RSM Australia

Targeting the new bottom line

In last month’s article, I focused on the imperative to move the pharmacist into the front line of customer engagement. This is across the pharmacy not just in the dispensary. It is move which brings your most qualified team member into direct contact with the customer. The aim is to ensure that all needs are properly identified and met with the end result hopefully being a more satisfied customer and a higher transaction yield with higher GP$ per customer.

The impact of price disclosure will clearly be a loss of GP$ per script and that will fall OFF the bottom line. The strategy of increasing customer engagement by the pharmacist is designed to assist in replacing those lost dollars. I have outlined in previous columns that the quantum increase required for a pharmacy to replace these dollars by simply doing more scripts is NOT achievable. It means that the whole of the pharmacy is required to contribute. GP$ per script has already declined through 2014 financial year and will continue to do so.

Targeting replacement GP$

Pharmacy owners should be targeting where the replacement dollars are going to come from and then setting in place strategies and actions to make it happen. The total expected loss might be the $90,000 per pharmacy that is being spoken of by the Pharmacy Guild or it might be more. Where is that going to come from in order to maintain your business bottom line? The ultimate 'package' will be different for each pharmacy.

It may be that you will:

  • target a 3% script growth
  • increase retail sales by $200,000 - and how will this be done?
  • implement sleep apnoea services
  • implement a travel health niche
  • review marketing spend to ensure it is more targeted
  • consider occupancy costs and whether space can be reduced or changed to achieve a better outcome

The combination of all of these may produce the result you are looking for. Remember, the improvements you make arising from this plan are only replacing lost income, they are not extra income. You need to be driving these changes now. The point is that you target where the replacement income is going to come from.

Detailed implementation

The general ideas listed above will require a detailed implementation plan. You will then need to ensure you are monitoring progress and making progress, and you won’t be able to implement the whole plan overnight. That would be disastrous and likely to fail. 

The plan will allow you to set specific targets for each part of the plan - a budget - identify changes to be made and the resources needed to achieve success. You will need to put in place around this the manner in which you will get reports on progress, including the financial improvements you are expecting. If you own more than one pharmacy, be sure that you understand the impacts individually in each store.

Changing roles is just a start

Changing the pharmacist’s role is just one of the actions you might take. There was an excellent presentation at APP this year by Glenn Guilfoyle from The Next Level. Glenn has done some interesting work studying the dispensing process and customer engagement times and can do this for individual pharmacies. From the observations he had made, customer engagement time was much less than what we think it is and the impact of small improvements can be far greater than we think.  In the work he presented, by increasing the engagement time by less than a minute, you could add as much as $7 to the average sale. That is a great return on investment.  

Of course, simply issuing a new job description is not the answer. The change in role is part of a bigger process which I outlined last month. One the key areas to address is, believe it or not, the selling skill of the pharmacist. Some pharmacists, having been deeply involved in dispensing, have not had too much customer time when it comes to listening and thinking of solutions across the pharmacy. You may in fact need to invest in some training and time to give effect to the change of mindset needed in your new leading primary health consultant!

Remember the ‘why?’

The move from behind to in front of the counter won’t come easy to some. When we move into a zone that is not comfortable, it can get tough and we tend to gravitate back to what is comfortable - so this will require constant attention if the change in behaviour is to be successful. As noted in my last article, different processes and the roles of various team members will require review and change. Hopefully this can be undertaken in an environment which sees this as progress and an improvement to the way in which the business meets the needs of its customers.

Walked into a Telstra store lately? The whole customer engagement process has changed. I am met at the door by someone wanting to know why I am there and am then directed to the most appropriate area of the store and attendant. If I will be waiting I am told how long the wait might be for, and this is being supported by television advertising promoting a new level of customer service and engagement (featuring Magda Szubanski).  

So it’s not a problem unique to pharmacy. Other organisations out there are seeking new ways to meet their customers’ needs. Pharmacy has a unique position in the healthcare space in Australia. Owners need to continue to evolve the business model and they can continue to hold this position and have a viable community pharmacy at the same time.