The Best Approach to Retail HME?
An incremental sales strategy gives providers that are new to retail the perfect platform on which to found their cash sales businesses.
- By David Kopf
- Feb 01, 2017
Whether they are currently engaged in retail or not, nearly
every provider in the industry realizes the potential for cash sales to expand
their revenues in the face of declining reimbursement. The problem is that
retail sales also represents a very large and broad set of products, so it’s tough to
know where to get started. Bottom line: providers need a strategy to get started.
Enter incremental sales. Providers can leverage an incremental sales
approach as a launch pad for their retail businesses, because it builds on the
successes they have already made in their funded HME business. But let’s start
by defining the term — what is meant by incremental sales, exactly?
Understanding Incremental Sales
Essentially, incremental sales is a retail sales strategy in which HME providers
use their relationships with funded patients as a stepping stone to help expand
those relationship into cash sales transactions, as well as to reach out to new
patients, according to Jim Greatorex, vice president of the VGM Group Inc.’s
Accessible Home Improvement of America (AHIA) division. Greatorex has a
long background in retail sales both as an HME provider and in his work with
“I define incremental sales as taking the most heavily utilized HCPCS codes,
and building a product portfolio — say, six to eight products — that you make
available to everybody,” Greatorex says. “And you hand pick the ones that you
feel will make the experience of using the particular prescribed item better;
either more comfortable or just make their life better.
“And you get your customer service people to become experts in these
products,” he continues. “And, you make sure that you expose especially every
new consumer to these products, and you then, on the back end, market them
to your existing clientele.”
“Incremental sales is often viewed as ‘add-on’ sales, like upselling or crossselling,
but it also can be defined as ‘the contribution of your marketing efforts
to increasing sales revenue,’” adds Lisa Wells, vice president of marketing for
Cure Medical. “The two definitions aren’t wholly independent, as you must
drive those types of sales through marketing or some type of promotional
effort. Retail sales is most certainly not a ‘field of dreams.’”
The benefit with incremental sales is that providers are starting with the existing
customer base, because those patient relationships have already been founded.
“The key reason to improve your incremental sales is because of a wellknown
fact of selling: it costs more money to get a new customer than it does
to keep one.” Wells says. “You want to get as much share of wallet from your
existing business as you can, and ideally you want to keep them coming back
at different times for additional purchases. The advantage of adding retail sales
onto your reimbursement items is that you can keep that cash flow going.”
And it’s important to note that a large percent of these clients are already
interested in retail sales, according to Greatorex.
“I would guesstimate that at least 40 percent of the folks who get the HCPCS
code or whatever prescribed item it is from you are already online two days later
shopping for items that go along with their condition,” he explains. “… It makes
a lot of sense that it should be you that’s showing them these [additional retail]
items. And then, instead of buying it online or somewhere else, the likelihood of
them buying these items from you is extremely high.”
How much business does that represent? Of course it depends on the
provider, but as a multiplier on existing sales, Greatorex says VGM has
analyzed on the approximate factors by which incremental sales can extend
the revenue intake of funded items and conditions.
“… With CPAP, which is one of the biggest categories, we feel that if people
spend just one penny with you on an ancillary item or incremental item, that
they are likely to spend in a calendar year at least $500 with you,” he says.
“You’re looking at profit margins of about 40 percent on those items, and on
some of the others we feel it’s 50 percent. So, if you can get maybe 20 percent
of your customers to buy $500 and you see how many people you have on
CPAP, that can give you a guesstimate as to what kind of revenue you can add.”
Good Incremental Sales Categories
In terms of categories, Greatorex says that in addition to sleep, funded product
categories that have solid incremental sales potential include hospital beds,
oxygen, walkers, manual and power wheelchairs are the predominant ones.
The key is to think about revenue potential for the existing item.
“For a lightweight, manual wheelchair, that is $700 in [incremental sales]
revenue waiting to happen,” he says. “That could easily go to a seat lift chair or
a scooter. You could go to cushions for the wheelchair. Also, I think most who
use wheelchairs have some kind of pain issue, and there are some great pain
products that you could make available to them. There’s a whole list.”
