Cash Sales Strategy in the Back Office
Developing some new ‘moves’ for your retail plan of attack.
- By David Kopf
- Oct 30, 2009
In chess, you have to plan your strategy carefully, and the same holds true for retail sales. Blundering forward will only result in disaster. You must play wisely.
As HME Business’s Cash Sales Series has demonstrated, retail sales are critical these days. With competitive bidding back in play, the oxygen cap, and various onerous propositions coming out of nascent health reform bills, retail revenue is becoming increasingly important to providers as a way to survive a difficult environment.
However, like a chess master planning an opening gambit, providers must think long and hard about how they want to approach a retail business. Obvious elements of a retail strategy are hiring and training sales staff, and creating a show floor and displays that will help move product.
However, besides creating a front-office strategy, providers must also consider the back office. In fact, it might be the first place they want to look to ensure their retail plan is based on a solid foundation. Bearing that in mind, some central considerations are software systems integration, the point of sale, and helping clients finance DME.
Integrating With HME Systems
A key element to retail strategy that a provider might not initially consider is how they will integrate their back office processes and system to support a retail operation. If they go forward without planning, providers could wind up maintaining two disparate systems — the last scenario they would want given that cash sales is all about quickly generating and sustaining cash flow. Why bog down the process?
“The key is to be able to use your HME software to make it happen,” says Brian Williams, marketing manager of HME software company Computer Applications Unlimited Inc. “If you use a pure retail system, it’s obviously not going to do your third party billing, and you end up with two different sets of reports and all that. It makes more sense to have retail built into your HME software, so that you are working with one customer database and one inventory system. It’s all part of the same big picture, so why would you want to use a separate system?”
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 patters that can benefit the cash business is critical.
“For example, you can much more easily run an inventory sales margin report, because you’re going to get a true picture — both for retail and insurance orders — of sales margins,” Williams says. “Whereas if you’re working in two different system, you’re not going to be able to do that, and you’re going to have to do a lot of manual figuring to make that happen.
“Let’s say a customer has a history of buying certain products, you’re going to know that by looking up that customer in your HME software,” he continues. “Your daily cash sales report should be part of your receivables recap for each day so that you know what kind of cash revenue you’re bring in, as well,” Williams offers as another example.
Another benefit of tying together retail operations with back end HME software is that it can not only integrate data but also support different pricing schemes for both publicly and privately funded patients and cash customers.
“From a retail standpoint you should also be able to give a discount,” Williams explains. “Maybe you want to have Tuesday be a senior discount day, or maybe a VIP discount for clients who frequent your retail business quite a bit, or something like that. You should be able to quickly do that.“
Ultimately an HME software system’s retail capabilities should help a provider formulate retail strategy by offering up solid information they can put to work. This holds especially true when it comes to marketing and advertising efforts.
“If you want to increase your retail revenue, you have to think like a retailer,” Williams says. “As retail begins to grow you can data mine. You can say ‘I want to market to a segment of my customer database that is interested in these type of products,’ and you’ll be able to see that based on their purchase history. Or, ‘I want to segment it by a particular zip code, and I want to see how one fares against another based on our location,’ so you should be able to do that, and then send out direct emails or mailers or whatever you want.”
By creating that data pool and using it for retail purposes, the number of marketing programs the provider can create is limited only by his or her imagination. Even basic ideas are winners. “In the HME software database you automatically have a birthday so why not send a birthday card and inside the birthday card include a coupon for 15 percent off from the retail store?” William suggests as a simple marketing idea.
In terms of integrating back office software, Williams says that most HME software packages have a retail component so that they can have a “quick order” process. Whereas third party retail management systems they will have to go through various integration hoops, and still be left with two systems.
“A retail order should be a very brief, cut-down version of [an HME oder] where [the system] taking the retail price has the ability to add or override any tax authority based on the taxability of the product and be able to print a customer receipt,” he explains. “So that way you’re tracking the revenue, and you’re getting your customer through your point of sale and out the door.“
Williams suggests providers test out the retail concept with specific products or customers or locations to ensure they have a smooth running retail integration with the back office.
“If you want to do more retail and you’re seeing more traffic there are some components that you might want to consider,” he continues. “Fortunately point of sale components have shrunk where you don’t need a big area for a point of sale. Most DMEs are just going to have a counter so that they can set up one computer and have it hooked up to your network, or the Internet if you’re using web-based software, and possibly a locking cash drawer, a retail receipt printer and possibly a USB barcode scanner.”
At the Point of Sale
The underlying principle of retail transactions is to speed up that process so that a client pays with cash, check or charge and is on their way out. This is a key driver for installing a dedicated point of sale system. A POS system will speed transactions so that they are as efficient any other typical retail businesses, says Spencer Kay, president of HME software company Fastrack Healthcare. Otherwise patients get impatient waiting in line. In a service-based business, fast is good and slow is bad
“You want to meet customer expectations,” he says. “People want to get the kind of fast service they expect from Home Depot.”
A dedicated system for a point of sale transactions at an HME business ensures the entry and processing of transactions goes much quicker. Where a traditional retail application requires staff to create an order, bill it out and accept payment, a true point of sale system allows for rapid entry of the product and payment.
“One of the big things is credit card processing,” Kay says. To ensure that speed, a point of sale system should incorporate card swiper and credit card processing technology that is properly networked so that credit card transactions are processed at the HME provider’s business just as quick as they would be processed at any other retail business. Kay advises providers to opt for systems that include integrated credit card processing software so that they don’t have to pay a rental fee on a credit card terminal.
