Written by and published in Elements magazine, July 8, 2014
Most pharmacists have detailed knowledge and quick access to information about their customers’ prescription purchases. Either from memory or with a few clicks, it’s easy to retrieve the month that Mr. Jones switched statins, or the brand of fibromyalgia medication Ms. Andersen prefers.
That same kind of detail about customers’ front-end purchases, however, can be harder to track. A lack of reliable data and objective analysis has made the independent front-end shopper particularly hard to pin down.
To clear up some of the mystery, the Healthcare Distribution Management Association (HDMA) and Hamacher Resource Group conducted a study on customers shopping independent pharmacy. The study, called Independent Pharmacy Shoppers: Who, What, and Why?, analyzes information gathered from surveys of independent pharmacists, point-of-sale (POS) data, and interviews with independent pharmacy shoppers.
“This is the first time a study of this nature has been conducted in the independent pharmacy space,” said Dave Wendland, vice president of Hamacher Resource Group. “We wanted to identify who’s really shopping independent pharmacy, what they’re shopping for, and why they favor that community pharmacy experience.”
With more detailed information about their front-end shoppers on hand, Wendland sees an opportunity for independent pharmacy owners. “There isn’t a single pharmacist I’ve spoken to in recent years who isn’t working harder and making less,” Wendland said. “I think there are a lot of pharmacists who, perhaps for the first time in a long time, have looked across the counter and said, ‘Wow, I’ve got 2,000, 3,000, 4,000 square feet of space that I’ve been using as a waiting room. I’d like to get back into the retail game.”
Whether you’re ready to get back into the retail game, or you just want to bring a bit more attention to your front-end business, read on for new ideas and insight. We’ve pulled out some of the primary takeaways from the study and asked the experts at Hamacher for practical ways to make them work in any pharmacy.
The takeaway: Customers trust the expertise of pharmacists for more than prescriptions.
A significant portion of shoppers interviewed—69 percent—said they seek information on OTC items from their pharmacist the most often. That’s more than doctors, friends and family, the Internet, advertising and television combined.
“One of the things independent pharmacies can do to increase their front-end sales almost immediately is to tend to the customers already coming into the store by offering more OTC recommendations,” Wendland said. “These patients likely have needs for the items that already exist in the front of the store.”
That extra level of expertise offered by the pharmacist can help assure customers that they’re choosing the right product for them. And adding just one more item to customers’ baskets can have a big effect on profits. “If one out of 10 customers bought one more thing, the net effect on profitability is nearly double,” said Tom Boyer, director of national accounts for Hamacher.
Boyer noted that a good place to start is to link OTC recommendations to the prescription side of the business. “Whether it’s recommending a probiotic with an antibiotic or a CoQ10 with a statin drug, it’s a pretty simple add-on capability that brings value to the customer,” he said.
If time or unease interacting with the public is an issue, there are ways to recommend products to customers without saying a word.
“Add-on sales can take a lot of different paths,” Wendland said. “One is certainly the direct conversation. Another is an indirect inference that these products work. Putting signs on the shelves that identify products that are good for patients with high blood pressure or heart disease is a great opportunity to communicate silently to the customer.”
“If you can’t get out from behind the counter, put together an ‘Our Pharmacist Recommends’ display. It could be an end cap display by the pharmacy or something on the counter. The key is to put your name on the dotted line.”
While pharmacists’ recommendations carry a lot of weight with customers, an engaged staff can also be a powerful––and profitable––support to pharmacists’ expertise.
Wendland recommends store meetings to empower staff to help customers with their OTC purchases. “Better training and equipping a staff to interact with customers is paramount,” Wendland said. “And it isn’t just about having them walk over and say ‘Did you find everything you needed?’ but rather engaging that shopper in the aisles in a way that is helpful, courteous, and committed to making it a good experience.”
“Just walking the aisles with staff is very helpful,” he said. “It gives you the chance to say ‘Show me what you’ve done with this department,’ or to ask what new items they’re excited about. It will make a big difference and it doesn’t cost a penny. Plus it reinforces the importance of the front of the store to the front-end team.”
The takeaway: The more often customers come into your pharmacy, the more front-end merchandise they buy.
Frequency of pharmacy visits has a measurable influence on the volume of front-end purchases. But in-store experience can make a big difference in how often, and how long, customers stay.
Hamacher helps pharmacies create an in-store experience that keeps customers coming back through its 360-degree store assessment program. “We always start with store experience and ambiance,” Wendland said. “But I even go as far back as the parking lot and ask if people recognize the storefront as a pharmacy that’s in business and that looks welcoming.”
“I think it boils down to first impressions, both inside and out,” Boyer said. “What’s the first impression of not only your existing customers, but new customers? Is the pharmacy difficult to get around? Is the staff immediately visible and engaged? Is it vibrant; does it have energy?”
To gain insight into a customer’s first impression, Wendland recommends a simple exercise. “I like to walk through the front door with the entire staff, including the pharmacist, the front-end staff and the technicians,” he said. “I give them each a blank sheet of paper and I tell them to write down what they see in the first seven seconds of walking in the store.”
