Hilary Kahn's Blog

 IN REPLY TO THE ARTICLE PUBLISHED BY him! RESEARCH & CONSULTING UK.

I was delighted to read the article by him! – a research consultancy in the UK focusing on shopper studies.  The article is entitled: “Category Management is dead. Mission Management is the future!” In my view, store planners, marketing executives, buying and operations executives, plus manufacturers would do well to think long and hard about the implications for pharmacy. Reference him! article CLICK HERE

What is Category Management
Category management lacks a single definition thus leading to some ambiguity even among industry professionals as to its exact function. Two comparative mainstream definitions are as follows:

1. Category management is a process that involves managing product categories as business units and customizing them [on a store by store basis] to satisfy customer needs. (Nielsen)

2. The strategic management of product groups through trade partnerships which aims to maximize sales and profit by satisfying consumer and shopper needs (Institute of Grocery Distribution)

Hilary Kahn’s Response:

I loved the concept at its inception because the Nielsen definition did one critical thing: It had the customer as the core and was meant to research the wants and needs of customers in the category, keep up to date with those needs and provide an all-encompassing, and by definition, relevant and interesting category.

It may have been a bold, before it’s time, and difficult to execute strategy. Disappointingly implementation was altogether different from the original intention:

1. One of its side effects was an immediate understanding and general improvement of shelf profitability.  For many retailers, buyers and category managers, the concept of the customer became a secondary consideration (so needs weren’t really met) and shelf profitability seemed to become the most important factor.  Of course shelf profitability is very important, but in my view, much greater profitability comes from maintaining the pharmacy (not grocery) customer as the core. It also limits defection to a degree and the head on collision of price is not so pronounced.

2. The analyses that have been used to determine space allocation and product held often originated from general grocery statistics, but they nonetheless were made to apply to pharmacy – 2 different businesses, different shoppers. Take bathroom and toiletry needs – a huge area and first choice in supermarket, but never so in pharmacy (where it becomes a top-up need) unless there was no decent supermarket in town!  The obvious impact here is significant use of space on categories and products that would work in grocery, but may provide metre upon metre of slow selling, or dead areas in pharmacies.  And the areas that ought to be ‘first choice for pharmacy, such as all the OTC health categories often are significantly under-ranged.  Again the grocery customer was at the core, not the pharmacy customer.

3. Big grocery brands (with their co-op dollars) frequently win the day, and often fringe, but potentially really important products and brands that add huge value to meeting pharmacy customer needs are excluded or under-ranged, further compounding the problem.

4. Notwithstanding the focus on ‘category’, some manufacturers talk the talk, but when it comes down to it, the concept of growing a much bigger cake is rarely embraced. Focus on short term sales via product push tactics often takes priority over the longer term strategic opportunities.

I have found that some manufacturers totally refuse to co-operate with others in the same customer or condition category, even if they are complementary, not competitive areas. An example is vitamin supplements in the arthritis category with hot and cold packs, rubs and sprays, paracetamol, arthritic aids and so on. One of the manufacturers point blank refused to entertain the notion of category. I’ll never forget a manufacturer of a ‘blue coloured’ package product saying to me: “I don’t really care what you do with the X category, as long as it’s blue!” My favourite, non-pharmacy example harks back to the late 80’s when I was doing a lot of consulting for liquor retailing when the ‘category captain’ of the spirits category offered to do all the planograms for the national retailer’s spirits category, and conveniently left out not only the best selling scotch whiskey (a competing brand) but also the retailer’s house branded whiskey!

him! says:
“The key reason shoppers use convenience stores is simple: convenience!”
Hilary’s response:
Shoppers have always visited pharmacies for a combination of convenience and solutions to meet specific outcomes – managing the condition, feeling better, prevention (which many times they haven’t received unless they’ve asked specifically).

