Medtrade 1999 Wrap-up

• By Angela Neville, Cynthia A. Parkman
• Jan 01, 2000

The second annual "Winning Retail Strategies" focus session held at Medtrade again brought universal acclaim from attendees. Attendees benefited from a panel discussion lead by five experts that represented home medical equipment (HME) providers, distributors and manufacturers. The panelists and attendees discussed strategies to enhance retail marketing efforts of HME providers.

"Every person on the panel had a valuable insight or experience to contribute," one attendee said.

As moderator, I began by introducing the concept of retail portals. Just as America Online (AOL) and Yahoo are portals for almost anything you need online, several national branded retail chains are achieving similar levels of trust and comfort with their retail customers. For example, Starbucks is a trusted place to go beyond a simple coffeehouse. It is now successfully selling food and branded merchandise. The Gap sells membership and a sense of belonging - far beyond just clothing. Crate & Barrel sells more than housewares because it presents an orderly world in which you cannot go wrong in whatever you buy.

How does this relate to home health care and home medical equipment (HME)? Most consumers are not aware of what is available. Home health care providers offer information to educate customers, caregivers and patients about their products before selling. They are not selling only HME but also quality of life, comfort and lifestyle enhancements. Why not become a portal for everything at home that improves a person's quality of life?

Following is a brief overview of each panelist's presentation.

Paul Pankros, director of home health care services

Walgreens Health Initiatives, Deerfield, Ill.

Pankros is a 40-year veteran of Walgreens and has developed their Walgreens Health Initiatives, a separate, full-service HME business that operates 16 locations in five states. He presented the three basic components of a successful HME retailing operation: good location, scope of products and services, and staffing.

Pankros explained that Walgreen's first examines a neighborhood's demographics and location. "We look for a medium income of $35,000, home ownership of greater than 55 percent, and over 22 percent of the over-55 age group. But we are also very interested in the 45-to-54-year-old age category. You might not picture them as the typical HME user, but they are the caretakers of our parents. If I can buy a product that will make my mother's life easier, then I am in turn making my life easier - and I am happy to pay cash out-of-pocket for this product."

Pankros also said that Walgreen's looks for a location with good visibility, good parking and easy access.

"We check with the city manager to find out the traffic count pass and look for a minimum of 6,000 to 8,000 cars per day that pass by any particular location. We also require a minimum 50-foot front for large display windows. Then at nighttime, we display a brightly lit selection of upgraded walkers, lift chairs, scooters and stair lifts - all great eye-catching retail cash items."

In order to know the scope of products and services the store should provide, Pankros said that they study the competition to see what home health care products they are selling. He said they also visit local doctors and hospitals to find out what products they need for their patients.

"We strive to differentiate ourselves from the competition, either by offering a full-service operation or specializing in a niche such as orthotics, respiratory or post-mastectomy."

According to Pankros, they decided to offer Medicare billing and accept assignment because these services complement their drug stores.

"Chain drug stores are an excellent referral base for retail home health care businesses," he said. "Every pharmacist knows who is their nearest HME supplier for when they have a customer in need. But such services result in a more costly overhead due to billing computer systems, accounts receivable staff and a delayed cash flow."

Pankros said he puts great emphasis on a good staff.

"You can have the best location, outside sales reps and advertising program, but if you don't have knowledgeable, in-house salespeople to sell your products, then your HME business won't succeed," he said. "We place our emphasis on staff training, education and communication. The better job we do of in-servicing our staff and enabling them to communicate issues back to us, the higher the level of customer service they provide."

"My definition of selling is not just making a sale. Our customer service reps initiate a dialogue with a customer, find out their needs and limitations, the activities that they can't do anymore, and then sell them the appropriate product. This means selling them an upgraded walker with seat, wheels and tray for $399 instead of the Medicare-reimbursable chrome folding walker because they have done their job and sold the appropriate product for that end-user."

Cindy Ciardo, director of operations

Kneupple Health care, Milwaukee

Ciardo manages a 45-year-old family-owned HME business that has re-created itself to successfully compete against increased competition from chains, marts and hospital-based operations.

According to Ciardo, Kneupple has refocused its efforts to promote the family business, community roots, knowledgeable staff and product selection.

"We shed our family pharmacy and respiratory businesses and moved all of our referral-driven and non-retail products, such as incontinence and wound care, out of sight. The fixtures were removed and the showroom floor opened up to display a complete selection of retail cash products."