Also, with a rented terminal, a provider still has to go into the HME software system and update patient accounts to show they are paid, whereas with integrated process, all necessary records are updated, Kay notes. Also, the system should include a PIN pad entry for debit card processing.
Barcoding is also critical. The key to an effective point of sale systems is to reduce the number of steps and automate as much of the transaction as possible. For this reason, barcoding is needed. In the same way barcoding creates efficiencies on the back end of the provider’s business, such as in retail applications, barcodes should create efficiencies on the customer-facing side of the business, Kay says. So, a good point of sale system should be able to scan the barcode on a product and immediately capture the product number, serial number and automatically bring up the price.
Also, the retail system should be able to print the labels that will go on the products, Kay says. Not only should the label code the product, but it should provide additional information such as price, and perhaps a quick description or name of the product. And of course, the barcoding of the product should be tied to the HME software systems inventory control component so that inventory is updated as items are purchased on a retail basis.
The point of sale system also needs to be able to bring up the right retail prices. This is important given that retail pricing will most likely differ from funded pricing for DME, Kay explains.
Likewise, as Williams mentioned, the point of sales system should support the various discounts and special pricing programs that are a part of retailing. This lets the provider have special pricing related to a coupon, to a special promotion, for certain customers, gift cards, or for certain stores, Kay explains. Moreover, the provider might have special pricing for key referral partners. So the point of sale system must be able to support a wide variety of pricing criteria.
In reviewing point of sales systems Kay advises providers to seek something that is known to work with their HME system or better yet, purpose built for it.
“[POS systems] are not standardized,” he says. “The ideal situation is something that is fully integrated.”
Kay advises providers to check with their HME software vendor/service provider offers a point of sale systems that is integrated with their system (some do), as that will offer the smoothest possible implementation path. If that option is not available, look at self-contained point of sale systems from name brand third-party vendors, and confer with your HME software provider on its compatibility with your system.
In terms of other key hardware for a point of sale system, in some parts of the country, the system must also include a display pole that lets the patient review the individual and total charges for the transaction as they are rung up.
One aspect to retail sales that might finally catch on in the HME marketplace when it comes to cash sales is financing. While it is a familiar aspect to other retail marketplaces, consumer financing is not a common feature in the HME industry.
That said, consumer financing represents an ideal means to help providers to grow retail sales, says Cy Corgan, national sales director for retail mobility products for Pride Mobility, which entered a relationship with U.S. Credit to offer consumer financing to HME customers earlier this year. Pride piloted this program in the state of Florida for four to five months, and decided to roll it out nationally at Medtrade Spring in March.
“The program is designed to attract and offer the retail customer a straight forward installment loan option to enable them to purchase the Pride Mobility products they otherwise couldn’t afford,” Corgan says. “Providers can build retail mobility sales by harnessing the power of low monthly payments to attract new customers to their showrooms and add immediate profits to their bottom line. Best of all, once a deal is done, the provider has absolutely no recourse obligation.”
Since its launch, Corgan says the program has seen solid up tick with Pride’s providers. “We’ve had a tremendous response from our providers and the feed-back from them has been 100 percent positive. The program is easy to understand, easy to use and U.S. Credit makes it run smoothly.
“Financing is often the way you can differentiate retail product,” he continues. “Often consumers come in and ask ‘What’s the difference between this vehicle lift and this vehicle lift?’ and the answer can be ‘This one has consumer financing attached to it,’ which can be the trigger mechanism for them to say, ‘Okay, I’ll go with it.’”
There have been attempts by consumer financing companies, such as GE Capital, to enter the HME market, but they haven’t worked. Corgan chalks that up to lack of familiarity with the territory.
“This marketplace has been difficult in comparison to standard retail marketplaces, such as furniture are automotive sales, where consumer financing is relatively prevalent, because the individuals that are being offered the financing often don’t qualify,” Corgan says. “GE Capital and a number of others have tried to enter the market, but they don’t have an understanding of the HME/DME market and the individuals they might be financing.
“Often times [patients] might be on medical assistance or they might not have three or four different credit cards,” he continues.” It’s easy to give credit to someone who already has good credit or additional credit cards.”
The key in the HME industry, since good customer credit is not as prevalent, is a more hands-on approach. U.S. Credit will sit down with the patient to learn more about their finances and lifestyle and how long they’ve been in their dwelling to better determine the actual credit risk.
“U.S. Credit is working closely with providers and consumers to work through the payment scenarios on a one-on-one basis, versus ‘Do you have a FICO score in the 700s?’ when some of them might have credit in the 500s,” Corgan explains.
Another issue is ease. Providing financing to patients needs to be seamless for the provider and the patient, Corgan says. “[Providers] fill out a simple one-page enrollment form and U.S. Credit does the rest. U.S. Credit takes care of all the documentation, servicing and compliance issues that make consumer credit a headache for the individual provider,” he says.
Pride also offers providers support with the program, he adds. “The program is designed as a business strategy for our providers to increase retail sales,” Corgan says. “In addition to the benefits of simplicity and ease of operation, Pride Mobility supports this program with valuable marketing materials and professional consultation services so each provider can promote the program to the general public and attract new retail mobility customers to their showrooms.”
Ultimately, what solid customer financing offers is a way to ensure that clients can get the DME they need even if that equipment is not funded publicly or privately. The customer gets what he or she needs with confidence and ease, so that they continue enjoying their lives. Paired with smooth point of sales processes and a back office integration that supports a company wide retail strategy, providers just might put their funding woes in checkmate.