him! says:
“Convenience stores need to ensure they focus specifically on providing increasingly convenient solutions to shoppers needs.”
Hilary’s response:
‘Stick to your knitting’ may be a cliché, but pharmacy is about health, wellbeing and wellness.  The huge volumes of script numbers with its associated turnover when compared with the front of store OTC sales or ‘health dollars per script’ suggests that there needs to be a lot of thinking given to what reasoning (needs) sits behind the request for specific script items. For example, ask yourself  why  a customer needs the scripts they come in for and what you can offer to assist beyond the script item. Specifically, consider a  script for an anti-inflammatory or for Champix or Nexium? What convenient solution does the customer need here? Why are they getting this particular item in the first place? How are we helping to meet the unstated need that they require a broader solution to assist in dealing with the specific condition? The reason (whatever it is) can’t be met with one add-on, but it can be met with a solution of products - things to take and do to deal with all the needs that underpin the request. Revisit can be assured when the pharmacist and staff help navigate the customer to those outcomes on an ongoing basis. If you want to know how you can implement a process like this into a pharmacy business visit  www.dispensaryloop.com
him! says:
“Convenience retail needs to become about making the shopping trip, and thus ultimately shoppers’ lives, easier and easier.”
Hilary’s response:
I’ve said that for 30 years – in reference to book sellers, the relationship and cross selling opportunities with cookbooks, or thrillers is obvious. Classical music lovers of Beethoven will also love Mozart (but they’re never positioned together), Verdi goes with Puccini, but they too aren’t merchandised as a solution... If you like Barbra Streisand, you’d also like Celine Dion and others – but try and find them together! The list is endless. And yet they are still alpha-stacked, missing huge opportunities to not only meet needs but lift sales and the customer experience. I was one of the consultants urging supermarkets to position Twinings tea in a big tea category, next to Liptons, herbals, coffee, Milo and Horlicks; or all savoury biscuits together (in their brand block) in the biscuits aisle.  When retailing paint, you wouldn’t expect that your customers would achieve a quality finish on a wall with only a top coat paint, without it’s undercoat and primer or the right brushes to do the job.

The end point for the pharmacy business is to enable customers to achieve the broader health outcome (more than the product they came in for). Clarifying and simplifying the shopper’s mission, thus increasing items sold and average sale is the opportunity available for pharmacy and the road it must travel. Want to know more?...visit www.feelgoodguide.biz

him! says:
“Need to consider in-store solutions in terms of ‘how will this make my customer’s life easier’ by identifying specific complications, issues or challenges in their shopper’s lives and help to alleviate them.”
Hilary’s response:
This can only be done by ‘becoming the customer’.  It’s much more than the notion of focus groups or observation. Rather it assumes ‘getting under the customer’s skin’ in that all the decisions are made from the point of view of the customer suffering the condition or with the specific need.

him! says:
“...many stores have already started to ensure they have all the relevant products for making basic evening meals, grouped together, with a suggestion for ‘tonight’s dinner’. Being solution driven isn’t necessarily about promoting these solutions, more that the ranging and merchandising considerations have been made with solving a specific shoppers problem in mind”
Hilary’s response:
In specific ‘health enclaves’ (see our Traffic Flow in Peak Period webinar), I identify the cross categories, the additional skills needed, potential services, space and so on. Health solutions, for one, are seldom only about taking pills and potions alone.  So many times they involve lifestyle change, frequent tests, activities, exercises, additional counselling and support.  What the him! article makes so clear is the assumption that if the mission involves a total solution, then each part (rather than the traditionally dominant category) needs to be deeply ranged with the customer’s needs at the centre. Do this, and the paradigm is re-invented.

him! says:
“This will need to be embraced wholeheartedly in order to fend off the threat from the supermarkets, and this where the shift to mission management compared with category management needs to come in.”
Hilary’s response:
Every retail segment worries about the erosion of their business through supermarketers and discounters. Time to take a long, hard look at why customers might visit your retail store (pharmacy), and what you offer and ‘stand for’ over and above the discount competition. I believe that if the horizon doesn’t shift to mission, and stays firmly rooted in products held by and presented as they would be in a supermarket, the future could be bleak – because other, bigger pharmacies now also occupy two crucial EST positions – ‘bigEST’ (ranges) and ‘cheapEST’ (reference McMillan Doolittle www.mdretail.com). Community pharmacy must become EasyEST – solution driven servicing customer missions in particular categories.