These included lift chairs, scooters, bath safety in a simulated bathroom display, and a complete selection of lumbar and cervical cushions.

"Customer service is our hallmark. We greet every customer when they walk in our door. We emphasize to our staff that the customer comes first. When a customer walks in, they must get off the phone and get their heads out of their paperwork because the customer comes first."

She said that the most effective marketing tool has been this one-on-one approach because of the relationships developed with customers who then go back and tell their referral sources, family and neighbors.

Ciardo's goal is to be the primary home health care resource for the customers.

"We don't want customers to have to look elsewhere for information on their diagnosis or available products. Our salespeople are trained on all products available in a category so that they can educate customers on the features and benefits of a wide selection of products that will help them with a particular diagnosis. We are educating, not merely selling, and do not commission our salespeople," she said.

Ciardo also works hard to get customers and professionals into her facility.

"We hang professional signs and banners out front because if we announce a sale in progress then new people come in out of curiosity," she said.

"We take our lift chairs and specialty walkers to retirement homes and leave them for a month. If residents can't come to us, then we go out to them," she said. "We present in-services to educate people at hospitals, nursing homes, retirement communities and physical therapy departments. After each presentation, we hand out gift certificates just to get new people into our facility to see our great product selection. They may not need medical equipment, but they also don't know that they don't have to be sick to need some of our products, such as a heating pad, cold pack, cervical pillow, lumbar cushion or compression stockings."

Direct mail is another way Ciardo targets specific customer bases with products such as compression hosiery and incontinence.

"Every time we have a sale, these customers return, buy more and then keep coming back. This is why we offer a professional discount on all of our products - because we are more concerned that referral sources come in often enough to be able to tell their patients what we have to offer."

G.J. Walley, director of home health care

Bergen Brunswig, Orange, Calif.

Walley coordinates the distribution of HME for Bergen Brunswig, one of the largest national distributors of pharmaceuticals and med-surge supplies. By closely working with both manufacturers and providers, he helps to pull through products and increase sales to help make HME businesses successful.

"What is the value of distribution in the HME industry?" Walley asked. "This is an entrepreneurial industry in which everyone likes to cut a deal. At trade shows like Medtrade, providers like to visit a number of manufacturers and bargain for the best pricing. But they must buy volume to get these prices. Look beyond the simple product cost and utilize a distributor to optimize the balance between cost, quality and time that will be most profitable for your organization."

Walley said the main functions of distribution are storage, delivery and transportation, receiving, handling and packaging, transaction and order processing, credit management, returns, customer service and information services.

"Think about the time an HME provider spends to fulfill all of these time-consuming, labor-intensive functions. Distributors help to streamline these processes, which is a lot more than simply delivering a product to you or your customer."

How does distribution help to streamline costs? He said that bar coding enables providers to keep track of their inventory and reorder easily. Category management enables providers to stock the appropriate products for their customers at the right price and not be out of stock.

"You cannot afford to be out of stock, because then your customer will simply go somewhere else to look for and buy that product," Walley said.

"We even help HME providers create their own formularies. We track product usage and can formulate what you order by season and month. Then we can stipulate what products you buy and sell at any given time throughout the year," he said. "Many of our products did not even exist five years ago, so we continually keep providers informed about who the target customers are, new products available, and how to sell them."

"Providers often come to us, buy product and then think that customers will magically come in to buy," he said. "They must work with us first to create demand. Products need to be displayed professionally because the days of storing your disposables up-front are history. You need to wow your customers with your product displays, and then have your salespeople trained to greet your customers, asking how they are and how you can help them. People remember good, professional customer service."

Frank Milatta, president

Health Care Depot, Freehold, N.J.

Milatta opened a retail home health care business in a strip mall that is next to a chain drug store and across the street from a medical center.

"Our customers are demanding less restrictions and more product choices when selecting HME products, the exact opposite of their health care systems and insurance companies that are limiting products, allowables and reimbursement," Milatta said. "They are less willing to settle for the basic HME products that their insurance companies say they qualify for. Instead of buying the Hyundai, they want the Honda or Buick and occasionally the Cadillac or Mercedes, and they are willing to pay cash for it."

Milatta said if an HME provider does not offer these product choices, then a competitor will. He displays the good product that is covered under the Medicare allowable, and then shows them better and best products.

