Razor Sharp Retail
How HME providers can hone their retail sales and marketing skills.
- By David Kopf
- Aug 01, 2010
Providers sit on the bleeding edge of CMS policies, and it’s not pretty. With the 9.5 percent MIPPA cut, the re-bid of Round One slashing funding by an average of 32 percent, increased RAC audits, the 36-month rental cap for oxygen equipment, and other policies that seem almost purpose built for undermining providers’ bottom lines, HMEs must find new revenue streams. And the best new revenue stream for providers is, without a doubt, cash sales. Retail can almost instantly expand a providers’ cash flow and help stabilize their finances so that they can stay afloat while overcoming Medicare funding delays and obstacles. Cash sales have become critical to provider survival, and HMEs must sharpen their retail games.
“Unless the HME provider really looks at cash opportunities, how can you completely survive in a competitive bid environment?” asks Ty Bello, BS, RCC, and president and founder of Team@Work, a firm that provides sales and managerial training to HME providers. “You can’t. You really have to look at all your alternatives and cash sales has been and will continue to be one of those alternative revenue streams that needs to be studied by the HME provider.” For Ron Street, CEO of HME provider Street Home Medical Inc. (Warner Robins, Ga.), which has been conducting a significant retail business for 16 years, cash sales and other funding sources contribute as much as 50 percent to his business’s bottom line. “It used to be 80/20 [the mix of Medicare to other funding sources] when I first started doing this,” Street says. “But right now, it’s probably 50/50 with cash sales and private insurance, versus Medicare and Medicaid.”
And 60 percent of that 50 percent is probably retail, Street further explains. Suffice it to say cash is king for Street Home Medical nowadays, so getting a head start on retail worked to his favor, Street says.
“I started with the cane tips that nobody wanted to carry,” he recalls. “We had people coming in wanting to buy them, and a little light went off. And then it went from there and expanded. Now I’ve got 9,400 square feet of retail showroom.
“If I didn’t have my retail business, we would have gone under a long time ago,” he continues. “It’s the retail that’s allowing me to keep my doors open and do the rental equipment. … If you’re not in retail, you need to be, and if you’re not going to be in retail, then you need to get out; the way reimbursement cuts are going to happen.”
That said there has been a key obstacle to entering retails sales in the homecare marketplace: a cultural barrier. The notion of “selling” has been frowned upon, as it seems less noble than working with a funded piece of DME.
“The word ‘retail’ for a long time has been a negative word inside of HME,” Bello explains. “Because we’ve worked in an area that we know very well, CMS. And now that is changing, as we are looking at cash sales.”
And while providers haven’t been that educated in retail per se, as consumers themselves, the staff and owners of HME businesses do have retail experience, he says. “We go out and buy things all the time,” he says. “Now it’s putting on that hat, as an HME provider, and saying ‘what can I offer my existing patient base and others in my medical community that could be a cash sale ticket?’”
Adopting a retail mindset hasn’t been an issue for Street Home Medical, because the provider has been pointed in that direction from the start, Street says.
“I’ve always been geared that way,” he explains. “We know that you have to be innovative and create new income. We knew back in the ’90s, when people were opening up oxygen companies and just wanted the cream of the crop. I was the only one selling diapers, Band-Aids, and those quad-tip canes.”
Being the only provider in town to stock those retail items worked in Street’s favor, because the provider was becoming a regular, reliable resource for its local DME marketplace. Those repeat small sales were building long-term customer relationships.
“If they need a cane tip, then later on they might need a wheelchair,” Street explains. “And then, later on, they might need a bed. And if they keep going form store to store to store, and they say ‘no, we don’t have those and we’re not going to order them’ they’re going to remember that guy that said, ‘yes.’”
Street notes that if a provider doesn’t sell retail items, then it is, in a way, working for its competitors that do sell cash sales items, because it is essentially creating a reason for patients to go down the street.
If anything, the cultural shift lies in simply wanting to make the sale, Street says. Certainly providers want to make sure they ensure top-quality care and that patients receive the right DME, but in a retail situation, they want to close the deal.
