RSM Australia

That dollar discount – the power of 3!

EVEYRONE knows what the dollar discount is about.  So let’s just talk about some issues.

Firstly – it can apply to ALL scripts.  The big focus has been on concessional patients but the discount can apply to general scripts as well. 

With the dollar discount has come the PBS co-payment and safety net changes.

The following changes are effective from 1 January 2016:

  • the general patient co-payment will increase from $37.70 to $38.30

  • the concessional patient co-payment will increase from $6.10 to $6.20

  • the general patient safety net will increase from $1,453.90 to $1,475.70

  • the concessional patient safety net threshold will increase from $366.00 to $372.00

Safety Net Impact

For a concessional patient we know it takes 60 prescriptions to reach the safety net if they pay the full co-payment.  If they take the discount along the way, it takes another 12 and ultimately the customer spends the same amount of money – 60 x $6.20 or 72 x $5.20.  All savings go to the government (12 less free scripts) and the $72 per patient comes out of the pharmacy pocket.

Whilst the mathematics would seem to indicate that there is a clear message to be given to concessional customers, the more important question is this – how many of your concessional customers do reach the safety net?  It is these customers to whom the maths may be of interest.  To the rest, it will be a case of ‘show me the discount please’.  So if you have a high percentage of concessional customers who do reach the safety net, you may be able to do some persuading.  Certainly we have had good anecdotal stories around high success in keeping the dollar on the pharmacist’s side of the counter.

Customers who don’t reach the Safety Net

If you have a high percentage that do NOT reach the safety net, then it will impact your bottom line unless you can persuade customers to not take the discount or recoup the dollars elsewhere in the pharmacy or resist giving the discount.

Why would customers not ask for the discount? 3 ideas to think about!

Is a better question to ask – why WILL the customer ask for it?

I am seeking to challenge you as the owner on your customer relationship. If your relationship with the customer is strong, I believe there is less chance they will ask for it. 

Why is it that your customers come to your store? Before you answer, I would like you to also think about three things:

  1. When you think you have the answer, take a look around your store and see if the store gives a message that supports your answer?  Are your staff aware of the answer and how do they ‘live it’ on the floor?

  2. How do you maximise the customer relationship?  Do you have standard greeting, prescription and POS procedures that build on that?

  3. Do you offer professional services both free and charged for?  Have you researched your area and local doctors to ensure they are relevant? Have you merchandised your store to ensure that your offering supports the professional services you offer and the types of issues that your customers face?

A strong customer relationship means that the customer has other reasons to come to your pharmacy and, most likely, will not be swayed by a $1 discount on prescriptions.

Can you ignore it? Here are 3 ideas that might help.

Short answer is – no, I don’t think so. Certainly many of your competitors will be advertising it. They may be in the discount game and so perhaps they are playing to their strengths. Their customers EXPECT a discount. The big play for any discounting of course is – does it pay off? Will you gain enough customers to pay for the profit you are giving away on each sale?

If you can’t ignore it how can you deal with it?  Here are three ideas.

1. Using POS material to make a statement

Perhaps you need to be clever in how you bring attention to it.  How about some POS material that has say 3 statements to the customer?

 
  Text Box: Looking for a $1 discount on your prescriptions?  3 reasons why we don’t think it is a good idea.  If we give a discount –<br />
1.	We will need to cut service.  And we think you really appreciate our service.<br />
2.	You will take longer to get to the Safety Net and will spend the extra money anyway.<br />
3.	We will need to put the price up on other goods and we think we provide a good all-round offer.</p>
<p>However, If you really would like to take the discount,<br />
just ask and we will oblige.<br />
Thanks for being a great customer.<br />
We hope to see you here for many years.<br />

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2. Provide clarity to safety net sustomers

Certainly, for those customers who you know will reach the safety net, it should only need a short, direct conversation around the mathematics. See my explanation under 'safety net impact’ for that. You should explain this clearly to your staff and even have them role play to give them confidence in talking about this with the customer. You should also produce a small flyer with this information and that can be used as a reference point for the conversation.

3.  Consider providing an alternative discount

Giving $1 away on prescriptions will generally have no longer term impact or give any positive reason to come back to the pharmacy. You could try to sway them by offering a discount voucher instead of a discount on prescriptions. For example, for a limited time, if the customer asks for the dollar discount, offer them a $5 retail voucher as an alternative and do this for a limited time. Yes $5 is more than $1 but the voucher is only provided for a limited period. The idea is to create loyally and bring the customer back to the store to spend more.

So what if they customer insists and really wants it?

Be prepared.  Do you want to give away the dollar or not?  So if all of the above fail and the customer is persisting, what is your position?  It will vary from client to client I suspect.  Nonetheless, you need to know where the line in the sand is for your pharmacy.

How can I recoup it?

The dollar discount comes straight off the pharmacy bottom line profit.  If the business is going to head down the path or ends up feeling forced into the path of offering the discount, steps should be taken to claw it back elsewhere in the business. 

Better retail – 3 ideas that can help

  1. Are there a number of categories where you can pick up marginal gains?  $0.50c per product here, $1 per product there?

  2. Now is the time to eliminate poor performers and make your retail space more productive by expanding stronger lines.

  3. Can you increase basket size by lifting stock intensity?

Better health care – 3 more ideas that can help

  1. Am I maximising professional services under 6CPA

  2. Are there professional services not under 6CPA but which are relevant to my customers that I could implement and which I could charge for?

  3. Have I promoted my professional services adequately to customers and to doctors and other health care professionals in the area?

Where to next?

In my experience, most owners have the understanding and capability to deliver on all of the ideas set out in this article.  For some, the difficulties may appear insurmountable.  For others, a lack of clear outcomes and measurement will see them lose focus.  Yes again, for others, it may be a case of 'where do I start?'. The stronger point, hopefully, is that doing nothing is not an option. So get started with your team or get some help to get you started. 

The time to start is now.

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