him! says:
“To really be ‘solution driven’ the industry will need to conduct range reviews focussed around shopper occasions and missions, rather than individual categories. An allegedly fantastic confectionery offer doesn’t necessarily meet the needs of a lunchtime shopper if associated categories such as sandwiches and soft drinks aren’t also considered.”
Hilary’s response:
This is a key and vital element – being specific to a category mission, if you decide to become ‘first choice’ and become the experts for customers with osteo-arthritis for example, how important is it to meet the needs to purchase assistive devices, have advice and access to the specialist skills of the physiotherapist, hand therapist, occupational therapist, podiatrist, weight management all emanating from the same store? Removing the assistive devices (or any of the elements) weakens the first choice positioning of the whole, doesn’t it? So do staff without specialist skills on the best arthritis diet, exercises, supplements, not to mention the skills that support over-use of anti-inflammatories and their alternatives. The whole is definitely the sum of its parts.  Managing to bring the elements together in a commercially viable and sustainable way requires a strong strategy, new ways of ranging and presentation, different training, more space, a new approach.  Get it right, and you have a sustainable model for the future.

him! says:
“A buyer or ‘mission manager’ will need to look after the total ‘meal for tonight’ etc and all the products and categories which need to fall within that. They will need to be responsible for pulling cross category promotions solutions and promotions together.”
Hilary’s response:
There’s no doubt that this will be highly challenging, maybe even threatening.  It changes how we market. It changes the category look and feel. It changes how and what the category (now mission) manager thinks, buys. It changes the KPIs. It shifts the brand (range mix). It may not change the way the brands are presented, but it certainly may add new ones into the mix.   In many ways it threatens the status quo.  Get it right though….. imagine specialist speakers talking to your customers on a consistent basis about their issues, answering their questions. Your pharmacy becomes first port of call, not simply the nearest.

him! says:
“This will mean a considerable change in how suppliers and retailers are currently working, and also a change to key KPIs and targets or goals set.”
Hilary’s response:
While groups, wholesalers and the like are accused by industry consultants  and many pharmacists of having a ‘deal driven, product push’ mentality, the notion of ‘mission management’ is on the opposite side of the spectrum. Mission management is a customer driven, not deal driven approach.

him! says:
“Both suppliers and retailers will need to better understand how different categories interact with each other and what different solutions are relevant for different shopping missions and occasions.”
Hilary’s response:
Imagine how fascinating, interesting and relevant the pharmacy can become if it were the ‘first port of call’ for anyone experiencing arthritic pain, menopause symptoms, blood pressure, celiac disease, sleep apnea, severe excema and psoriasis to name just a few! More customers becomes the key KPI – who will visit more often, use other parts of the store, tell others and spend more.  That is, after all, what good retailing is about! Want to find out how important the focus on customer experience is: look up www.register.hawkinsstrategic.com

him! says:
“We know that if something is not available, associated categories suffer. For example, the poor availability of sandwiches in many convenience stores will be a key barrier to crisps and snacks and soft drink sales.”
Hilary’s response:
A fantastic example. Sandwiches, crisps and snacks could well have been the province of different category managers historically. In many ways this is a revolutionary way of looking at ranging. We’ve always been critical of understocked ranges, but the full impact of the potential to lose the customer because of insufficient focus on cross-ranging has not been so eloquently put before.

him! says:
“In order to provide solutions to shoppers needs, retailers and suppliers will need to take a solution driven approach to ranging and promotions, which will mean a movement from individual category management to mission management.”
Hilary’s response:
Community pharmacy future will depend on it! Marvellous article. Congratulations him!

The Bottom Line
If all your customer knows is that the purpose of your pharmacy is as a destination for the tablets they need,, then it is highly probable you will eventually be out of business as margins erode and the discounters or deregulation take that ground. If pharmacists don’t change the way in which they interact with their customers, their business will go elsewhere. A solution driven approach to customers problems is a model of business highly-suited to community pharmacies looking to compete against the proliferation of discount offers. Pharmacy businesses must to stand for something that matters to customers, and the only option for most is to demonstrate they are there to deliver solutions to their customer’s health problems and have the system to do so.

