Looking for Ways to Increase OTC Sales? If You’re Not Focusing on Customer Retention, Here’s Why You Should Be.
Like many pharmacy owners trying to become more profitable, you’ve probably started to shift your attention to your non-prescription revenue. More specifically, focusing on strategies to increase over-the-counter purchases, which typically have more predictable profit margins that aren’t dependent on payer reimbursements or subject to administrative fees. Often, when pharmacies are trying to boost their OTC sales, attracting new customers is at the top of their priority list. However, gaining new customers is just one piece of the puzzle – retaining them is just as important (if not more so) to the long-term success and profitability of your pharmacy. Not only do repeat customers provide an ongoing revenue stream, but they are more likely to spend more each time they’re in your store as well. In fact, studies have found that repeat customers spend an average of 67% more than new customers1 and a 5% increase in customer retention can result in a 25-29% increase in revenue1.
If you’re not focusing on customer retention as part of your front-end growth strategy, here’s why you should be – and how using an integrated point-of-sale system, like BestPOS, can help.
A Loyal Customer Base = Repeat Business.
Customer loyalty is a powerful driver in the long-term success of any business. Not only does it cost significantly less to retain a customer than gain a new one, but once a customer develops loyalty to a store or brand, they’ll continue purchasing from them for years. This means pharmacies that have built a loyal customer base are spending less time and money on each sale. However, it takes an average of three or more purchases to begin building customer loyalty. So, how can pharmacies entice customers to make multiple purchases at their store? One of the most effective ways is by implementing a loyalty program.
When developing a loyalty program for your store, there are several things to consider, including the ease of earning and redeeming rewards, as well as the reward itself. It’s important to think these things through, so you can ensure the loyalty program will be worthwhile for both your business and customers. For example, one of the most common frustrations for consumers is when it takes too long (or it’s too difficult) to earn a reward2. To avoid this and other loyalty program pitfalls, make sure:
- There aren’t too many barriers. While certain items in your pharmacy can’t/shouldn’t be eligible for rewards, too many exclusions can dilute the impact of the program. After all, the goal of a loyalty program is to encourage customers to purchase more from you, so the more OTC items you include, the more upsell opportunities you’ll have.
- The point to reward ratio is reasonable. Nothing kills the excitement of joining a rewards program like finding out it takes thousands of points to earn a reward – especially one that seems small compared to the effort/dollars it takes to achieve.
- The reward is significant enough to be enticing. Whatever reward amount you decide on, make sure it’s valuable to the customer. For example, offering a $1 reward after the customer has spent hundreds to earn it is unlikely to drive the customer to purchase more from your store, or come back again. However, offering $5 off a purchase after spending $100 might. This way the reward feels much more attainable for the customer – and it equates to a 5% discount across multiple purchases, so it won’t have a significant impact on your bottom line either.
- Tracking points and redeeming rewards is simple. If customers are responsible for tracking and redeeming their rewards, it’s likely the loyalty program will fall flat and be forgotten. Instead, alert customers to any points earned during a transaction, and share their current loyalty point total to keep them engaged. Plus, if you set up rewards to be applied automatically to a transaction as soon as it’s earned, it’s a nice surprise for the customer at checkout – and one they’re likely to remember the next time they’re deciding where to make a purchase.
Once a loyalty program is up and running, you should begin seeing its impact, as nearly 75% of consumers say they are likely to make another purchase after receiving a loyalty reward3 and approximately 66% of consumers will modify their spending to maximize their reward benefits4.
Sales Promotions Are Linked to Higher Customer Satisfaction.
Sales promotions are another effective way for pharmacies to increase revenue – and boost customer satisfaction. In fact, a survey conducted by RetailMeNot found that coupons can actually alter brain chemistry and increase customer happiness5. Research has also found that consumers tend to spend more when they are happy and satisfied customers are more likely to purchase from you again in the future, too.
As with the loyalty program, it’s important to be strategic about the OTC sales promotions you offer to ensure you see the maximum return. Factors you should consider include:
- The timing of each offer. Reviewing sales trends can help you develop relevant, timely promotions for your customers. This allows you to promote specific items when they are most in-demand and incentivizing shoppers to buy from you, versus your competitors.
- The products you select. You can run a sales promotion for a specific item, or an entire department/product category. Just be sure you’re not just selecting items you want to move out of your inventory and offer discounts on popular products too. Promotions are only effective if they are compelling, and customers actually want them.
- The type of discount used. Based on the item(s) you select, the type of promotion you offer may be different. For example, you may use a lower, introductory price for new products, a buy-get or bundle offer to clear out slower moving items, or a percentage or dollar amount off a popular item/category.
- How competitive your offers are. It’s also important to keep an eye on your competitors to ensure your sales promotions are on-par, or better, than what other pharmacies in your area are offering.
Afterward, it’s important to analyze the success of each promotion, so you can identify where you may need to adjust in the future. For example, sometimes, using a specific dollar amount off is more likely drive consumers to make a purchase versus a percentage-based promotion, even when the discount is the same.
Leveraging Technology to Boost Your OTC Sales
Customer retention efforts don’t have to mean more work for your pharmacy either. In fact, an integrated point-of-sale system, like BestPOS allows you to:
- Design your own loyalty program, including setting point/token and reward values and determining which products/departments are eligible. Plus, you can enable the program to automatically track points and apply rewards, too.
- Create a variety of sales promotions for a specific item or category of products, including buy-get offers, specific dollar or percentage discounts, and assign a start and end date to each offer.
- Quickly generate helpful reports that can be used to monitor your inventory, sales, and promotional trends.
- Use electronic data files from your wholesalers (known as EDI) to make automatic price adjustments and apply any manufacturer discounts that may be available.
This way, it’s easy to gain valuable insights into your customers’ buying habits and create timely, compelling promotional offers and reward repeat purchases – all of which help to increase customer loyalty and your OTC sales.
To learn more about all the ways an integrated point-of-sale system can help your pharmacy become more profitable, request a free demo today!
Sources:
2https://www.loyaltymagazine.com/tag/loyalty-report/
3https://nmgprod.s3.amazonaws.com/media/files/97/e3/97e3466268a5f6a39748b0acf861188d/asset_file.pdf
5 https://www.bigcommerce.com/blog/use-coupon-codes-for-mind-control-and-customer-satisfaction/
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