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Round One: Helping Your Customers Develop a Retail Mindset

By Vet-Advantage
May, 2012

Helping Your Customers Develop a Retail Mindset

You can bet your veterinary customers are watching the news and TV ads just as closely as you are. They’ve taken note of the launch of generic OTC and prescription products from FidoPharm in Walmart and Sam’s Club stores, and the TV ads announcing “same protection at half the cost.” They continue to experience tough competition from Internet retailers, such as PetMed Express. And they might have seen data indicating that pet visits – and hence, spending at veterinary clinics on merchandise, food, parasiticides, etc. – continue to lag. (Though they probably don’t need industry data to convince them of the last fact.)

It may look dismal. And yes, the market is changing. But veterinary practices can maintain their status as trusted providers of retail products, according to those with whom Veterinary Advantage spoke. In fact, veterinary clinics retain an unassailable edge in the market – their medical expertise, and knowledge, care and love of their patients. But in order to maintain a foothold in the retail market, veterinary clinics have to price their products competitively and give their clients multiple ordering options. Their distributor reps can help.

Data goes both ways

Within a week of each other this spring, two studies appeared to present contradictory data about the market for pet-related products and services.

The first, released in late February, found that veterinarians continue to be key influencers and a primary channel for pet products, but that changes in consumer behavior and potential legislation could erode their role.

The study – based on a survey of 1,200 dog and cat owners by The Pert Group and Brakke Consulting – showed that dog and cat owners rely on veterinarians as their primary channel for pet products, including flea and tick control, heartworm prevention, joint health, pain management and therapeutic food. But survey respondents said they visited the veterinarian nearly 20 percent less in 2011 than they did in 2007 (the last time Pert and Brakke conducted such a study), if they went at all. In 2011, 77 percent of survey respondents said they took their dog or cat to the veterinarian, compared to 88 percent in 2007.

Spending by cat owners who had not taken their pet to the veterinarian in the last year was down across multiple categories, according to the Pert/Brakke study. Lapsed cat owners said they spent 28 percent less on heartworm prevention, 23 percent less on dental products and 20 percent less on flea and tick control compared to 2007. 

Pending legislation could erode sales at the clinic even more, according to Pert and Brakke. Under the Fairness to Pet Owners Act, veterinarians would be required to write prescriptions whether or not they actually dispense the medication. Traditional pharmacies would be able to fill scripts, creating additional competition. (See November/December 2011 Vet-Advantage.) A majority of respondents to the survey indicated that they would fill those prescriptions outside the veterinary channel, at least some of the time.

Meanwhile, the Internet and pet superstores continue to gain share in several product categories due to lower costs, variety and convenience, according to the study’s authors.

Just a week after Pert/Brakke released their findings, the American Pet Products Association – which represents pet product manufacturers – issued an upbeat report announcing that overall spending in the pet industry was at an all-time high in 2011, surpassing $50 billion. However, some of that spending appeared to come at the expense of the veterinarian.

APPA’s annual spending and data report for the pet industry showed that spending grew 5.3 percent, from $48.35 billion in 2010 to $50.96 billion in 2011. The association also projected a steady 3.8 percent growth rate through 2012, with nearly $53 billion in overall pet spending. Reported categories include food, supplies/over-the-counter medications, veterinary care, live animal purchases and other services, such as grooming, boarding, and pet sitting.

Pet services experienced the largest growth in 2011, rising 7.9 percent over 2010. Spending in services – including grooming, boarding, pet hotels, pet sitting and day care – was $3.79 billion. Of all categories, pet services were expected to see the largest growth in 2012, at 8.4 percent, an estimated $4.11 billion in spending.

Supplies and OTC medications also demonstrated significant growth in 2011, with $11.77 billion spent in this category, according to APPA. Up 7.6 percent from 2010, the increased use of OTC medications as an alternative to veterinary care has driven the supply segment higher. The use of OTC medications and supplies was expected to rise throughout 2012 as well.

Demonstrating a slower but steady increase in 2011 was the food category, says APPA. Forecasted to rise by 4.1 percent in 2011, food exhibited 5.8 percent growth, and was estimated to rise by 3.1 percent in 2012.

Slower still was growth in veterinary care, which climbed 2.9 percent in 2011 vs. the year before, according to APPA. “It was slight growth,” says Bob Vetere, president, American Pet Products Association. “But I think it’s better than the loss that some people expected. It’s still cautionary. I think 2012 will be important.”