“I don’t care who pays me — whether it’s Medicare, Medicaid, or you have to reach into your pocket,” Street jokes, while driving home the point that retail requires putting on that sales hat. But it’s sales with a service bent to it, because that will get the sale in healthcare. “My motto is ‘how many people can I help today.’ You have to wake up with that attitude. ‘Can I help you with a wheelchair? I’m going to get you a wheelchair.’ You have to have a passion for the business. The more people I help, the money comes in.”
Shaping a Strategy
Once providers think from a retail frame of reference, they need to start looking at what works. For providers that are currently in retail, Street advises to stay in the retail game, and if sales aren’t what they should be to stick with it, and review what items are selling the most, and then work to increase that volume by another 10 percent.
For providers that are new to retail, Bello suggests they look at their current mix of funded products, and do some research and due diligence as to what DME would compliment those offerings as retail products, as well as appeal to their marketplace. Then providers need to think competitively about how they gain market share in those retail product categories from their competitors.
“[As an HME], I also have to look at what does my referral community current refer to other providers in the area, regarding cash sales, that I would be willing to adopt?” he adds.
Bello also notes that while providers might not be able to confer with their local competition, they should network with some far-fl ung providers serving similar markets to see how they have shaped their cash sales business.
“One of the best things we can do is explore those cash sales opportunities with other providers form other states that have been successful with cash sales,” he suggests. “Why not call them up? Why not take a field trip and go see how they’ve been successful with their location? What are the hurdles that they had to overcome and what did it take to ramp up their retail location?”
Membership in buying groups, member service organizations and industry associations is a great way to find these contacts, Bello says, adding, “put your money down, buy a ticket, and don’t forget to buy dinner for the family that has let you see their business.”
In the same way that the managers and owners of HME businesses must adopt a retail frame of reference, so to must their team members. While the traditional HME sales staff has been working on selling to referral partners, retail marks an entirely different dynamic in that the patient is coming in and staff must dialog with them, instead. Fortunately, this isn’t necessarily a hard step, since staff have been exposed to retail sales all their lives.
“We’re retail consumers,” he says. “So where do we go to shop, what do we buy, and what do we expect when we’re there?”
For starters, staff that approach sales with a high degree of service. The goal is for a much higher-touch sales approach than typical retail.
“We all have experienced the untrained staff of local department stores, chain stores, and places like that,” he says. “We really need to take a mindset of, say, a Nordstrom. There really is a whole way of customer service for a retail setting, and I believe that is one of the stores that has it down pat. We need to study that type and level of customer service. You have to sell clients, but it’s almost like you’re not selling them, rather than you’re just serving them, and in turn, they’re buying.”
Bello suggests providers create a retail sales training approach that involves scripting and dialoguing for retail customers, as well as intense equipment and service education so that staff know exactly what they are selling. They must be able to answer the tough questions.
But again, the goal isn’t just to make the sale while ensuring the patient gets the right DME. It’s a balancing act between being revenue- and patient-focused. Do it right and patients stay happy, and come back for more.
“Never oversell you patients on things that really don’t need,” Bello advises. “Give them what they need, moreso than what they want. You can sell them what they want, but it might not meet their needs. I’d rather sell them what they need, because we’re looking at repeat clients. These people will be back either for themselves, or share their story about your store with others. That’s what we’re after.”
“You cannot have the mindset that ‘if we build it, they will come,’” Bello says. “Patients will note come. We have to let the marketplace know that we have these products to offer. So it has to be marketing effort to let your existing referral community that you’re carrying these products, and that they will in turn let their patients know you have these products, as well.
“You also need to remember that you have a base of existing customers, and they too need to know about your retail products,” he continues, adding that providers need to make sure that any marketing to existing patients falls within any legal or regulatory requirements from state or Federal funding sources. Understanding these requirements is especially important when it comes to marketing through existing communications, such as bill stuffers. “You have to thoroughly check that out.”
Providers that might not have a lot of marketing experience should not be afraid to seek professional help, and a great place to start is with their vendors, says Noelle Craig, retail mobility & internet retailer sales support supervisor for Pride Mobility Products. Vendors such as Pride often provide a wealth of marketing assistance, ranging from no-cost to on a fee basis, to providers. Pride offers its HMEs a wide range of services ranging from print marketing materials all the way up to help create television and radio ads.
The reason for this is that it is in manufacturers’ best interests to do so. Helping their providers ensures their DME will have effective sellers.
