It can end up being the best of times and the worst of times when a change in the market makes existing rules redundant. This has certainly been the case for the retail pharmacy sector in Australia, where the recent proliferation of ‘discount chemists’ has challenged established franchises and independent pharmacies alike. Their varied strategies to counter this attack to their financial viability can serve as a lesson for other industries that face challenges to their operation and bottom line.
Promises of cheap prescriptions made to customers, sometimes real and sometimes hollow depending on the fine print, threatened traditional pharmacies that considered themselves protected by the illegality of discounting PBS prescriptions. When a pharmacy chain capitalised on a loophole that was always evident but never broadly acted on, pharmacists around the country traversed the five stages of grief. And that grief was felt not just for the obvious monetary loss, but for the cheapening of the profession that discounting appeared to engender.
So moving from denial through to acceptance, has it panned out to be an age of wisdom or an age of foolishness for retail pharmacies? Many pharmacies have reacted by following suit and dropping their prices after joining a larger buying group that made discounting viable. The race to the bottom is a short-term fix though, since ultimately few groups will be able to match the supreme buying power of the larger discount chains.
The alternative strategy that smarter pharmacies have adopted is restructuring their market offering and providing customers with value-added services such as health screening, influenza vaccinations and in-house dietitians or child health nurses. These pharmacies have rebranded themselves as one-stop destinations for health rather than $2 shops for medicines. By delegating non-clinical dispensing tasks to technicians, the full potential of pharmacists as medicine experts is utilised and, in return, these pharmacies have gained customer loyalty and increased sales.
So how does the pharmacy experience translate to other industries?
Often, reactions to operational challenges are hasty, superficial and uninspired, such as slashing prices, cutting costs or running a cheap campaign that erodes customer perceptions of the brand. What’s more, these measures can represent the beginning of the end for businesses in competitive markets.
Thinking outside the square and offering customers added value to their usual transactions will ensure that those customers who are worth keeping remain loyal. Conversely, those who chase the latest bargain are inherently fickle: they will always be on the lookout for your competitor’s next deal. Don’t waste valuable resources on wooing them.
Although a seemingly insurmountable challenge caused by a change in your market can appear to be the worst state of affairs, it is not necessarily so. By stepping back and developing a more considered and innovative approach to the problem, the solution could see your business reaching its full potential and performing at its best.
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