What happens post-recession?

The recession has had a deep impact on the industry and on veterinarians, says Vetere. Pet owners cancelled or postponed surgeries for their pets, and many turned to OTC products as a substitute for face-to-face visits with their vet. “Dental products, glucosamine, preventive type medications, more vitamin supplements – I think that’s what got people through the last couple of years of the recession,” he says. “What vets will keep their eyes on is this: How many people found [buying OTC products] to be so acceptable that they’ll continue to cut back on their pet visits, vs. the group that says, ‘I got through this tough time, now it’s time to get back to the doctor.’”

Long-term, the outlook for the pet product market looks good, says Vetere. “A lot of baby boomers have turned to pets now that their kids have left home. They’ve humanized them. They’re looking to keep them longer. As a result, they’re trying to keep them healthy longer.” That’s why some pet owners start their puppies on glucosamine for joint health, then continue it through the dog’s life.

The question is, how much of that OTC and prescription business can veterinarians maintain?

Some practitioners have all but ceded sales to retailers or Internet-based companies, says Vetere. But others have chosen a different path. “Some see themselves as full service [operations],” he says. For them, offering a variety of products gives clients one more reason to visit the clinic. “[These practices] are saying to their clients, ‘You don’t need to go to the pet store.’ They become more of a one-stop shop, and that’s a marketable point. It rings true with people.”

But it isn’t necessarily easy. “[Veterinarians] may not be able to compete solely on pricing [with the retailers], so they’ll have to give better service,” says Vetere. Again, vets have a story to tell. The veterinary clinic is staffed with people who are knowledgeable about animals and pet-related products, he points out. In contrast, the pet owner shopping at a big consumer outlet may end up talking about flea and tick preventives with the guy from the garden shop.

Behind the eight ball

Veterinary clinics need to develop and maintain a retail mindset, says Brenda Tassava, CVPM, practice administrator, Broad Ripple Animal Clinic and Wellness Center, Indianapolis, Ind. “But we can’t be so dependent on it.” Tassava is also director of operations for Broad Ripple Veterinary Management Solutions, which offers management consulting, management training, support staff training, remote practice management, and HR and IT support. She is also director of the Bark Tutor School for Dogs, a training school affiliated with Broad Ripple; and master certification coach for Canine Colors LLC.

Twenty to 30 years ago, veterinarians put themselves behind the eight ball with some misguided pricing policies, says Tassava. They marked up some key products several times, figuring they could make a good profit on them and hold down prices on the medical care they offered. “What we did was flip the value of our services, which is our true value. We need to learn that [providing medical care] is where our value is. Retail is a big part of our business, but not at the same markups we saw in the 1980s and 1990s.”

“When I think of a retail mindset, it’s easy to conjure up images of buying and merchandising and advertising products,” says John Volk, senior consultant, Brakke Consulting. “A lot of those things don’t fit a veterinary practice well. “They can’t buy in volume like large pet stores, and they don’t put the advertising power behind OTC products.

“But they have a very keen client/customer focus, and they do the best job they can serving their clients. That means they recommend products they have confidence in; offer clients the opportunity to buy them the way they want to buy them – across the counter or online; and price them competitively when they need to.

“Veterinarians and their staff are very highly regarded by pet owners,” he continues. “Their No. 1 goal is to help clients keep their pets healthy, and to treat them when they’re ill or injured. When I talk to veterinary groups, I emphasize, ‘Your first and foremost obligation is to provide the best medical care you can at a reasonable price. The key part of your revenue should come from medical services, because that’s what distinguishes you from everyone else.’” But in the course of providing services, practices dispense products, “so it’s important for veterinarians to offer the best prices and services they can.”

Veterinarians have opportunities to increase their practice income by offering non-pharmaceutical products sold through the veterinary channel, such as flea and tick preventives, certain joint supplements and pet foods; and OTC products that they think are important for their clients to use, such as vitamins and minerals, shampoos and treats, says Volk. “But it’s important for veterinarians to realize that pet owners will shop in various channels regardless of what the veterinarian says.” Some people simply prefer to buy their products online rather than in the clinic. “So veterinarians can choose to offer products online, either directly or through services like Vetstreet,” he says. They can also take advantage of online purchasing programs offered by their distributors, he adds.

