There's money on the table worth £73,800 - grab it
The size of the potential opportunity outside of dispensing could surprise you, suggests Retail Performance Specialists (RPS Ltd)
We work with independent pharmacies all over the UK to develop total business performance in an everchanging landscape. We’ve started to notice some trends.
One thing we notice within the independent pharmacy sector, when analysing the difference in total business performance, is that the spread of services sold, and retail sales achieved, is much greater than the spread of scripts dispensed. For example, our research shows that retail sales range from five to 58 per cent of turnover. In one town with three pharmacies that all had similar script numbers, retail sales ranged from eight to 32 per cent of turnover.
It’s easy to see that the opportunity to improve services within retail is huge.
Two years ago, retail sales were 15 per cent of the total turnover for independent pharmacies, but this has now declined to 10 per cent. Contrast this with the multiples, who have a much higher proportion of their wealth creation coming from retail. In fact, 36 per cent of all sales come from retail and the gross profit is approximately 30 per cent higher.
Looking at prescriptions statistics, pharmacies are now dispensing three per cent more than a year ago, with EPS accounting for 35 per cent of the total. All this is against a backdrop of funding reductions, which have resulted in independent pharmacies losing an average of £17,000 per annum.
Amid this uncertainty and serious concern, there still lies opportunity. To put this into perspective: if one in four customers bought one extra item at £2, this could be worth on average £23,000. If one in six customers accessed one of your services, costing an average of £8, that could generate about £48,000. And if your MUR or NMS average went from 200 to 300, that could add £2,800 to your income. Amazingly, when you add up all the money sitting at the table, it could be about £73,800. Also consider increasing the number of patients registered for EPS? This gives you the opportunity to build loyal customers who use you to ‘top up’ shop when they visit; not just to pick up a script. This further increases your chance of achieving the extra £73,800.
Try this fun test of your observation
Below are two videos to watch to test your observation skills.
Video 1: https://tinyurl.com/oty2umt (Skip the advertisement, and if you have seen this video before, go to video 2)
Video 2: https://tinyurl.com/kny888b (Rewind to be beginning if needed)
What’s the relevance of both of these videos to community pharmacy?
We see what we are looking for. It’s human nature. We need to reprogramme our thinking because our beliefs and preconceived ideas can sometimes hinder us. We see what we have always seen instead of the opportunity that is right in front of us. Changing your mindset about what it is possible to achieve – without the baggage that may be holding your business development back – is an essential step to driving your business forward.
This is all money on the table, because most independent pharmacies already stock the products their customers buy. The problem is they just don’t buy them from you. An old boss and mentor of mine used to ask me, “Do you sell that, or just stock it?” and often quickly followed it with, “Ask the person you bought it from. They know how to sell it.” A bit stinging, but it certainly made me open my eyes.
The multiples have grown successfully because of a combination of factors, including:
- Efficiency of the supply chain – never being out of stock
- Buying power – margin management and product mix
- Retail impact – contribution to the bottom line.
We know that the number of prescriptions is growing at about three or four per cent, we know that funding is reducing profitability, and we also know there are many opportunities on the table. There is no doubt that missing these opportunities is costing pharmacy businesses money – that could help fill the financial gaps created by funding cuts and help sustain and grow the business.
The opportunity is there to become someone’s pharmacy of choice. Earning this status means people have chosen your business as the pharmacy that they prefer. This is about how you make them feel. It’s about understanding, helping and supporting them when they need it. It’s about treating the person, not the condition. So, it’s time to make sure that you grasp this opportunity. Why would you not?
Eyes on the prize
- If every third customer buys one more thing, that will be worth £12,000 to £20,000 per year
- If one in five people starts using you for their top-up shopping and buys four or five items, that will be worth another £15,000 to £25,000 per year.
The answer may be quite fundamental. Often, we do not take the money on the table simply because we: l Don’t notice it l Don’t think it’s worth it l Justify failure – we think we can’t compete, or we don’t have the right customers. There isn’t a silver bullet. Commercial thinking is about identifying all opportunities, prioritising them, and moving all of them a little.
Then, cumulatively, they become worth a lot. Elite athletes and sports teams also look to gain advantages wherever they can, whether it’s the clothes they wear, the training they do, or their mental preparation. Every little positive step contributes to overall success. All sports people are looking for ways to improve, to stay ahead of the competition, to win. Do you want to win? You need to look at your business from a commercial point of view.
We must see the opportunities and not be constrained by our own view of the world. Renowned psychologist Abraham Maslow coined the phrase “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail”. Translating this into pharmacy terms, if we perceive our main tool as dispensing, then everything is a prescription. But there are more tools and they could grow your business by more than 30 per cent.
A 30% increase ready to take
Having worked with many independent pharmacists, we see that a lot of commercial opportunities are there on the table and are easy to capture. We developed the concept of ‘one more thing’, which we explained in our last article in P3. This concept has been used successfully by many pharmacies we work with on the Pharmacy Growth Programme (PGP).
In short, it’s about considering the following.
What would it be worth:
- If every third patient bought one more thing?
- If every fifth patient took up one of your services?
- If every commissioned or private service was offered to one more customer? With apologies to Rudyard Kipling, “yours is the earth and everything that’s in it”. That’s the opportunity that awaits.
Take the test - act now
There is a simple way to start the process.
Involve everyone in the whole pharmacy team: pharmacist, dispensing technicians, counter staff, delivery driver and administration staff.
- Have a team huddle in week 1 to discuss this initiative. Explain the reasons for it
- Ask everyone watch the first video (left) to test their observation skills
- Encourage everyone to make a list of the opportunities and estimate what it would be worth to the business
- Discuss and agree how to capitalise on the opportunity with the team
- Allow the team to decide which opportunity to adopt and implement
- Set a target, and at the end of the week see what you have achieved
- In week 2, watch the second video (left)
- Repeat the steps above to identify new opportunities.
Our Pharmacy Growth Programme combines business knowledge with an intimate understanding of the marketplace and a team with decades of experience at driving retail growth. We know the programme works because we have helped many pharmacists like you and have a proven track record. Results range from 15 per cent to 40 per cent increases in income. So, why not get in touch with us and give it a go? What’s the worst that could happen? If you want to take the opportunities that are on the table, we will support you every step of the way and ensure your business not only survives, but thrives.
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