“At one pharmacy we worked with, the pharmacist was surprised that the first things his staff saw were inflatable toys, stuffed animals and greeting cards,” he said. “None of it said ‘wellness,’ ‘pharmacy’ or ‘health.’”
Creating a positive in-store experience for customers isn’t something that pharmacists have to do alone.
By using resources like planograms and in-store merchandising, it’s easier to arrange the pharmacy in a way that customers find approachable.
According to the study, the pharmacists who reported front-end growth were more likely to rely almost equally on planograms and in-store merchandisers than those who indicated that their sales were decreasing or holding steady. The implication is that stores committed to front-end growth recognize the importance of carrying the right products, in the right places, with the right pricing and promotion.
The takeaway: Customers are in and out quickly. Make that time count by cutting clutter and focusing customers’ attention on star-performers.
Customers typically spend 15 minutes or less inside the pharmacy, the study found. The challenge for pharmacy owners is to make those 15 minutes as productive as possible.
A good place to start is by taking a critical look at what’s on the shelves and deciding if it should be there. “I think retailers sometimes fall into a trap of thinking ‘I need this product’ or ‘I need that category,’” Boyer said. “The better approach is to focus on what merchandise your customers want.”
Boyer noted that there are lots of ways to find out what your customers want to buy, including using demographic analysis, sales analysis, looking at what the competition is selling, and simply talking with patients.
Another helpful approach is to look at trends in front-end items and changes in the health care marketplace, and use those to your advantage. “The good news about the Affordable Care Act is it’s going to create more patients getting scripts,” Boyer said. “It’s almost certain pharmacists are going to get more traffic in their stores, not only for scripts, but also for other health essentials.”
A growing number of patients interested in preventive health is another market force that Boyer recommends pharmacists take advantage of. “In this era of the Affordable Care Act, self-medication and wellness promotion, I think independents need to focus more on being that health care entity that they really are,” he said.
Keeping a finger to the pulse of front-end and OTC trends is a good way to anticipate patients’ needs and maximize those 15 minutes they spend in the pharmacy.
“One of the fastest growing categories of drugs in general is the sleep aids category,” Wendland said. “Another fast-growing trend right now is probiotics. I’d even add to that natural and homeopathy in general. And the independents can benefit from riding that wave.”
The trend towards natural products doesn’t necessarily mean patients have become distrustful of traditional OTC medicines, Wendland said. Rather, they are interested in bringing natural medicine into the fold.
Another area Wendland recommends pharmacists pay close attention to is Rx-OTC switches. “Independents should stay very attuned to Rx-OTC switches and not lose that business to some other channel,” Wendland said. “Three recent examples include Oxytrol®, Nasacort® and Nexium®. But there are others that appear to be poised for switch as well.”
The takeaway: Customers like choice in retailers. Capture more of their purchases with merchandising, marketing and pricing strategies.
Customers rarely shop at just one retailer. They rely on a variety of outlets for their OTC and personal care purchases, the survey found. The top two competitors for independents, according to shoppers, are mass merchants and chain drugstores.
In order to compete, Wendland and Boyer recommend pharmacists draw on some techniques used by big box retailers, while emphasizing the competitive advantages of independents.
“The shopper study revealed that there were three things that independent pharmacy patrons preferred about independent pharmacies,” Wendland said. “One was the trust and respect they had for the pharmacist. Second was the fact that it was in their community and the dollars being spent there were staying in the community. And the third was the friendliness.”
Finding ways to reinforce these positives to customers can boost loyalty and help pull more of their business from competitors. There are some things, however, that big retailers typically do better than independents. Wendland and Boyer offer a few suggestions on applying chain-like business strategies to independent pharmacy.
“Independent pharmacies should be on a managed pricing program,” Boyer said. “Especially with store brand or private label, that’s an area where we really see a missed opportunity. The basic premise of your store brand or private label retail is that it has a relationship to the comparable national brand. Some pharmacists mark up their store brand or private label from cost. That’s a no-no. Because they’re really missing a profit for themselves.”
The problem with marking up from cost boils down to customer perception, Boyer said. And it’s a case where pricing that’s too competitive can work against the sale.
“If you have a national brand at $4.99, for example, and let’s say your store brand is $1.99. That’s a pretty wide spread. So the consumer may think, ‘Is that an inferior product?’ Really that product should be priced around $3.89 or $3.99. Under a managed pricing program, you have a system in place that prices the store brand or private label to the national brand equivalent.”
Another area where independents can take a cue from big retailers is through optimization of end cap displays. “End caps are the second most-shopped area in a store, and it’s probably one of the weakest links in community pharmacy today,” Wendland said.
Boyer suggests focusing end cap displays on areas that would be of greatest interest to customers, such as disease state management, women’s health or preventive care. “Beyond just having the typical cold and allergy or vitamin display, think of areas where you could create a type of store-within-a-store along the lines of disease state management or wellness and health promotion,” he said.