Page 16 - HMEB Business, February 2017

by David Kopf
Problem Solvers
The Best Approach to Retail HME?
An incremental sales strategy gives providers that are new to retail the per- fect platform on which to found their cash sales businesses.
Whether they are currently engaged in retail or not, nearly every provider in the industry realizes the potential for cash sales to expand their revenues in the face of declining reimbursement. The problem is that retail sales also represents a very large and broad set of products, so it’s tough to know where to get started. Bottom line: providers need a strategy to get started.
Enter incremental sales. Providers can leverage an incremental sales approach as a launch pad for their retail businesses, because it builds on the successes they have already made in their funded HME business. But let’s start by defining the term — what is meant by incremental sales, exactly?
Understanding Incremental Sales
Essentially, incremental sales is a retail sales strategy in which HME providers use their relationships with funded patients as a stepping stone to help expand those relationship into cash sales transactions, as well as to reach out to new patients, according to Jim Greatorex, vice president of the VGM Group Inc.’s Accessible Home Improvement of America (AHIA) division. Greatorex has a long background in retail sales both as an HME provider and in his work with VGM Retail.
“I define incremental sales as taking the most heavily utilized HCPCS codes, and building a product portfolio — say, six to eight products — that you make available to everybody,” Greatorex says. “And you hand pick the ones that you feel will make the experience of using the particular prescribed item better; either more comfortable or just make their life better.
“And you get your customer service people to become experts in these products,” he continues. “And, you make sure that you expose especially every new consumer to these products, and you then, on the back end, market them to your existing clientele.”
“Incremental sales is often viewed as ‘add-on’ sales, like upselling or cross- selling, but it also can be defined as ‘the contribution of your marketing efforts to increasing sales revenue,’” adds Lisa Wells, vice president of marketing for Cure Medical. “The two definitions aren’t wholly independent, as you must drive those types of sales through marketing or some type of promotional effort. Retail sales is most certainly not a ‘field of dreams.’”
The benefit with incremental sales is that providers are starting with the existing customer base, because those patient relationships have already been founded. “The key reason to improve your incremental sales is because of a well-
known fact of selling: it costs more money to get a new customer than it does
to keep one.” Wells says. “You want to get as much share of wallet from your existing business as you can, and ideally you want to keep them coming back at different times for additional purchases. The advantage of adding retail sales onto your reimbursement items is that you can keep that cash flow going.”
And it’s important to note that a large percent of these clients are already interested in retail sales, according to Greatorex.
“I would guesstimate that at least 40 percent of the folks who get the HCPCS code or whatever prescribed item it is from you are already online two days later shopping for items that go along with their condition,” he explains. “... It makes a lot of sense that it should be you that’s showing them these [additional retail] items. And then, instead of buying it online or somewhere else, the likelihood of them buying these items from you is extremely high.”
How much business does that represent? Of course it depends on the provider, but as a multiplier on existing sales, Greatorex says VGM has analyzed on the approximate factors by which incremental sales can extend the revenue intake of funded items and conditions.
“... With CPAP, which is one of the biggest categories, we feel that if people spend just one penny with you on an ancillary item or incremental item, that they are likely to spend in a calendar year at least $500 with you,” he says. “You’re looking at profit margins of about 40 percent on those items, and on some of the others we feel it’s 50 percent. So, if you can get maybe 20 percent of your customers to buy $500 and you see how many people you have on CPAP, that can give you a guesstimate as to what kind of revenue you can add.”
Good Incremental Sales Categories
In terms of categories, Greatorex says that in addition to sleep, funded product categories that have solid incremental sales potential include hospital beds, oxygen, walkers, manual and power wheelchairs are the predominant ones. The key is to think about revenue potential for the existing item.
“For a lightweight, manual wheelchair, that is $700 in [incremental sales] revenue waiting to happen,” he says. “That could easily go to a seat lift chair or a scooter. You could go to cushions for the wheelchair. Also, I think most who use wheelchairs have some kind of pain issue, and there are some great pain products that you could make available to them. There’s a whole list.”
Another example would be urology, Wells notes.
“For example, you might have a recurring order for reimbursement of intermittent catheters, but you can add on incontinence products and bowel management items like Enemeez that are typically cash-pay,” she explains. “Introducing these items does two things for your client base: it adds conve- nience for them to get more at a one-stop shop, and it improves your bottom line with recurring revenue from your customers that you don’t have to wait for reimbursement on.
“Also if you are selling to wheelchair users overall, then you have the oppor- tunity to add multiple lines to your mix that will help capture more share of wallet from this specific end-user,” she continues. “Most end users only buy a wheelchair every five to 10 years, and a new seat cushion every three to four years. ... Adding disposable supplies helps the provider get monthly recur- ring revenue from these infrequent customers, and also keeps that customer engaged with the provider for the purposes of retention.”
“The key reason to improve your incremental sales is because it costs more money to get a new customer than it does to keep one.”
16 HMEBusiness | February 2017 | hme-business.com
Management Solutions | Technology | Products
— Lisa Wells, Cure Medical.