Media and Messages
The right mix of marketing messages is also important, Craig says. For instance, if the provider offers financing services, it should make sure to get that point across in its messages to attract cash customers to visit the showroom in order to check out a more expensive, unfunded item the might have initially thought they could not afford.
“It’s very often that you’ll have a customer that comes into a showroom monthly for repeat supplies or a prescription refill,” she says. “And they might walk right past one of those retail products, such as scooter or lift chair assuming that they can never afford to make that large-ticket purchase. Letting them know they can own that product for a certain dollar a month makes them turn around and say, ‘hey, this really is affordable.’ That’s what’s going to make the sale.”
Other important marketing messages to communicate are price point, product quality, service before and after the sale, and ease of shopping make for a dynamic mix of marketing messages that will drive customers to the door, she says.
And don’t forget messages that are tailored to the temper of the times, says Cy Corgan, national sales director of retail mobility for Pride.
“During challenging times like we have now, that’s the time to really advertise to the consumer that you have promotions going on; that you’re having specials,” he says. “If you take a page from the auto industry, what happens when sales go down? They start to advertise more incentives, rebates, more financing and better terms, which brings the consumer into the showroom, and hopefully purchase. That’s the same thing we should do in our industry from a retail standpoint.”
Corgan also advises that providers should maintain heavily detailed patient records and use those databases
for data mining, which is a very economical way to drive repeat business. “If they bought from you once, then they might need additional products two, three, four, five years form now, or even a few months from now,” he says.
Also, for providers just starting to market and advertise, Craig recommends to take a measured approach. “Start slow,” she says. “Don’t just jump right in and try to do a gigantic television commercial. Figure out your budget and start slow.”
Tracking marketing and advertising performance is also important, she explains. Providers should train their team members to ask customers where they heard about the business. This is another reason for not jumping in, because starting slow with just one or two marketing campaigns will make it easier to track their effectiveness.
For Street Home Medical, Street says that his business doesn’t do much print advertising, but maintains a strong Web presence both from its website and through social networking on Facebook.
“I’m a heavy believer in marketing on Facebook,” he says, noting that Street Home Medical’s marketing efforts are targeted toward both referral partners and patients. “I’m throwing retail sales on there: ‘Mother’s Day Sale: lift chairs.’ These are cash items.”
Street says he has throttled back on any radio advertising as the listening habits of clients has changed too much in the past. As more people use iPods and other electronic players to listen to music and podcasts, the radio audience has become fractured. However, Street says his business advertises heavily on local cable. In fact, it’s a key element in his marketing efforts.
In terms of who Street is trying to reach with his television advertising, he says he has three key audiences; patients, referral sources, and caretakers. So for his television advertising reflects that strategy.
“If I’m looking for nurses, I’m on Home and Garden, E! Entertainment, the Food Network, and those sorts of channels,” he explains. “If I’m trying to reach doctors, I’m on MSNBC, CNN, Larry King Live, and that’s where they run my spots.”
Also, Street says he hasn’t skimped on the production value of his commercials, even contracting musicians to develop a jingle for his business: “The Road to Recovery Starts with Street Home Medical.”
“Doctor’s call us up and sing the jingle over the telephone and then say, ‘give me a CPAP order,’” he says. “It works for us.”
Points to Take Away
- Cash sales is becoming a critical element in ensuring providers have enough cash flow to survive the current funding landscape.
- Retail sales used to have a bad rep among HMEs, and thusly adopting cash sales means adopting a new mode of thinking for some. Don’t resist it.
- This new mindset must be understood by everyone in the organization, staff and management alike.
- Retail can still be patient-focused. In fact, a successful retail strategy with an eye on repeat business revolves around giving patients what they need, rather than what they want. Service will result in sales.
- Smart marketing plays a critical role in providers’ cash flow strategies. Create the right blend of audience, media and message.
- It is critical for providers to determine their market’s retail product needs and how to successfully advertise to they right customer groups that they offer those products.
Looking for more information how to jump-start your cash sales efforts? Check out our Cash Sales Solutions Center on HME-Business.com. There you will find a regularly updated collection of features and articles on retail sales for HME providers. Also, you’ll find the latest product listings for various products that are ideally suited to retails sales. Make it a part of your regular web browsing.
This article originally appeared in the August 2010 issue of HME Business.