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With more than 3 billion prescriptions dispensed annually, the pharmaceutical customer is definitely one that a grocer wants to hold on to. They have larger average market baskets than nonprescription customers, they're bombarded with $2.9 billion in direct-to-consumer prescription drug advertising annually, and once they fill out their first prescription in a retail pharmacy, they tend to keep coming back.
In Understanding the Value of the Pharmaceutical Customer, a presentation at the NACDS Pharmacy & Technology Conference in August, Francine Jackson, ACNielsen's v.p., Southwest Homescan, discussed the importance of pharmacy to the retail customer. She examined which aspects of retail pharmacies are important to their customers and how retailers can leverage consumer behavior to provide the best services to their pharmacy customers.
Data for the presentation was drawn from the ACNielsen Homescan Consumer Panel, a nationally projectable sample of households that scan their purchases of all UPC coded items across all classes of trade. There are 61,500 households in the panel, from all across the United States, representing all demographic groups. IMS Health, a provider of information solutions for the pharmaceutical and health care industries, provided additional marketshare data included in the presentation.
Prescription volume has grown at a steady pace—last year posting a 4 percent increase in the number of prescriptions dispensed. While the drug channel leads the retail pack, selling 57 percent of all prescription drugs, it's losing share to other channels. Grocery, which grew its prescription sales 1 percent last year, is the second-largest dispenser of prescriptions, with 20 percent of the marketplace. Supercenters, although only 7 percent of the marketplace, have been growing at a rate of 2 percent as consumers are increasingly adding prescriptions to their one-stop shopping experience.
Pharmacy customers are among the most loyal a grocer can have, according to Jackson. "Sixty-one percent of households satisfy all of their prescription needs at a single retailer, so once the grocer gets them in, they usually stay in," she says.
What's more, 61 percent of the population suffers from at least one chronic ailment, such as allergies, arthritis, or high blood pressure. Of these, 68 percent medicate with prescriptions. In some cases, such as among people with diabetes and high blood pressure, the patients don't have a choice as to whether they fill their prescriptions. In others, such as allergies, the sufferer can use prescription drugs with less compliance, or he or she may occasionally use OTC medicines.
But what's important is that these sufferers do fill prescriptions on a regular basis. "Those customers with chronic ailments are automatic repeat customers," Jackson says. "Many of these chronic ailments are long-term, and they also dictate the patients' OTC and general household purchasing behavior, such as low-salt foods for people with high blood pressure. Retailers who target these consumers have a greater chance at gaining highly loyal customers on both sides of the pharmacy counter."
To find out just how retailers can capture more pharmacy sales, ACNielsen conducted a Pharmacy Service Survey of its Homescan panel to determine which retailers are used most often for prescriptions, which features consumers found most important at the pharmacy, and which features might influence consumers to switch pharmacies.
Speed, ease, and convenience
What customers viewed as very important were speed, ease of ordering and convenience, and (for those consumers with medical coverage), acceptance of insurance. "They are looking for a less-than-20-minute wait time; ease of ordering refills, either online or over the phone; pharmacists that are available; and extra information, when possible."
Many of these features can be assisted by some of the technologies in place today, such as interactive voice response, automated dispensers, and electronic signature capture technology, all of which allow the pharmacist and other staff to spend more time with customers (see sidebar on page 51).
Those features viewed as less important to the consumer were 24-hour-a-day, seven-day-a-week availability; convenient location to work; home delivery; and switching coupon/incentives. Interestingly, drive-through windows were also listed as less important. "Many retailers think that drive-through windows are good," Jackson says, "but they actually work against the retailer, as they result in smaller overall basket sizes than those of customers who come in-store."
The top reasons for customers to switch to a new pharmacy were similar to those listed as very important: acceptance of insurance; a convenient location—10 to 15 minutes from the consumer's home; prescriptions ready in less than 20 minutes; and the ability of patients to order prescriptions easily online or via telephone.
Young, minority customers
Among younger households, one-stop shopping and convenience to home or work rated higher than among other age groups. Minorities wanted 24-hour-a-day, seven-day-a-week access; one-stop shopping; closeness to work; and access to additional information.
While many supermarket shoppers may get prescriptions, few actually fill those prescriptions in the store, presenting a large opportunity to build pharmacy conversion. "The question to ask yourself is, they are in your stores, they fill prescriptions, but do they fill them in your stores?" Jackson says. "Among the consumers who shop the food stores and have prescriptions—for anything—only 11 percent actually fill their prescriptions in that channel. This represents a tremendous opportunity to build conversion, if the retailer handles them right."
Based on the numbers, grocers would do well to convert as many of these shoppers as possible. Prescription customers spend more money annually in the grocery store than nonprescription customers: While average total customer spending per year in the grocery channel is $2,489, the average for prescription customers is $3,021. Even if you subtract the prescription sales totals from these numbers, the prescription customers still buy more: $2,204 for prescription customers vs. $1,942 total customer average without prescriptions.
Prescription customers also shop more often, making an average of 93.5 trips into the grocery store vs. a total consumer average of 76.
During their shopping trips, prescription customers spend more money. The average total dollar ring for prescription customers is $46, compared with an average of $33 for total grocery customers.
"You can see from this data that a large chain can boost sales tremendously by simply raising the conversion rate of their customers by a few percentage points," Jackson says.
Jackson offered some strategic recommendations to grocers regarding their pharmacy business. First, they should gain intelligence on the pharmaceutical customers, then take action for first-mover advantage in building the pharmacy customer base. "These highly loyal prescription customers will be much more difficult to win later," Jackson says, "so you have to be the first ones to court them."
Then grocers should identify products that address chronic sufferers' needs. "This will help to boost sales and increase customer satisfaction," she says.
Finally, Jackson recommends that grocers consider lifestyle marketing to chronic sufferers to compete effectively across channels. "You want to provide information and products for nutrition and exercise for disease management, and also collaborate with pharmaceutical and managed care companies on drug compliance programs," she notes.