Cash Sales Preparedness
How can providers find a path toward retail readiness?
- By David Kopf
- Dec 01, 2011
Retail sales represent a tantalizing new revenue opportunity for providers suffering from multiple reimbursement cuts, but its an opportunity that covers unfamiliar ground. After years of relying predominantly on Medicare funding, as well as private payor funding and to some degree Medicaid funding, retail represents not only a business overhaul, but a mental overhaul for providers.
Which is why providers need to go into retail like a Boy Scout — they need to be prepared. Rather than diving headlong into cash sales with no advanced planning, research or preparation, providers need to consider a variety of factors required to craft a successful retail venture.
Think of it like camping. An unprepared adventurer might wander into a wilderness area totally unfamiliar with the territory, its weather, its local wildlife and water sources, and pack for the trip accordingly, leaving that camper completely at the mercy of whatever nature has to throw his or her way. Now picture the Boy Scout who followed the motto of “Be Prepared.” The Boy Scout did enough homework and packed correctly for the trip. Where one camper might be left panic-stricken in the wilderness, the other will most likely be toasting marshmallows next to a cozy campfire.
Which would you rather be when it comes venturing forth into the retail wilderness, the Boy Scout, or bear food? The obvious answer explains why providers new to retail must have a plan.
And now, more than ever, the pressure is on for providers to develop those cash sales plans if they want to have new revenue streams hitting their bottom lines anytime soon. With Round Two of national competitive bidding looming; the fate of an NCB repeal through H.R. 1041 looking dim; the removal of the first month purchase option of standard power mobility; the continuing struggle of the 36-month rental cap on oxygen; and the 9.5 percent cuts per MIPPA have made business just about unbearable for many providers. Add to that the thread of Round One cuts going nationwide — an option that still sits on the Congressional Super Committee’s bargaining table — and providers have about six reasons too many for crafting a retail plan now.
There are various elements that comprise a successful retail business, let’s explore them:
Retail sales start with marketing. While marketing indeed involves advertising and promotion, at the outset marketing comprises what you sell and who you sell it to. Providers must determine the sorts products they want to sell, and that comes from doing the right research, advises Ty Bello, RCC, the president and founder of Team@Work LLC, which provides sales and marketing consulting to HME businesses.
Bello says the first thing is to go out and start investigating what is already selling in the marketplace.
“Go out and shop other similar retail locations that have medical products,” he advises. “Mystery shop them. Go in and check ‘em out.”
The next step is to meet with referral partners, he says. Conducting a short market survey with physicians’ offices and similar partners that gauges their willingness to refer their patients to your HME business is a great way to see how you can start opening up your retail sales pipeline for specific products. But he warns to take their replies to your qualitative surveys with a grain of salt.
“Don’t take everything they says as gospel, though,” Bellow explains. “The majority of the time, they really don’t use a lot of whatever they ask for, and you wind up stocking those items when you don’t need to.
The next important consideration in this is pricing, Bello notes. What prices can a provider charge, and what margins can they expect to make? And, in calculating those margins, Bello says providers need to remember that the overhead of cash is demonstrably lower than that of covered items.
“You don’t have to run it through six or seven different departments in your business,” he says. “Now it just goes in, cash in the barrel, order a new one, you’re finished. So it takes less to make more margin.”
Once you get patients coming to your business, you want to make sure you deploy a staff that can serve and sell to them. But the big hang up when cash sales seems to be that latter role: sales. For some reason, “sales” is a dirty word in HME, when it doesn’t have to be. It’s as though there’s a belief that sales involves tricking or cajoling people into something they don’t need, but that’s not the case. If anything, sales is a collaborative process drive by the desire to serve patients — exactly the motives that drive any HME professional.
There are three elements to doing retail sales right: welcoming customers, qualifying customers’ needs, and then acting as a resource to help them find the right solution. When the customer walks in the staff should immediate greet him or her and ask if they can help them find what they need; not simply point in the direction of the needed DME, Bello says.
Offering to walk the customer over to the right section of the store — even a small one — gives a good starting point for the staffer to start assessing the customer’s needs, says Cy Corgan, director of Retail Mobility Sales for Pride Mobility Products, which manufactures a number of mobility and auto access products designed for both funded and cash sales patients.
“Ask the customer questions to get an idea of ‘a day in the life of’ the end user,” he says. “Really start thinking about the features the benefits and the upsell, and get away from the thinking of ‘well this is what the insurance company or Medicare is going to pay for.’ Consumers and caregivers might have the money to pay for those extra, high-end features and products. That’s what retail companies do.”
When a consumer enters a retail sales environment that does it right, the result is a collaborative and service-oriented. The provider determines the patient’s needs, and offers the best solution based on those needs. Trying to offer something above patients’ needs, or below their needs is actually counter-productive because it creates a bad customer experience that will ultimately kill what could have otherwise been a repeat customer (and perhaps one that would have spread good worth of mouth).
The key here is product knowledge. Staff must have expert knowledge of the features and capabilities of each item, as well as any services related to those products. They need to be the on-staff experts for the categories they cover.
