The Retail Round-Up -- HME Business

Products & Technology

The Retail Round-Up

How pairing cash products with funded DME in your showroom can drive higher retail profits.

By Joseph Duffy
Apr 01, 2012

Retail Round-Up When shopping in most retail stores, it’s no coincidence when you find products paired and displayed together to incite cross selling — the strategy of selling related or complementary products. Peanut butter next to jelly. Chocolate sauce next to ice cream. Polish next to shoes. Product pairings appear in most any retail store and there is no reason why they shouldn’t appear in an HME providers’ showroom as a way to boost cash sales and make it easier for customers to find necessary items.

As many providers are finding out, cash sales give providers an immediate revenue stream that is not dictated by reimbursement sources requiring documentation to qualify and justify the need. Furthermore, payments from funded sources for services and products rendered are typically 30 to 90 days.

“I define merchandising as showcasing your wears,” says Jim Acker, vice president of sales and marketing for Blue Chip Medical Products Inc. “Historically, most providers had cash sale items as an afterthought with big ticket or funded products being their main focus. Good merchandising requires strategic placement of products that complement the focus of the provider and are easily visible to their customers. That said, with slow pay and denied payments for funded products, providers have realigned their thinking to the fact that cash sales will help them realize a more immediate return on their inventory investment and reduce the risk of having to wait for their money.”

If your merchandising plan does not include pairing products for display (including funded, reimbursable products next to complementary cash-sale items) in your showroom (and your catalog or other sales materials), you may be missing out on an opportunity to help recoup revenue being lost to cuts, caps and competitive bidding. With Round Two of competitive bidding getting ready to lash out at providers’ potential profitability, now is the time to rethink or step up your merchandising plan.

“Reliance upon third-party payers, especially with the onslaught of audits and arbitrary recoupments, is risky,” says Miriam Lieber, president of Lieber Consulting. “Although not all providers are cut out for retail showrooms, cash sales can grow out of patients who are also third-party patients.”

With competitive bidding affecting reimbursement, a baby boomer generation growing at a huge rate, and 30 percent of Americans who are caregivers, cash sales have huge potential, says Rob Baumhover, director of retail programs for VGM Group Inc.

“So, you need to stop relying on government pay and put your margins in your own hands,” he says. “Your customer base is growing at a rate that’s never been seen before (96 percent of seniors want to continue living at home), and with caregivers shopping, there is an entirely new consumer base. An ideal balance of cash sales versus third-party reimbursement would be 80 percent to 20 percent.”

Understanding merchandising

Before delving into strategies behind product pairings, it is important to understand merchandising, not because it is new to the industry but because it has an increasing sense of urgency as cuts, caps and competitive bidding chip away at revenue.

“Merchandising is the methods, practices, and operations used to promote and sustain sales,” says Cy Corgan, director of retail mobility sales for Pride Mobility Corp. “It is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to the variety of products available for sale and the display of those products in such a way that it stimulates interest and entices customers to make a purchase. For instance, utilizing a store plan-o-gram helps to lay out a showroom in an efficient and visually appealing manner. Providers can utilize a manufacturer’s merchandising materials to highlight products and as an educational tool for consumers. The need for cash sales has motivated providers to pay more attention to merchandising and the realization that a clean, well-organized, inviting showroom attracts more customers.”

Important to product pairings is that customers entering a store are influenced by the visual information they gather in the first split second.

Tom Musone, marketing director for Juno USA, says he was in a meeting recently when a Juzo dealer had a good idea about merchandising: The dealer would change products around every quarter and his sales would increase on the products that he moved.

“If you want to increase your cash sale business, you need to think in terms of how do I add on sales — how do I convince someone who has come in for product X to buy product Y?” Musone says. “Keep your add-on sales in a place of visibility, and make sure you surround that product with communicative tools, either a POP, or prop that tie in with the product.”

Probably most importantly, Baumhover says the most important reason for merchandising your store correctly is to make it easy and convenient for customers. If you are successful, they’ll spend more time and stop in more frequently. And that’s a win-win situation for providers.

“Simple things like creating an experience for the customer by taking the product out of the box so people can touch and feel the items,” says Cali Thomson, business manager for bath safety and walking aids for Invacare Corp. “Use visual cues for customers to find the product (ceiling danglers, aisle violators, header signs, etc.), and utilize vertical space with plan-o-grams to display best selling and high-volume SKUs at eye level. Store displays should start with the lowest displays in front and progress to the highest or wall displays in the back.”

Remember that in retail, nothing is permanent, says Baumhover. If an item or category doesn’t move after the right amount of time and effort, switch it out and bring in another. Leading to product pairing, Baumhover says to consider the following.

“Start by choosing your departments,” he says “I’d keep it between five and eight per store. Once you have decided on your departments, choose enough categories to fill the allocated space for each department. Once each category has been identified, that’s when you dig into specific items. There are several ways to approach this task. First, meet with your staff and discuss any and all customer requests. Second, and the most important, look at your past and current sales. The answer is always ‘what your customers are buying.’”