Another example would be urology, Wells notes.
“For example, you might have a recurring order for reimbursement of
intermittent catheters, but you can add on incontinence products and bowel
management items like Enemeez that are typically cash-pay,” she explains.
“Introducing these items does two things for your client base: it adds convenience
for them to get more at a one-stop shop, and it improves your bottom
line with recurring revenue from your customers that you don’t have to wait
for reimbursement on.
“Also if you are selling to wheelchair users overall, then you have the opportunity
to add multiple lines to your mix that will help capture more share of
wallet from this specific end-user,” she continues. “Most end users only buy a
wheelchair every five to 10 years, and a new seat cushion every three to four
years. … Adding disposable supplies helps the provider get monthly recurring
revenue from these infrequent customers, and also keeps that customer
engaged with the provider for the purposes of retention.”
And the amazing thing is that incremental sales can take a product category
that might not be all that stellar from a funding standpoint, and turn it into
something that can drive meaningful income because of all the related items
attached to it.
“A walker is a terrible reimbursed item,” Greatorex says. “Why anyone would
want to be in that would be questionable, except we feel that, there again, it’s a
$650 incremental sales waiting to happen.”
Getting Started With Incremental Sales
The key for getting started in incremental sales is to quite
“I would start with two categories at the most, and learn
with those,” Greatorex says. “… It’s picking a list of the
most highly utilized, best-quality, highly rated consumer
products, and making it part of your company culture
available — always — to every new customer and also
capture some of your existing customers, especially if you
have face-to-face contact with them.”
Wells adds that providers should double-check their
assumptions by talking to their patients.
“Ask your customers what they buy monthly that they
have to pay out of pocket for,” she explains. “Or if you are
drop shipping through a third party, ask them to guide
you on ancillary product offerings that are also handled
by your distribution center.”
Greatorex notes that VGM has developed a program
that catalogs the items related to various HCPCS codes
that providers want to stock and sell incrementally. Then
it will help train customer service staff that might not be
comfortable with selling cash products, or see some kind
of stigma attached to selling.
“We’ll help with a script until [staff] become comfortable
with [selling],” he explains. “And really all it takes
to become comfortable with it, is to do it and become
successful. Anyone can become a sales person, because
all it takes is knowing that the product will make their
life better, and your passion will come out however you
personally show it. It just takes a little while for some
people to show that.”
And getting the customer service team to understand
that selling something shouldn’t be stigmatized (because
doing so helps those patients get something that can help
them) is critical, because the real revenue-driving opportunities
during those points of personal connection.
“You will be most effective in getting a high percentage
of consumers to buy with a face-to-face,” Greatorex
explains. “If you only make a brochure and include it in
your billing statement mailings, you’re really only looking
at, in the best-case scenario, a 3 to 5 percent success rate
with that. If you’re doing incremental sales on a face-to-face
basis, I bet your success rate will go up to 25 percent.”
And once providers and their staff start to get their sea
legs with incremental sales, they can start to get out in
front of their clients by anticipating what they need, Wells
adds. They can become solutions providers.
“The single most important tactic to driving incremental
sales is to offer more to your customer than what
they just came to get from your store,” she explains,
adding that they should include this agenda in their
marketing efforts. “Share daily deals online, cross-sell in
your customer newsletter and add box stuffers to your
shipments so that customers can see what else you have
that they might want or need.”
The bottom line is that retail sales are a business imperative for providers
now, and incremental sales offers them a way to address that imperative.
“It introduces you to retail, and opens your eyes to all kinds of possibilities,”
Greatorex says. “We’re in a consumer-driven healthcare model now, it’s not
clinically or third-party driven anymore. The consumer is driving the train,
and if you don’t develop a way to comfortably and effectively promote cash
business, you might it difficult to grow your business or keep viable.”
This article originally appeared in the February 2017 issue of HME Business.