The ‘P’ in Pharmacy – It’s about Professionalism, not Price
2019 is an opportune time to consider your professional services offering and the value to pharmacy and customer alike.
How can professional services impact my pharmacy?
The Guild recently estimated that the latest round of price disclosure will reduce dispensary remunerations directly by a further 19 cents per script from October 2018. This impact, while perhaps not significant in isolation, continues the trend of recent years.
Coupled with the added retail pressures and changes in the macro consumer environment, this is providing greater impetus to the question:
Should I be looking more closely at my professional services offering?
There is certainly measurable optimism in the market regarding professional services. However, many pharmacies lament that they are yet to develop an effective strategy or embrace its full potential.
Let’s talk numbers!
From an accounting standpoint, we refer to Professional Services Income (PSI) as any revenue that falls outside the traditional retail and dispensary parameters. The separation of such revenue on a pharmacy’s Profit and Loss Statement is imperative when measuring the financial benefit being derived from such an offering. Without current and accurate financial data, it is difficult to quantify the success of any PSI strategy implemented.
To highlight the benefit of PSI to a pharmacy’s bottom line, let’s consider the following example:
If a pharmacy were to earn $10,000 a quarter in PSI, this would equate to a total contribution of $40,000 to the bottom line over a 12-month period. Commonly, there are no additional costs in earning this revenue if resources are more effectively utilised, particularly staff and space.
This correlates to a direct positive impact to net profit. In contrast, to earn a similar net contribution from traditional revenue lines, the same pharmacy would require additional sales of approximately $115k assuming a gross margin of 35%.
How do I implement in my pharmacy?
Like any robust business plan, it begins by considering the goals and strategic direction of your pharmacy. It is imperative to look at your customer base and what is important to them. It is then that you begin to consider the actions required to best grow and develop this area of your pharmacy.
A key performance indicator will be how and where pharmacists are spending their time within the pharmacy. If your pharmacists are anchored behind the dispensary computer, then increasing their knowledge and ability to provide these services to customers will be an exercise in futility.
Pharmacists need to be customer-facing and that could mean considering your overall staff structure and more engagement with technicians.
In some cases, it may mean encouraging the pharmacists to operate on the retail pharmacy floor to increase interactions with customers. The overall staff mix may need reviewing as part of the business case.
What impression am I giving the customer?
Like any professional service, there is little value in selling something if the customer is not aware it even exists.
In the same manner we drive our retail operations through advertising and marketing, we should be providing this level of attention to promoting our professional services. Any additional services offered should be as visible as the operating hours displayed on our pharmacy window. Whether that be home delivery services, dose administration aids or MedsChecks, advise the customer what you offer and how you may assist them.
There is certainly measurable optimism in the market regarding professional services.
And whilst these services have been developed through the 6CPA, we appreciate that many pharmacists have specialised knowledge in various health areas, which in itself can become a viable professional services strategy. Pharmacy owners need to consider their community, customer profile and complete offer to significantly develop a robust professional services offering. This in turn creates loyalty, better health outcomes and, ultimately, stronger revenue.
The offer and overall customer experience delivered by your pharmacy will ultimately gauge if a consumer believes they should be charged for a service and the value they attach to it.
Consider that the ‘P’ in Pharmacy is for Professionalism. Ensure that, as a pharmacist, you are presenting the appearance of a professional healthcare provider. Creating the right appearance of the pharmacy, the consulting room or the space allocated to providing your professional services, adds to the overall value proposition.
Consider updating and rotating signage and marketing displays regularly to remain relevant, and capitalise on seasonal changes in demand. For example, highlight relevant services at the beginning of cold and flu or pollen seasons.
So, what can help drive my services revenue?
When looking at your own business, below are five suggestions in developing a robust professional services platform:
- Plan and establish infrastructure to support the services offered. This may involve upskilling staff or establishing a professional services room to better engage with your customers. Encourage staff to promote such services — a united front will encourage greater confidence in your customers.
- Link any professional offerings to your retail division and loyalty program. For example, if you provide blood pressure testing to a customer, consider promoting your monitoring products. Link these services to your member programs.
- Ensure a tangible outcome is provided. This may be a transcript of the conversation, a printout of testing results or further information for the patient.
- To specialise or not? … that is the question. There are many, many services being offered in pharmacies across Australia. From Absence from Work certificates through to wound care and everything in between. The response will differ for each individual pharmacy. If your skillset supports a specific service, capitalise upon that. There are opportunities to offer a high-quality service for a price. Alternatively, consider the community you are servicing: What healthcare services are your customers seeking?
- Collect and analyse your data. Once a strategy is implemented, it is important to monitor the revenue received from these services. Without current and relevant data, it is difficult to identify what services are profitable. Know your customer and continue to ask them for feedback on what you are doing well or what they want to see.
To get the most from your pharmacy, make a commitment to look at your own services offering.
All too often owners hasten to jump to action and ultimately fall short of expectations. Be strategic and purposeful in what you are seeking to achieve.
Consider the goals, customers and available resources of your pharmacy to ensure you derive the most from your professional services strategy. In doing so, ensure you measure the income that flows from your efforts.
If you need further assistance to regarding any of the content discussed in this article, get in contact with your local RSM Pharmacy Business Expert >>.
This article was originally published in Gold Cross Products & Services Pty Ltd • ITK Issue 64 • February-March 2019