A fight on their hands

“Big-box stores may huff and puff, but Walmart can’t blow your veterinary hospital’s pharmacy down – not if you have a proactive strategy,” writes author and consultant Wendy S. Myers, president, Communication Solutions for Veterinarians Inc., in the March installment of her e-newsletter. Communication Solutions for Veterinarians is a consulting firm that helps practices with compliance and client service. “[The American Animal Hospital Association] reports pharmacy, food and OTC income make up 26 percent of gross income in small animal practices. Instead of crying, ‘My, what a big pharmacy you have!’ fight the predatory Big, Bad Wolf.’”

The key word is “fight,” because that’s what veterinarians should expect.

“The pet industry is a very financially attractive market,” says Myers, speaking with Vet-Advantage. “Because of that, retailers want a piece of it. They know the emotional ties that pet owners have to their animals, and they know that pet owners may be at the retail store multiple times a week.” Not only do the retailers intend to capture the prescription business, but they hope that while their pharmacists are filling prescriptions, pet owners are shopping for detergent, toilet paper, cat litter and other household necessities.

What can veterinary practices do? Use some common sense, for starters. “Far too often, a client comes in for a wellness visit, and the staff doesn’t even offer to refill their medications,” says Myers, who is also a partner in Animal Hospital Specialty Center, a 13-doctor referral practice in Highlands Ranch, Colo.

If the staffer has taken the time to read the pet’s medical record, he or she knows exactly what refills the patient needs, continues Myers. And they should go into the exam room with a plan for compliance. “They need to walk into the room with a ‘We will refill’ approach, not ‘Do you want to refill?’ Too often, we ask clients what they want to do vs. doing what their pet needs.

 “I tell technicians to [say to pet owners], ‘Today your dog is due for his physical exam, and we’re going to refill 12 months of parasite prevention.’ If the client has questions about price, she’ll ask.” If that’s the case, the technician should let the veterinarian prioritize the pet’s needs – and corresponding costs – with the owner.

Veterinarians themselves have to get involved, adds Myers. “I think too often they have delegated the flea control discussion to a receptionist. I recommend that when the doctor is talking to the client about parasite protection, she brings the box in and hands it to the client. Then those products are treated as medicine, not retail. I strongly recommend they dispense in the exam room. When you buy it in front, it’s retail – at least that’s the consumer perception.”

Rather than cave in to the big box retailers, then, veterinary clinics should press their advantages, says Myers. First is the client education they offer. “That’s the most valuable service that veterinarians and staff provide – detailed descriptions of how these products work.”

“Tout your guarantee,” she writes in her newsletter. “If your dog gets heartworms after using PetTrust Plus [the FidoPharm product], do you take your dog to the Walmart greeter? Heartworm preventatives sold in veterinary hospitals have a 100 percent manufacturer’s guarantee that includes paying for treatment, which could exceed $1,000.”

Pricing strategically

Competitive pricing is key, says Volk. “Pet owners are becoming increasingly price-sensitive. Some of that is due to the recession, but not all. We found that some of these trends have been going on 10 years.

“Veterinarians need to make a choice: Either they can offer pricing and convenience equivalent to what pet owners can get outside the veterinary channel, or they realize they’ll lose some of that business to other channels. If they choose to focus solely on medical services and products, there’s nothing wrong with that. But if they want to compete, they have to have the retail mindset. And there is opportunity, because of the high regard with which pet owners regard veterinarians. But that advantage doesn’t fully overcome price and convenience, especially when those products are widely available.”

Veterinarians who think they can’t compete on price with Internet retailers and other outlets should think again, says Volk. “Veterinarians often complain about services like PetMed Express, and at times, PetMed Express does offer products cheaper,” he says. But when one compares that company’s prices (including shipping) with what clinics charge, there might not be that much difference. “Consumers want to buy online, and PetMed Express takes advantage of that. But if veterinarians offered a similar opportunity, pet owners would take advantage of it.”

 “Post your prices,” Myers advises clinic owners. “Hang a white board in the lobby or have a local FedEx office make a poster with prices of your parasite preventatives, including rebates and free doses.” Compare them to the prices clients might find on the Internet or at the big-box stores.

Clinics often mistakenly try to match their products penny for penny, neglecting to figure in the value of rebates and free dosages. “If a box of heartworm preventive for a large dog is $100 on PetMed Express and $100 at your clinic, it’s really cheaper at your clinic” because of the rebate, she says. Clinics also need to assign and communicate the value of free dosages pet owners can earn when they purchase products. “When the receptionist checks out the client, she needs to say, ‘Because you bought six months of preventive, you’ll get two doses free, which has a value of $36.”

