Throughout August to November, I've had the privilege of connecting with pharmacy owners all over Australia. It has been immensely rewarding and I have met so many inspiring pharmacy owners. Obviously, 60 Day Dispensing continues to dominate conversations, and particularly what owners need to be doing now and the impact on valuations. Not only are the conversations on valuation impacts, but also on the strategies that owners must be employing to reduce the impact of the hit.
If we keep this at a basic level for now, simple business strategies say that, if pharmacy businesses are going to lose $x00,000 in profitability then they must introduce measures to fill the gap to survive. Those measures can simply be broken down into three groups.
1. Preserving Cashflow: This involves initiatives like refinancing loan repayments and effective tax planning.
2. Reducing Expenses: Roster optimisation, adjusting trading hours, and reviewing expenses.
3. Growing Income: This is where we want to focus our attention.
If we focus on the income side for now, the pharmacy income streams, in a very simplistic way, is just volume x $price. Most strategies are focussing on price. Increase prices for private scripts, under-co-payment scripts, OTC pricing, retail pricing, pricing for services that were once delivered for free etc. Whilst they are important, and necessary, they are also short-term hits. But they are also missing one crucial component. Volume. The risk with this strategy is that your patients may not potentially like a price increase. That is only natural, you would be the same. If we increase prices to get more Income, we also risk losing customers that do not like the price rise. $GP is the goal but it is very short term thinking and you are potentially at risk of not focussing enough on one crucial component. Your patients. But some of your competitors are most certainly focussing on your patients. There are some very clever pharmacy owners, who are positioning themselves to take advantage of this. They are the ones that have asked me, “if all my competitors are putting up their prices, how can I win their customers off them?”.
Let’s focus on volume for now. What exactly is volume? Volume comprises of three things.
Customers Numbers x Customer Loyalty x Customer Frequency.
This reveals to you a number of critical elements that are vital to longer term growth and success in your business. Focussing on Volume is a long term hit. If you win a new patient, assuming their experience with you is positive, they will stay with you for years to come. Meaning your pharmacy will be better positioned for long term sustained growth. So, not only do you need to be considering short term hits like price increases, but your attention needs to be on how to grow volume.
When you introduce strategies that focus on all three areas you can boost your script numbers, and transaction numbers. We have worked with many pharmacy owners on this area and have shown them the strategies that work. But I want to flip your view on what volume is and leads me to the main point I want to make. There is one area I believe is crucial for pharmacy owners to focus on. The Lifetime Value of a Patient.
Each new patient you win, if they have a great experience with you and stay loyal, is then with you for years and years. How much is a new patient worth to you in $ terms over the course of their time with your store? A lot. But each new patient has family and friends, who are also potential new patients. But what is also important, is winning new patients now, particularly in a world where Full Scope of Service is coming through and being a strong focal point in discussions in the industry, enables you to now sell products and services to them. The Lifetime Value of a Patient is now worth more to a pharmacy, particularly high service model pharmacies, than ever before, and it is only going to grow. For high service model pharmacies, this is a very important time to get your strategies homed in on building patient numbers. Those who focus strongly on this, will get to experience sustained growth in profitability for years to come. Assuming our world doesn’t change again. Sigh!
At Peak Strategies, our commitment is to assist you throughout your business journey, offering specialised services in pharmacy mastermind consulting for strategic business growth and targeted marketing strategies. Outside of our service offerings, we have curated a vast inventory of articles related to both business growth strategy and marketing. This collection provides a wealth of knowledge and resources, featuring insightful articles and marketing strategies tailored to guide you through the dynamic pharmacy landscape. Whether it's gaining a deeper understanding of your patients, honing your skills in email marketing, or embracing innovative health services, our expertise encompasses it all. Explore some of our recommended resources linked below to discover valuable insights and tools for success.
1. Understanding your patients
2. What do your patients really think?
3. Email mastery for pharmacies
4. How to introduce a service to your patients
5. A common error we see with pharmacies and marketing
6. Hang out where your customers hang out
7. 4 Pharmacy KPI’s you need to care about
8. Health services are the future of pharmacy
9. Would you like to join our loyalty program?
10. Reach thousands of customers outside the four walls of your pharmacy
11. Top KPI’s to monitor during 60 day dispensing
12. What are your 60 strategies?
The future of pharmacy can still be hopeful for those who recognise the importance of thinking long term, focusing on patient relationships, and nurturing their Lifetime Value. As we continue to adapt to the changing world around us, remember that by embracing these strategies, you're not only securing the present but also laying the foundation for a prosperous and resilient future. Together, we can navigate the ever-shifting tides of the pharmacy industry and build a stronger, more patient-focused tomorrow.