New data presented for the first time to Australian Retail Pharmacists at the recent APP 2014 congress reveals some sobering statistics and benchmarks. This data, collected by real time, on-site observations focused on dispensary workflows and customer engagement across some seventy retail pharmacies over the past two years. “Yes, some of the numbers are stark”, says Glenn Guilfoyle, Principal of The Next Level, the group involved in collecting, assessing and reporting these new findings. “By the same token, it also shows the magnitude of the sizable opportunity for many, many retail pharmacies, against the spectre of PBS reform”. “The good news is that the interpretations indicate that the change of behaviour required by most pharmacies to avail themselves of the commercial opportunity is very readily within reach”. “There is a very good case to suggest that behavioural change, which is more attitudinal than anything else, amounting to converting value neutral time at the dispensary counter with the customer to value adding time, in the order of 20 seconds, could deliver a significant boost to profitability”.
“The emerging correlations are really quite intriguing and compelling”, says Guilfoyle. “We are continually adding to this pool of data from the stores we have already assessed, and so it is still very much a “work in progress”. But for the first time, we can start to define best practices for retail pharmacy – at the script and s2/s3 counters – in terms of actual data, rather than relying on the various gurus out there who have been trying to articulate best practices on the basis of experience, judgement, perceived wisdom and other non-data driven exhortations. For example, the data shows that …..
• If the script customer stays in the store for the duration of the dispense – a startling 48% choose or are encouraged to leave and come back later to collect – there is a moderately strong correlation with relatively long customer engagement duration. And the correlation reaches statistical significance.
• Further, and possibly paradoxically, relatively high visit retention correlates even more strongly with quick script processing duration. Again, the correlation reaches statistical significance.
Now it gets even more interesting as one continues to drill down into this behaviour highlighting data. Let’s go back to the behaviours surrounding customer engagement duration.
• Relatively long customer engagement duration strongly correlates with relatively long proactive medicines and health counsel duration (a component of customer engagement)….with statistical significance.
• Relatively short script processing duration very strongly correlates with relatively short white space duration (the time that processing stops before completion for any reason …. A re-handle) and relatively low re-handle frequency … both with statistical significance.
• Relatively long proactive counsel duration correlates strongly with the high representation of the Pharmacist being the dispensary team member role conducting such counsel (statistically significant).
Now that all sounds compelling enough. But do these behavioural patterns correlate through to increased sales in script add-ons (notably from the non-script health categories)? Well, that is still a “work-in-progress” , and “watch-this-space”. The correlation here is weak and does not reach statistical significance. So does the momentum built up in the case all fall down like a deck of cards now? Not at all, argues Guilfoyle. “One needs to practice understanding and patience in interpreting this data, especially so for practicing pharmacists contemplating adopting the learning’s from this research.”
“Firstly, understanding. You need to understand that the all of the correlations expressed are purely behavioural. The Pharmacist and dispensary team members enjoy a high degree of control over the extent to which they execute these sorts of behaviours or otherwise. That is why this is a good news story! And this partly explains why these correlations are coming through with good strength and significance from a relatively modest population pool at this stage. Increased sales of complementary products and services, leveraged from executing such behaviours, are prone to other forces besides the behaviours of the team. For example, local area marketing and competition dynamics. In other words, whilst still palpable, the Pharmacist and dispensary team members enjoy a comparatively lower degree of control over the extent to which they can influence commercial performance, when compared to their behaviours. There is also a “pollution” factor that we continue to work on with Pharmacists, in terms of consistency and accuracy of data that they extract from their point-of-sale systems to send to us in these studies.”
“So, understanding leads to patience”, Guilfoyle explains.
“We can reason that as the cohort pool grows, and if the behaviour-driving-commercial-success hypothesis is sound, eventually the correlation strength and significance will come though, as data robustness and extraneous non-behavioural influences ultimately become overtaken by the weight of numbers representing the two variables being correlated in a statistical exercise like this. We cannot postulate when this will be….thus my urge to watch this space, and be patient.”
“The anecdote I would posit to temporarily fill this piece of the jigsaw puzzle goes something like this ….”, Guilfoyle muses.
“To any Pharmacist contemplating the relevance of this to their unique situation, I say that if you look something like the typical or average Pharmacist in our cohort (which itself is a good cross sectional representation of retail pharmacy Australia, with the possible caveat of under-representation of the “small end of town”), then you will be producing around 145,000 customer transactions per annum. Further, you will be ringing up around $15.50 from the non-script health categories for each one of those 145,000 customer transactions. The data also tell us the a pharmacy performing better than average in this respect, and specifically, performing at the level that marks the lowest point of the upper quintile (ie the start of the top 20% of pharmacies, by performance on this specific ratio), will be ringing up around $22.50 from the non-script health categories for each one of those 145,000 customer transactions. A difference of around $7 per customer transaction. If we run a crude 50% GM overlay on that, we can take the emerging $3.50 GM per transaction and multiply that by the 145,000 customer transactions pa, and salivate at the thought of the increased $500,000 margin opportunity”.
Now the sceptics will say that that is a big increase ….. from $15.50 to around $22.50 is around 50%. “Fair cop” submits Guilfoyle.
Back on the font foot, he counters “so let’s go back into the data to ascertain the amount of time on average that the dispenser invests on the script customer in the form of proactive counsel. It is 39 seconds per script customer visit. 39 seconds of the 2m 28 seconds of engagement time, of 5m 11 seconds total average visit time. It represents a very small component. So I challenge Pharmacists, whether sceptical of my 50% rationale above or not, to increased that duration accordingly by 50%. Raise your proactive counsel from 39 s to 1 minute!” And in doing so, proactively look for relevant add-on complementary health solutions sales. Prove to yourself whether my $500, 000 claim is valid or not. Even if I end up 100% over the odds, will $250,000 increased margin from 20 seconds extra investment in each script customer be a bum deal?”
“In any case, you are likely to off-set your margin loss from PBS reform……and still have plenty more to come out ahead.”