“Our biggest step a couple of years ago was, rather than fight the online pharmacies, to embrace them,” says Tassava. Broad Ripple offers its clients the ability to “Shop Our Pharmacy” through VetSource, Webster Veterinary’s home delivery pharmacy partner. Clients are informed that Broad Ripple may not be able to match prices with Internet-based retailers or big-box pharmacies for medications dispensed at the clinic, given the cost of purchasing, storing and dispensing them. But, clients are told they can obtain competitive pricing through Broad Ripple’s online system.

Coordinating services and products

Some practices – Broad Ripple included – have built their retail offerings around the services they offer. Just minutes from the Animal Clinic is the Broad Ripple Animal Wellness Center, offering preventive healthcare services as well as advanced holistic and integrative medicine, including acupuncture, behavioral medicine and counseling, food therapy, canine massage therapy, and more. “If you can develop practice retail around services, it will yield a much higher return on your investment,” says Tassava.

The owners of Loomis Basin Veterinary Clinic in Loomis, Calif., have made a decision to emphasize medical services over retail sales, says administrator Jon Cunnington, MBA, CVPM. “Our general practice is our bread and butter; but increasingly, a greater and greater percentage of our business is coming through specialty or emergency services,” including emergency medicine, internal medicine, oncology, surgery, cardiology, radiology and behavior.

Even so, the clinic isn’t about to drop sales of medications, preventives and other pet-related products. Loomis Basin has reduced its prices on several preventive products, telling pet owners on its website that buying from the clinic is not only convenient, but perhaps the only way to ensure that the manufacturer will honor product guarantees.

Clients are encouraged to purchase medications and prescription refills from the clinic’s full-service dispensary. “Our staff is committed to taking the time to give you the personal attention you deserve, and will make every effort to ensure you go home with the right product for your special pet,” says the clinic on its website. “Loomis Basin’s knowledgeable staff will happily guide you as to the most effective way to administer any and all medications and may ask you questions about your pet’s lifestyle that you didn’t think of. Because we keep meticulous records of your purchases and refills from our on-site dispensary, you can be assured of product consistency and availability. It is our goal to ensure that your pet’s prescription refill requests are handled in a timely manner, so that no gaps occur in your pet’s therapy.”

What can reps do?

Distributor sales reps can help their customers develop a successful product marketing strategy, according to those with whom Vet-Advantage spoke. Reps can familiarize their customers with the distributor’s online ordering capability, points out Volk. “They can approach the veterinarian from the standpoint of, ‘There is a certain contingent among your clients – and it’s growing – who want to order online, because that’s how they order a lot of things. You can maintain that business by using our service to provide that online capability.’”

Reps can also share with customers how other practices in the area are balancing services and product sales. “Veterinary practices really depend on their distributor reps to know what’s going on out there,” says Volk. Reps can help practices keep abreast of trends, and even hook up veterinarians or practice managers with peers.

Sales reps should take the time to ask their customers, “Have you turned on the refill reminder for flea, tick, heartworm, NSAIDs, in your practice management software?” says Myers. Refill reminder programs can generate thousands of dollars in sales, she says.

Reps can help their customers become better retailers by scrutinizing the clinic’s lobby or waiting room, and then offering suggestions, says Myers. “Look around the lobby from an outsider’s perspective,” she says. Is there dust on the products on the shelf? Are things labeled with prices? Are products merchandised in an attractive way? Is there too much clutter? Are the most popular products at eye level on the shelf, or are they near the floor or ceiling?

“Most practices would be delighted if the rep came in with a retailer’s eye and said, ‘Would you be interested in having me make some suggestions as to how to more attractively merchandise your products?’”

“If [sales reps] can look toward the service-focused strategy and help their practices develop product lines that revolve around a new service area, that would help tremendously,” says Tassava. “They would be offering support that some practices don’t have.”


 Key Points

Some practitioners see themselves as full service [operations], says Bob Vetere, president, American Pet Products Association. For them, offering a variety of products gives clients one more reason to visit the clinic.

The key part of a practice’s revenue should come from medical services, because that’s what distinguishes you from everyone else, says John Volk, senior consultant, Brakke Consulting. But in the course of providing services, practices dispense products, “so it’s important for veterinarians to offer the best prices and services they can.”

Veterinarians need to make a choice, says Volk: Either they can offer pricing and convenience equivalent to what pet owners can get outside the veterinary channel, or they realize they’ll lose some of that business to other channels.

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