Product selection for product pairing is part of the merchandising process. Once that is done, place the product out within each category to ensure your best items are at eye level, the product is spaced nicely, the items that need to be displayed are, and that everything has signage. This part is typically the most difficult, but there are experts in this area, and many vendors are developing suggested layouts for specific categories.

Product pairings: What works?

There is no magic formula for pairing products and watching them march out the store with cash registers ringing in the background. It takes understanding your particular customers, education and how you can solve customer needs.

Sarah Bandzak, regional sales manager for Blue Chip Medical Products, says the first order of business should be to evaluate and identify your customer base.

“If providers have a large following of CPAP patients then they should consider pairing CPAP pillows with CPAP units,” she says. “The cash/retail items should have easy-to-read educational and practical info on the value proposition of these products. For example, comfort and ease of use to ensure safety and compliance. Some manufactures do a better job than others on offering their expertise in pairing cash and funded products.”

“Pairing products can be made simple by considering how a consumer is going to use a product and then determining which other items in the store complete the experience,” says Michelle Mikitish, retail mobility sales manager for Pride Mobility. “For example, sell a lift chair and add a lift chair care kit. Bill for a bed and sell the sheets and a mattress overlay. Show a manual wheelchair and include cushions and portable ramps.”

Paired products are often accessories and aftermarket products. Corgan suggests selling these products as a package and work down, not up.

“Service after the sale is a key part of the best practices philosophy,” he says. “Research indicates that satisfied customers will return for repeat and add-on purchases. Bundling [product pairing] products on a showroom floor allows the consumer to see how different items work together, such as a scooter, which is a billable item, and a vehicle lift, which is a cash sale item. A retailer must demonstrate for a consumer the everyday benefit of the purchase.”

Lieber says product pairing must have good, sound planning and some research. She suggests filtering sales reports to sort products by the disease/illness code. Providers can then start matching up potential cash sale products that the customer will appreciate. Once you determine what products go best with each disease state, find those patients who are currently not using the products. Maintain a list of suggested items for customers to see whether they are searching your website or your showroom. Track purchases and look for trends and patterns. Pairing products by disease should be a good project for your employees. Consider establishing sales goals and rewards as appropriate.

To Lieber’s point, provider Mark Gielniak, vice president of Diabetes Plus, uses product pairing as part of his daily merchandising strategy.

“Most insurance companies do not pay for sharps containers, alcohol swabs, medical identification bracelets, or diabetic socks,” he says. “We have been successful pairing sharps containers and alcohol swabs to customers who use insulin. We also have had success in selling diabetic socks to our shoe customers. We do encourage all our customers to wear diabetes identification bracelets or necklaces. We also carry all the books that the American Diabetes Association sells. Books sell very well around the holiday season as gifts.”

Visually, the paired products should be placed at eye level in the store. But to make the showroom a more integrated part of a customer experience, consider creating show rooms constructed as scenes from the customers’ homes, where they can enter and easily visualize their needs. The room not only gives you a special way of presenting paired products but it also gives you cues to talk about the many cash sale products that are displayed.

For cushions and wedges, Bandzak suggests setting up a wheelchair with a cushion and beds that have wedges and other positioning devices.

A salesperson must have excellent, convincing product knowledge and cross-selling skills to make customers comfortable and to teach them about add-on products that they may never have experienced before. Bottom line: Your sales force needs to be constantly educated to succeed in cross selling.

One of your biggest clues regarding what products to pair is keeping track of your store’s best-selling items.

“Determine your best-selling items and think about which cash sales would complement those items,” says Thomson. “Track your sales from before you implement a cash sales opportunity and when you begin. Regularly analyze your sales to see which items are working and make any necessary adjustments. Don’t forget to come up with a plan on how to sell it to your customers. Just putting something out on the floor doesn’t mean it will sell. Create a ‘home’ like environment (bathtub with shower chair, bath mat, and grab bar, including a toilet with a raised toilet seat, a vanity with mirror, etc.). Create vignettes to display like items and promote up-selling opportunities to create a story of what your store is about — one message.”

When it comes to merchandising and pairing products, Thomson says providers need to keep three things in mind when developing a plan: One, how do you get started and what do you need; two, how do you sell it to your customers; and three, how do you maintain it?

“The goal should be for each customer to walk out of the showroom with at least one to two additional item that they didn’t intend to buy,” she says. “Retail is not new for the industry, it just hasn’t been a focus — until now. Providers need to act like merchants and apply basic retail fundamentals to their showroom to increase cash sales by up selling and cross selling other items. It is not enough to put a few items in an area of the store that are not clearly marked, unorganized, dusty, items hidden behind something, etc., call it a ‘showroom’ and expect to boost cash sales. To be successful, providers need to be serious and take the time to think about it, plan, and execute the strategy.”