You must be strategically intentional in your planning and use of an online pharmacy. Veterinarians tend to approach online pharmacies in one of two ways: They say they can’t compete so they won’t even try, or they set their prices the same as online retailers. Neither of those philosophies resonated with John Talmadge, DVM, so his team at Bigger Road Veterinary Clinic looked into an online pharmacy to see if they could price products to be competitive.
“We had nothing to lose,” Dr. Talmadge says. "We'd already lost $300,000.”
Step 1: Put the right products in the right place
The first big move was to transition sales of large bags of therapeutic diets to the online pharmacy and only stock small bags in the hospital. Those products were priced the same whether you bought in hospital or you bought online, because the markup was already so slim. Clients, however, could enjoy free shipping and the convenience of home delivery if they used the online pharmacy.
Step 2: Watch the online pharmacy separately
Next, the Bigger Road team started tracking their online pharmacy with a separate P&L to see whether their changes made money. They track the monthly performance to this day. The online pharmacy profit and loss is actually easier to track. Between overhead costs, labor costs, inventory shrinkage and more, it's hard to get an accurate number for the profit margin of an in-house pharmacy. The online pharmacy doesn't have that problem.
Step 3: Check that your associates and your revenue won't suffer
Last but not least, Dr. Talmadge wanted to see if associates would suffer if product sales went to the online pharmacy. He conducted a test: He'd offer no production on online pharmacy sales to see if associate salaries were negatively affected. He offered to cover salary losses if they did. Dr. Talmadge had a hunch that he wouldn’t need to, however, because he figured that clients were used to spending a certain dollar amount when they came in, and that the associates would not only make up any lost production to the online pharmacy, but would actually come out ahead because they would make better production on services.
He was right. Client Psychology 101: When the client spends money on products on the online pharmacy, they view it as a separate transaction. They continued to spend the same amount as they used to at the veterinary hospital for wellness visits because they were already used to spending a certain amount. But now the pets were getting more lab work and more vaccines at the hospital, and parasiticide purchases were moved online to a separate line item in pet owners' heads. The pets get better care, and the associates earn a better living. The doctors at Bigger Road are thrilled and totally support the online pharmacy, according to Dr. Talmadge.
Step 4: Check that your veterinary team members are on board
Any practice manager can tell you that getting the staff to change habits and routines can be difficult, so Dr. Talmadge knew it was important to incentivize the change. Bigger Road’s leadership went ahead and told the staff that it was OK to tell clients that if they shopped through the online pharmacy, they would receive a discount, anywhere from 30 to 50 percent less than buying from the in-house pharmacy. This was particularly rewarding for front-desk staff, who deal with large bills and disgruntled clients.
How successful was the four-step process for Bigger Road?
The practice—which grew to two practices a few years ago—went from $16,000 in online pharmacy sales in 2012 to more than $200,000 in 2013. The practice became veterinary distributor MWI’s largest online pharmacy in 2013, and when they outgrew MWI's online pharmacy capabilities at the time, they switched to Vets First Choice. Growth this year in parasiticide sales is up 38 percent over 2016. Online pharmacy revenue is up 25 percent over last year. And 2017 could end up with roughly $550,000 in revenue from the online pharmacy—that's a whopping 43 percent of total product sales for the practice.
How online and in-house pharmacies work together
What are the top product categories online for Bigger Road? You can guess the top three—parasiticides, NSAIDs and therapeutic diets—in that order. But the online pharmacy is not intended to replace the in-house pharmacy. It exists to make the in-house pharmacy more efficient. Bigger Road does carry inventory to get clients started—for example, chronic drugs or parasiticides—as well as all the acute drugs. And Dr. Talmadge and his team are open with clients that the cost of medications bought in house are higher because they need to handle the inventory. He says that clients understand why drugs in house cost more than drugs online.
By moving to an online pharmacy, Bigger Road was able to reduce $120,000 to $150,000 of in-house pharmacy inventory to $50,000 to $70,000. That's reduced the cost of theft, loss and expiration dates. And the Bigger Road team doesn’t have to spend as much time counting pills for chronic medications, freeing staff up for other client-facing duties.
The online pharmacy also allows the Bigger Road team talk about virtual inventory, offering clients the option to purchase recommended items not carried in the hospital—and a plethora of products and compounded medications for Bigger Road’s clients to choose from.
'But the door won't swing!'
A big fear for some veterinarians is that an online pharmacy decreases client visits. Dr. Talmadge says the reality is—online pharmacy or not—clients will come in the front door less because practices aren't making service convenient. We must go to them, he argues.
Time is a precious commodity. Anything we can do to save clients time is valuable to them. From a relationship marketing perspective, an online pharmacy is convenient for clients. In today’s marketplace, the focus could shift from concentrated efforts to get clients in the front door to getting the practice in front of clients on a more regular basis. The online pharmacy assists Bigger Road’s effort in this by sending reminders in the practice’s name on a regular basis. It keeps the practice relevant and present in the client’s awareness.
Still have online pharmacy reservations? You're not alone. Tell us about them at [email protected], and we might print your thoughts in an upcoming story.