Pharmacists and suppliers need to overhaul their category management sales approach by considering in-store customer solutions driven by ranging merchandising, skills and activities.. They need to identify specific issues or challenges in their customer’s lives and help to alleviate them. Then they must go to work on 2 critical points: getting more customers into the pharmacy to sample their real strengths, and finding ways to get the pharmacy more deeply welded into the community.
We need to remember that unlike a convenience store, the pharmacy is all about information and advice, not simply product, so any solution will need to go beyond product alone.

It is also vital that the interconnecting messages for these separate categories are clearly highlighted in the pharmacy. The ‘customer is led down a path of discovery. After all, a customer does not know what a customer does not know, especially in a technical area such as health. The same would apply in other technical or advice areas such as liquor, bookselling, IT, sound, to name a few.
The challenge for pharmacy lies in the fact that not all suppliers or manufacturers are ready for their products to be grouped as part of a health solution. Many are blinkered by their brand and locked into their traditional category presentation and position. In saying that, some manufacturers are slowly coming around. In our FeelGood pharmacies where we increase the total space dedicated to health, manufacturers immediately see the benefit of having both their branded merchandising, as well as presence in a multiple of heath categories. They just need to look at mainstream big box retailers to find the same merchandise (differently bar coded) in as many as 32 different locations .So it’s not so much an issue of being “out of the box”, more so of simply catching up.
The key now is for wholesalers, buying groups and banners to start becoming orientated around the ‘mission of the customer’ rather than focused on traditional supermarket planning and traditional supermarket ranges.

Ultimately, the responsibility for change lies with the pharmacy owner. It’s the pharmacy owner who has their business on the line. They must start demanding changes from the traditional push supply and begin taking charge to support the buying mission of their customers, before those customers vote with their feet and totally defect to simply price.

I welcome your comments!

Hilary Kahn

How effective is the supermarket grid in pharmacy?

The grid works for supermarket because the positioning of products support the customer’s shopping list - week in, week out. It is the ‘list’ that drives the traffic, not the lines of gondolas. The question was put: why follow the grid, as opposed to a typical department store, race track or newsagent layout?

The issue in the pharmacy is that the customer is usually shopping for a single item (rather than a list of items), with the challenge to enable the customer to see and buy more than just the one item.

The following principles of traffic flow were demonstrated using grid layouts – while there are other principles, these directly impact on the stores ability to manage peak period.

The speed with which customers walk to their major destination with a mission in mind is single-minded and faster than on the way out. Understanding this and positioning categories accordingly has a significant impact on sales.  The proviso is that customers on the way out will buy more providing they have not already paid, and that the categories en route are relevant and interesting.

Beware the grid straight line in from the entry and out from the dispensary.  The concept: ‘the shortest distance between 2 points is a straight line’ is definitely not a productive traffic flow principle. One only dispensary counter aggravates the problem further.

Design traffic flow that forces customers around the total store to strong and compelling category ‘enclaves’.  Width of unblocked aisles is vital to facilitate easy traffic flow, browsing and enable staff to comfortably engage customer.  Paco Underhill calls it “butt brush” – a sales killer.

Payment points should never be at the back counter when there is a store filled with merchandise to sell (pay before you buy – is also a sales killer). In the supermarket all elements are split to manipulate traffic (wanted products, payment points, service areas including bakery and delicatessen).

In pharmacy, compressing all the elements constricts the traffic flow (as it would in a supermarket).  Back (dispensary) payment points negatively impact front store sales, service and increases theft.

In a department store within a space of 1000m2, the rule is that the customer needs to locate the destination within 4 seconds.  Of all the rules this is the most important. If the customer can’t see it, he/she doesn’t know it’s there.  If it is difficult to access, its frustrating and a total disincentive to buy or revisit the store.

Presentation slides using a grid plan demonstrated how to split the elements in a way to add vitality and movement to the store, as well as significantly increase strong selling areas and remove slower selling areas. Examples were used of power walls and signage that really compels.

