Swotting for Pharmacy

When management consultants first approach a business they carry out a SWOT analysis. In marketing, projects are first examined by conducting a SWOT analysis. What is a SWOT analysis and how can it be applied to independent community pharmacy?

Doing a SWOT - examining the strengths, weaknesses, opportunities and threats to your business can be a very illuminating exercise - identifying areas of concern as well as pointing to areas of development.

In this SWOT analysis, we will look at the threats and weaknesses first and then look at strengths and opportunities.

Threats

• Changes as a result of the new contract
• Supermarket competition
• Changes in the licensing regulations
• Manpower

We can’t make the threats disappear, but we can realise they exist and prepare for the possible impact they could have on the business.

There have been many challenges in recent years:

For example - Retail Price Maintenance (RPM) – this was a big issue and quite rightly, everyone prepared for the worst and the possibility that yet another income stream would be lost. Switched on owners not only looked at alternative income streams, so that lost profit could be recouped from a different area of the business but also how they could fight ‘fire with fire’ and retain the ‘at risk’ business anyway. In reality much of this business was retained through improved marketing campaigns and a greater emphasis on what a local pharmacy can offer in terms of service and convenience, which a large supermarket often does not offer.

The moral of that story was very much, yes you must be competitive but price alone is not everything. Convenience and service do have a value.

Supermarkets are an ongoing threat - the very fact that they are big means they are perceived as also being better value than community pharmacy. The perception can not be changed easily, but community pharmacy can meet customers’ needs in other ways to attract them into the store. Independent pharmacy should focus on how it can emulate supermarkets in terms of creating an attractive shopping environment and at the same time differentiating the offer and sell it through personal service and by building relationships with customers.

Discount claw-back hit many pharmacies hard a few years ago and the effects were felt for sometime after its introduction but that was of course only the clawing back by government, of excess profits, which had been made within the system previously. It is quite legitimate to take advantage of price differentials to make extra profit; that is the free market operating. However, pharmacy owners need to recognise why this is happening and assess whether it is likely that government will view the profits made as unjustified and reclaim them. You can then prepare by making a provision for the future, through setting aside some profit to cover such a claw back.

Then there was the manpower threat caused by longer graduate courses which resulted in a dearth of pharmacy graduates in 2001. This, added to more manpower intensive pharmacies opening - including supermarket pharmacies - and more pharmacists moving into other areas of the industry, led many to believe that there would be a manpower crisis for community pharmacists which would result in the closure of pharmacies, abandonment of holidays and a rapid escalation of locum rates.

All those issues have come and gone and retail pharmacy has survived with profitability and goodwill values just as high as they ever were.

Now the challenge centres on the new pharmacy contract, the changes to PPRS, surgery relocations and the freeing up of the contract in the four key areas.

Weaknesses

The biggest weakness pharmacy has to overcome is the perception of many pharmacists that all change is negative. Often this threat of change forces a review of the business and recognition of the weaknesses – for example the public perception that small business equals expensive products and that without RPM all OTC sales from a pharmacy would be lost. The removal of RPM forced the recognition that it is possible to compete with the supermarkets through doing things differently. The first is to make the community offer much more attractive to customers. The shopping environment needs to be inviting and customer friendly, with easy layout of products and helpful staff on hand to advise on different brands and products.

Support can come in the form of joining a buying or symbol group, such as Vantage which provides marketing, merchandising and business development support as well as providing the same buying power as large multiples.

Pharmacists also need to remember they are in business and therefore need to develop all round business skills - you can’t retire from front of shop, but instead need to be more proactive - for example, employ a dispenser and spend more time building relationships with customers, providing a consulting role as well as a dispensing role. Perhaps look at training courses to develop marketing and sales skills.

Strengths

In addition, pharmacist’s need to play to their strengths. Remember community pharmacists provide:

• Expert advice
• Professional service
• Extensive knowledge
• Personal touch

To play up to these strengths, pharmacists need to encourage customers to make their local pharmacy the first port of call instead of the doctor’s surgery. This was one of the main principles behind AAH Pharmaceuticals’ Community Health Services (CHS) programme when it was launched. This provides pharmacists with an additional income source by carrying out health awareness tests such as allergy testing and osteoporosis risk assessment. It is now government policy to develop the provision of healthcare through pharmacy, under the new pharmacy contract. This will see pharmacists recognised and reimbursed for providing a much extended role which in due course will include some prescribing responsibilities.

Opportunities

• Develop alternate income streams - for example - professional services which can be charged for
• Maximise potential - cross-selling, if the customer requests a cold remedy, do they also need a box of tissues?
• Planning for the future - keep a close control of the business side, review your business plans, have management accounts produced and look at business training
• Shop layout - invest in merchandising and category management to make the most of the pharmacy
• Technology - with internet usage increasing and electronic scripts around the corner - pharmacists need to make sure they address these developments to derive maximum advantage

The future is exciting if only we are prepared to grab the opportunities. Don’t wait for this to happen, plan a strategy early.