“It’s a trained individual that’s a good retail sales person,” Bello explains. “Someone that really understands the products that are in the store and really understands the customer. It’s inviting when a customer gets into the retail space. Ask yourself: when was the last time you went to a retail location and got served and not sold to. Big difference. That’s where engagement, and understanding your products and customer really come into play.”
“People that need some of these products don’t have the knowledge base,” says Cali Thomson, business manager for Personal Care for DME giant Invacare Corp., which also manufactures retail items.
Thomson uses the example of a customer searching for a shower chair to illustrate her point: “They don’t know which shower chair is best for them, which features would be beneficial to them,” she says. “They also don’t know that they might need a suction cup grab bar, or a bath mat,” she notes of the possible cross-selling items.
How the store looks and is arranged is equally important, Thomson notes. The floor must be designed to help patients find what they need, ensure they see all the solutions available to them, and engage with them.
“Put products on the floor with attractive packaging, that stand out on the shelf to attract attention in just the same way you would if you were going into a Target or a Walmart,” she says. “Keep things eye level, with heavier items on the lower shelves. People want to touch and feel things leverthat they want to buy.”
Even basic signs are a huge help in getting patients to interact with the store. And once they get there, providing as many ways as possible for the patient to interact with those items is critical. A great way is with specialized displays, Corgan says. For instance, Pride makes special retail kiosks for some of its retail items that let customers educate themselves about the product. Not only are displays like that helpful, but they are getting the customer to build a relationship with the solution.
That’s key in an era when consumers have so much access to information online. If they’re used to doing research online prior to making a sale, it makes sense to help them do the research right on the spot or at least help them connect prior online research with what’s in the store. That was the kind of thinking behind Pride’s kiosk, Corgan says.
“Our retail kiosk was designed to be a showpiece for when the consumer walks in,” he explains. “You get a lot of consumers who are not aware they need these products, and if someone tells them they do, the first place they go is to the Internet to do the research. Hopefully they’ll learn about Pride products and when they walk in the showroom they’ll recognize the Pride brand.”
In thinking about arranging the sales floor, the goal is to get customers to engage with as many of your offerings as possible. They might be there to buy a walker, but they might also need a bath safety item or an ADL. So, you put your most popular items toward the back of the store, which requires patients to go through as much of the store as possible, Corgan explains.
If anything, the entire retail store must be designed to foster sales in any way possible, Thomson says. Or, for instance, a common tactic is to surround the cash register with common impulse-buy items.
The Back Office
Besides making sure things go right on the sales floor, providers must also consider the back office. Some central considerations are software systems integration and point of sale systems.
Providers need to consider is how they will integrate their back office processes and system to support a retail operation. The last thing a retail provider wants to be stuck with is having to maintain two separate systems — one for their regular HME operations and one for retail. So, they must work with their software system provider to ensuring they have a platform that can simultaneously serve both.
Tying together retail operations with back end HME software not only integrates the data but also supports different pricing schemes for both publicly and privately funded patients and cash customers. This lets the provider set up special pricing for special retail programs and promotions.
A shared platform also helps marketing. With a single system, providers can more easily access and wield strategic information, as well. Running reports and looking at sales and customer data to determine patterns that can benefit the cash business immensely.
A data pool can be collected over time and leveraged for retail purposes, making the number of marketing programs the provider can create limited by only the providers’ imagination. Even basic ideas are winners. For instance, if the provider has been collecting date of birth information it could send a birthday cards that include a coupon for 15 percent off from the retail store.
Another key element to retail sales preparedness is financing. Not all retails sales are small ticket, small margin, high volume items. In fact, there are many items for retails sales that can translate into some rather sizable expenses for customers. Examples would include portable oxygen concentrators, mobility scooters, auto access, home access items, and remodels for bath safety or home accessibility.
Sure some of these items, such as POCs or scooters, are covered, but not all patients that need them have coverage. Or, they might simply want an item that insurance won’t cover, but they have the cash to pay for it themselves. In any case, all these items represent large consumer expenses.
This is where financing comes into play. By providing consumer financing, providers can grow retail sales by reaching unfunded patients, Corgan says. Providers can partner up with a consumer financing company, such as U .S. Credit, which works with Pride Mobility, to sit down with clients and figure out a financing program for their needed DME, he explains.
“The provider has to have the ability to offer payment options,” Corgan says. “When you come to a point where you have someone very interested in a product, at some point the sales staff is going to have to ask for the order. And the sales person is going to have to ask, ‘How do you plan on paying for this today?’
By offering payment options, the provider is getting their business that much closer to picking up another sale — most likely a big one. If a customer has to pay $3,000 up front in cash or on a credit card for a scooter, that might be tough to swing, but if the provider offers inviting financing terms, then they might be willing to buy.
“It’s offering those options that often times makes the biggest difference between the consumer making that purchase today, and possible walking out the door,” Corgan says. “It’s a very important closing component of the sale in the consumer’s mind.”
This article originally appeared in the December 2011 issue of HME Business.