Customers hate disorganised, cluttered stores.  They are quick to highlight that the retailer needs to lift/his her game! Don’t confuse the deliberate ambiance of a strongly discount environment like Bunnings, JB Hi Fi and Chemist Warehouse with a store with insufficient retail disciplines and processes to clear merchandise that isn’t selling! 

Clutter kills – reduces customer numbers, sales and the perception that this particular retailer actually understands how to retail. How do you clean out your excess or dead stock?... Get a skip, or avoid buying the merchandise altogether. Don’t get caught by the lure of high margin stock, remember, retailers don’t bank percentages! Stock that won’t sell kills profit, stock that blocks sales can kill your business!

Customers expect to speak to ‘the specialist’ in specialist advice destinations. The credibility delivered by specialist, skilled practitioners on the sales floor is vital for credibility. The best known part of the Apple Store is the ‘Genius Bar’. In the old days of Brashs, the person with the best product knowledge spent his time checking the numbering on the CD cover with the disc in the back store! What a waste of skill, sales and service.  Read Bruce Annabel’s AJP article (June 2011).  Without disrespect to well-trained front store staff, the credibility (and sales improvement) offered by qualified specialists in the front store can’t be compared. A pharmacist talking about medicine or a naturopath discussing supplements and vitamins will always be more compelling. Put the right (best) people in the right place – talking to customers in front of the counter. Let dispensers dispense!  Include information and allow the store to work harder. Communicate information and advice to customers – when customers say they are ‘just looking’, give them something to look at and understand in order to make a purchase.  That is advice, no less than when it comes out of a mouth.

Sussan’s trademarked the term ‘this goes with that’.  When grouping categories, ensure that each category stimulates the impulse to shop in the adjacent category because they meet a similar need, mission or end use.  That applies within categories as well.  Everything the customer wants and needs should always be together – the alignments should be clear, evident, highlighted.  Break the groupings and you create frustration and lose sales. Maintain the alignments and lift the average sale. Remember – it’s your store, your risk.  Be sure that your pharmacy brand’s focus is consistent with your own growth strategy and market needs.

1. Improving sales by manipulating traffic around your pharmacy assumes your retail offer meets your market needs and compels your customers to buy. Even more fundamental, it assumes you have sufficient customers, or even the ones you do have will be there tomorrow.  It also assumes that the decisions you make are support your analysis of the gaps that exit in your market and your ability to service these gaps.
2. The concept of ‘first choice’ (Hilary Kahn) and EST theory (McMillan Doolittle) both assume that your pharmacy needs to be ‘best’ to survive.  The point was made of Bunnings dominance (notwithstanding its competitors efforts to get into similar format stores).
3. If the end game is to position the pharmacy clearly as a key provider of health in the local community, then specialisation needs to be apparent to all customers.  You need to ‘look the part’ (look as though yours is a health focused pharmacy) with particular specialisations. In the presentation we identified 8 to 10 potential ‘enclaves’ with all their sub-specialities and specialist skills to support (whether on a full time or call in basis). Deeply specialise in two or three areas and customers will seek you out and use other parts of your store as well.
4. First… determine the categories, identify the specializations and services needed, then allocate the space and the right merchandise. Don’t squeeze health categories into the pharmacy, rather remove those categories that contaminate the health focus and aren’t selling well anyway. Placement of core categories is a key driver of traffic flow –make this a primary consideration when planning your store.
5. Space allocation on core categories cannot be determined by financial return on space alone. If they are categories that are established to define your business, they must have impact and leave in the customer’s mind no doubt that you are a first choice destination for that category.  It’s a chicken and egg – looking the part may for a while demand more space (as in upmarket beauty categories of old) than sales warrant, but if they are part of the overall strategy, then the space and salaries allocation may become an imperative to be able to ‘act the part’ and drive more customer visit and revisit.
6. Skills within the pharmacy must be aligned to support the specialisation areas. Anecdotes abound of highly successful, specialist trained pharmacists who have developed real followings in areas (small pet, pain, troubled skin, sleep apnea, arthritis, weight management to name a few).
7. If you are going to do it, do it right – don’t be tokenistic. It requires more than just header signage on top of the category. It must be an integrated system involving signage, buying, merchandising, supporting collateral and marketing.