson Provider Technologies (MPT) support centers have achieved SCP certification 18 McKesson Provider Technologies (MPT) support centers have achieved SCP certification 60 SCP certifications have successfully been achieved since January 2001 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) 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) ECSG was also the first MPT center to be audited under the “surveillance” methodology (January 2005)

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

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

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

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

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

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

24. Proactive courtesy calls were placed quarterly… Proactive courtesy calls were placed quarterly… One-dimensional methodology… One-dimensional methodology… No common approach… 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 problem The realization The realization The approach The approach Loyalty collection mechanism 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 problem The realization The realization The approach The approach Loyalty collection mechanism Loyalty collection mechanism

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

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

30. Administered by Satmetrix Administered by Satmetrix Collected monthly via case event survey Collected monthly via case event survey Survey generated approx. every 30 days Survey generated approx. every 30 days Sent to the customer contact associated with the closed support case (unless surveyed within the last 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 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 Loyalty scale and definitions Here’s how we do it Here’s how we do it Courtesy call customer segments Courtesy call customer segments Courtesy call preparation Courtesy call preparation

33. Respondents rate the loyalty questions using a 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

34. PromoterHigh scores on each of the loyalty questions. They are committed and are very likely to provide recommendations. ContentMedium to high scores on each of the loyalty questions. Although they are likely to remain loyal, your company should develop action plans so that “Content” customers become “Promoters”. DisappointedBelow average scores on each of the loyalty questions. They are dissatisfied with one component of loyalty, and could easily be lost to competitors if your company does not address their needs. LostLow scores on each of the loyalty questions. They exhibit a high level of dissatisfaction on the loyalty questions. At this point, it is better to concentrate your efforts on customers in the Disappointed or Content categories.

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

36. Monthly Satmetrix loyalty results are imported into a local database and a “customer loyalty score” is derived 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 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 Based on combined data, two priority lists (customer segments) are defined and courtesy calls begin

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

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

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

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

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

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

45. Customer Loyalty Category Customer demographics Customer contact demographics

46. A & B list template common fields FieldAuto Populated?FieldAuto Populated? Customer loyalty categoryYesTelephone numberYes Customer nameYesExtensionYes Customer #YesE-mail addressYes Time ZoneYesCase volumeNo StateYesCourtesy call commentsNo Customer support regionYesRelease levelYes Support transition dateYesRegulatory issuesNo Customer loyalty scoreYes# of office locationsNo Called in FY?YesFiscal year-endYes Date contactedNoHospital based?Yes Message left?NoChanges in contact info? No Follow-up dateNoProblem/under utilized areas No Contact nameYesInterest in participating in the beta process No TitleYes

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

48. ActionDescription No action necessary Standard courtesy call with no follow-up required. Additional follow-up required Issues encountered that require further follow-up by someone within the business unit. Immediate customer escalation Issues encountered were so severe and broad that immediate escalation to the Customer Care team was needed. Added to the team “radar screen” for further analysis Immediate escalation was not required, but the situation needs to be further evaluated to determine the best course of action. Added to the Product Support reference site funnel Customer has expressed interest or has demonstrated they would be a reference site for the Product Support organization. Customers are analyzed for reference site readiness. Lead generated A need for additional services, consulting, etc., was identified and a lead was entered.

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

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

51. Impact on least loyal customers Impact on least loyal customers (cont’d.) 25 of the 30 customers (83%) showed loyalty increases Almost a 29% increase in overall loyalty scores

52. Impact on broader customer base 3 immediate escalations to Customer Care 3 immediate escalations to Customer Care 47 customers added to the team “radar screen” for further analysis 47 customers added to the team “radar screen” for further analysis 9 of the 47 customers were escalated to the Customer Care team 9 of the 47 customers were escalated to the Customer Care team Increase in aggregate customer loyalty results month-to-month Increase in aggregate customer loyalty results month-to-month Average monthly loyalty improvement of 4.55% Average monthly loyalty improvement of 4.55%

53. Impact on broader customer base Impact on broader customer base (cont’d.) Goal: 85% within Promoter and Content categories Total # of customers with loyalty data 174188177164181201173200195 174 181177 165 188 163 181173 Pre-Implementation Post-Implementation

54. Impact on team efficiency Avg. # Courtesy Calls per Month Avg. # of Customer Contacts per Month Avg. Monthly Reach Rate Avg. Length of Call (minutes) * Avg. Cost per Call Previous Process Current Process % Difference 39.8827.7869.66%20$11.91 101.5489.2387.88%7.5$4.66 61.6661.4518.22%-12.5-$7.25 154.61%221.2%-62.5%-60.87% Difference

55. Impact on the company Courtesy call data utilized to influence future releases of our products Courtesy call data utilized to influence future releases of our products Increased the quality of dialogue with the Sales organization Increased the quality of dialogue with the Sales organization Demonstrated applicability and repeatability in other McKesson offices Demonstrated applicability and repeatability in other McKesson offices The process named as a company best practice The process named as a company best practice

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

57. 1.01:Customer Satisfaction Process 1.01:Customer Satisfaction Process 1.09: Direct Customer Feedback 1.09: Direct Customer Feedback 1.11: Customer Loyalty and Retention Programs 1.11: Customer Loyalty and Retention Programs 2.07:Technical Account Management Program 2.07:Technical Account Management Program 11.03:Customer status updates for the Sales and Services Teams 11.03:Customer status updates for the Sales and Services Teams

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

59. Assess where you are with customer loyalty Assess where you are with customer loyalty Where do you want to be? Where do you want to be? Formulate a game plan Formulate a game plan Have your team take the field! Have your team take the field! Track Track Measure Measure Revise game plan as needed Revise game plan as needed

60. Comments & Questions Follow-up comments to: Ken.Dawson@McKesson.com 1-800-800-5403 x 4324