"When retailing reimbursable items, remember to show customers the upgrades from Medicare items for products such as walkers, scooters, canes, seat lifts and commodes. Customers often want the better products and are willing to pay for them. As a courtesy, we complete the insurance forms so they can get reimbursed later. Retailing non-assigned products, such as bath safety, lumbar, foot care, hot/cold compression and professional products such as uniforms, scales and wound care, is a must," he said.

"We have found that successful HME retailing is a team approach that includes the suppliers, distributor, provider and marketing. The manufacturers help market their products with co-op advertising, in-services to referral sources, product literature and consumer literature. For example, we utilize retail packaging and product brochures to keep our sales costs down without having to take the time to explain everything to customers," he said.

Milatta said distributors enable him to place small orders, not maintain high inventories, get products delivered the next day and drop-ship products directly to their customers.

"But we have learned to have redundancy by using a primary and secondary source," he said. "Our customers don't want to be told that we can't quickly get the product they want at a good price. Tracking products is also key to being profitable. Bar coding helps us track rented and sold equipment, and a point-of-sale system ties together all sales and rentals."

Milatta said the success of retailing HME hinges on having knowledgeable and friendly salespeople.

"We can always teach people about HME products, but they need the disposition and personality to be friendly. We have a mixture of salespeople and medical professionals who work together with constant training and feedback to improve," he said. "They learn to cross-sell because if a customer requests a particular product, then there is a high probability that they need other related products as well. If they don't buy now, we have at least planted a seed so they will come back later to buy."

"Marketing your store and products is the last link in this retail HME team. Our goal is to be top of mind so that whenever our referral sources or end-users need HME products, they think of us first," he said. "We use our logo and slogans everywhere and advertise weekly in newspapers and in the local pennysaver. We hold special events co-sponsored by suppliers, such as our lift chair and scooter blowout sale that brought new people into our showroom. Even if they didn't buy, they now know about us and the products we offer."

Sue Chen, president

Nova Ortho-Med, Gardena, Calif.

Chen manufacturers and is an aggressive marketer of mobility and bathroom safety products.

"Manufacturers just love brown boxes," Chen said. "They are inexpensive, easy to use, move from our warehouse to yours, and then you toss them in a van and deliver them to the patient. But those times are over. Brown boxes don't sell themselves. The growing demand for retail is changing the way manufacturers operate."

Chen advises providers to be proactive and said, "Many manufacturers are still developing their retailing programs. This is the perfect for time for you to explain your own marketing program and then ask how they can partner with you. Don't settle for a prepackaged program, but ask for specific help that meets your own marketing and advertising needs."

Chen mentioned several elements in which manufacturers can help retail products effectively:

• Product. Is the product inside the box innovative, of good quality and does it come with a good warranty? "Warranties are critical in HME because we are not talking about a simple bad hair day if the product breaks. If your mother or grandmother is not able to take a bath or walk to the store, how long will they have to wait until the manufacturer corrects the problem? Will you lose that customer because of poor service?"

• Packaging. Retail packaging must be four-color and consumer-friendly. "Is it easy to read and show what the product does? We even experimented with completely assembled products in retail packaging and found that consumers prefer the product ready-to-use when it comes out of the retail box."

• Retail Displays and Planograms. "Does your manufacturer provide these and other promotional tools to help educate your staff, customers and sell through their products?
• Product Literature
. "Literature is very important when your staff has to learn about a large selection of products. Can you use the manufacturer's literature as a selling tool to answer 99 percent of the questions that customers ask? Is it easy for the customer to understand so that they can take it home to show the patient? Is the literature readily available so that you just call the manufacturer and ask for 100 stuffers that will be shipped to you that day?"

• Co-op Advertising Program. "Most manufacturers offer some type of co-op, but you must read fine print as in any contract. Usually co-op programs are based upon sales with that specific manufacturer. But how is this percentage actually applied? Do they pay for all of an ad if you have accumulated all of the funds, or do they only pay for some specified percentage regardless of funds available?"

• Consumer Support. "Every retail product I buy, even a container of shampoo, has an 800 telephone number for customer support if I have a problem. This customer support is especially important in home health care. If the consumer has a question, will they be able to reach a real person who can answer their question? Or will they get lost and frustrated in voice mail, punch the wrong buttons, hang up and decide never to buy from you again? Your customers need an answer right away if you want to keep their loyalty."

This article originally appeared in the January 2000 issue of HME Business.