How to profit on a hospital pharmacy
Be competitive with prices and communicate to clients why they should buy their pets’ drugs from you.
One of my favorite business books, “Built to Last,” compares companies that have stood the test of time with companies that have gone out of business. Among the discoveries by authors James Collins and Jerry Porras is one that may surprise you. It sums up how companies that last feel about profit:
“Profit is like oxygen, food and water for the body,” the authors write. “These things are not the point of life, but without them, there is no life. In the same way, visionary companies see profit as a residual of doing things well, not the point of being in business.”
If you agree with that perspective, then this article is for you. Doing the right things to make a profit — not doing things just to make a profit — starts with understanding your customer, because an in-house pharmacy can’t be profitable if no one buys from you.
Set Competitive Prices
What things drive purchase choice? What can market research tell us about where pet owners and other consumers buy and why they buy? How can we use that information to encourage clients to buy their pet prescriptions from us?
Market research tells us that most clients believe they will pay more to fill their pets’ prescriptions at a veterinary practice than they will if they buy online or at a store. That is why many clients ask if they can purchase heartworm and flea preventives online. This is also true of any long-term medications like arthritis pain drugs and insulin.
Consumers are price-conscious. They want the best deal. (Don’t you?) Prices are easy to compare online. That means if you want your clients to buy prescription products from you, you have to fight for their business and price “shopped” prescription items competitively.
Can you make a profit on in-house pharmacy if you price competitively? Yes, but you have to work at it differently than you have in the past. And if you are still in doubt, here are two good reasons prescription sales are worth fighting for:
Quality control. You know that the products you sell come from legitimate pharmaceutical companies and that your clients will receive the right dosage and instructions for safe administration. If anything goes wrong, like a product recall, you have the ability to contact clients and help them work through it.
Good business. Pharmacy sales represent 25 to 30 percent of revenue in most practices. Why would a practice walk away from that?
5 Key Tips
Here are five simple things that veterinarians and their teams can do to encourage clients to fill their prescriptions at the practice and keep coming back:
- Counter the Perception That Your Drugs Cost More
Make sure your clients know that your products are competitively priced, but do it the right way. What you say needs to work with the way clients think. In other words, if you do the right thing but do it in the wrong way, it still won’t work. To illustrate, here are two posted signs for you to compare and contrast:A. “Our flea and tick products are market priced. You can take them home today or buy them online from us for convenient delivery to your door.”B. “Get safe, reliable heartworm and flea protection for your dog for only $___ per month when you buy a six-month supply. Offer ends August 30. Pick yours up today!”The wording on sign B works the best because clients prefer concrete offers they can easily understand over informational content, like that shown in sign A. Sign B’s wording also invites clients to take action and pick up the product today. Finally, B’s wording adds urgency to act: Don’t miss out; this offer goes away after Aug. 30.
- Use the “80/20 Rule” and Medical Choice to Cull Pharmacy Products Down to the Critical Few
Be selective and limit your high-volume pharmacy products to only the one or two in each category that you believe are best for the pets you see. Carrying multiple products that do essentially the same thing is expensive, especially if they are “shopped” products like flea, tick and heartworm preventives that everyone carries.Stocking too many products in a category makes you look more retail than medical. It also may foster the consumer perception that you can get products like these anywhere; they are nothing more than commodities to be had for the cheapest price.What products do you believe in? Meet with your doctors and chose the one product you think is best in a category, and then make a second choice. Carry only two, if possible, to reduce costs and emphasize your medical-driven selection. Use the “80/20 rule” and focus on the few products that deliver 80 percent of your revenue.
- Go With an Online Pharmacy Ordering Option
Convenience is important to busy, time-pressed, computer-savvy consumers. More and more pet owners, especially today’s highly desirable millennial clients, are shopping online to get what they want delivered to their homes. Working with an online service can help you attract and keep market share for the growing number of clients who prefer convenient online shopping.
- Manage Inventory for Efficiency and Profit
Sound inventory cost control — inventory costs should be no more than 18 to 20 percent of revenue — is important lest your costs eat your profit. If you need help with inventory management, a consultant, accountant, software vendor or distributor should have resources and training to help you do it more profitably.
- Get the Word Out
Whether it’s competitive pricing, online prescription availability or making the case for the products you recommend, nothing will happen unless pet owners know about it.Signs posted inside offices are a good start, but most shopping today starts online. Are you there? You need to be. It is where new clients will find out about you and it is where current clients go to buy. Try these things to get the word out:
- Create a short, practical e-newsletter that’s fun to read, timely and useful. Email it to clients once a month to let them know what’s going on at your practice. Include pet trivia, stories about the people and pets that are part of your practice, and special promotions they can take advantage of that month.
- Use your practice website to spread the word. Include a “What’s New” page. Repurpose the promotions and stories from your monthly newsletter.
- Repost your stories and promotions on Facebook and Instagram. Make the story and pictures fit your monthly promotion; for example, a painful arthritic pet that is now active and playful again.
- Share the stories with your team so they can share them with clients.
Karyn Gavzer is a practice management consultant, writer and award-winning speaker. Learn more at www.karyngavzer.com.