Lessons in retail marketing to successfully manage secondary profit centers

Secondary profit centers (SPCs) usually require a separate inventory of items that do not exist in the primary profit center (PPC) or primary practice (PP). Managing this inventory efficiently and correctly is essential to running a successful SPC. Unfortunately, this is one of the least understood and appreciated aspects of a practice. Fortunately, however, it is one of the easiest and least expensive to incorporate.

Nutrition is a common example of an SPC. Many practitioners realize the importance and efficacy of natural remedies and often implement nutrition into their practices to better serve clients and increase practice revenues. Unfortunately, most practitioners interested in establishing a nutrition center think of it more as a hobby than a profitable aspect of the business. Mark Percival, DC, ND, founder of Health Coach Systems International, says, "If you run the nutrition aspect of your practice as a hobby, then it will end up costing you. If you approach nutrition as a fundamental aspect of all healing and seek the operating systems that genuinely support this, it soon becomes the most profitable department in the practice."

Shop Talk

Innovative, simple, and low-cost strategies can be implemented to make the practice more profitable. However, these strategies require a basic understanding of retail skills that the average practice/practitioner is probably lacking. The basic laws of retail are:

• Reduce inventory loss.
• Know your statistics.
• Facilitate repeat business.
• Reduce employee errors.
• Reduce inefficiency.
• Maximize the sale.

These rules are best achieved through a point-of-sale (POS) retail and inventory management system. Stand-alone POS retail systems designed for the health care environment provide a simple, low-cost solution for health care retailing. If inefficiency is minimized while profit is maximized, chiropractic is in a position of strength to better serve patients and the community, which should be the goal when adopting mainstream business models. The retail market has provided time-tested and proven models to increase profit, decrease loss, and improve efficiency. The models specifically pertain to the control of inventory and the dispensing of goods.

In the past, there have been inventory control programs to help practitioners manage stock; however, an integrated inventory control and POS dispensing systems that "talked" to each other was lacking. The ideal health care retail POS system contains three sections that provide SPC solutions for both the front and back office: 1) inventory management, 2) dispensing, and 3) statistics.

POS inventory management benefits the SPC by reducing time needed to enter items into inventory with the use of bar code technology. It also reduces counting errors and inventory loss and/or theft and can automatically reorder items or flag the dispenser when predefined stock levels are low. In essence, it quantifies stock and sales, and it also allows stock rotation to become more efficient by permitting the practitioner to identify fast and slow movers.

Statistically, slow movers might be items that are too broad, lack sufficient appeal, or are highly specialized. In such cases, a POS inventory system quantifies these assessments and makes the appropriate adjustments—such as ordering less of the item or designating the item as special order.

Easy Street

Often, automating the dispensing process determines how successful an SPC will be. Three key factors of successful dispensing are: facilitating the sale, companion sales reminders, and user-friendly systems.

Reading bar code labels printed on patient charts and products is less time intensive and much easier. If a particular product does not have a bar code, one can be printed and placed on the product when it is received into inventory or a master list can be posted in the dispensing area. POS dispensing systems can be programmed to print instructions, labels, and patient educational handouts. This reduces explanation time and also provides a take-home reminder for the patient, increasing patient compliance.

Companion or synergistic items that are often dispensed together can be linked so that if dispensed alone, an on-screen flag will alert the staff to mention the additional item. Prompts can be included, such as: "Are you taking a good multiple vitamin?" and "It has been 6 months since your last nutritional assessment. Do you want to schedule one now?" This is referred to as "up selling" in retail and is the equivalent to: "Do you want fries with that?" Up-selling maximizes patient care by ensuring patients do not fall through the cracks.

Successful marketing of an SPC depends on knowledge of your business’ statistics. For example, statistically, women’s health products will be bestsellers if this is your main client base. Rather than continuing to focus on men’s health, which a quick report can show poor results, refocusing marketing dollars and inventory investment and efforts towards women’s health will increase profitability. No matter how knowledgeable you become, there are at least three main areas in your SPC that drive 80% of sales. Increasing marketshare in these areas is wiser, rather than continually trying to be all things to all people. POS statistics will help identify this. Furthermore, POS statistics help track the success and impact of targeted marketing campaigns.

All Systems Go

SPCs often involve more than one person or practice compensated according to performance (commissions). A sales or commission report can be printed for any staff member or practitioner. POS statistical systems incorporate the daily uploading of information to a secure website so practitioners can access the office sales report. These statistical reports can be generated quickly to pay commissions and bonuses, track employee performance, and generate reports for tax/accounting purposes. This system is also valuable when information is lost, altered, or destroyed because it can be easily accessed and restored.

POS health care retailing systems move you from the passenger to the driver’s seat of your SPC. However, POS systems should be more than an enhanced inventory management system. It should also provide powerful dispensing and statistical functions that are easy to use. A truly integrated POS system runs the practice more efficiently, reduces cost, and provides valuable statistical feedback necessary to refine and grow, while simplifying the process.

About the Author

Nicholas Calvino, DC, is a nutrition and business consultant and a health and nutrition author and lecturer. Calvino operates Natural Health Partners, LLC, specializing in physician branding and managing secondary profit centers. He can be reached at 810-385-6737 or via email: adjustme@cyberdude.com.