Unordinary Thinking No. 42 – Cross-selling in the drugs business

I have never quite figured out in my own mind whether I think selling drugs is difficult or easy.  Difficult because of tricky supply side issues such as sourcing, shipping and dealing with unscrupulous characters or easy because of plenty of demand and income which the government chooses not to tax.

Okay, so perhaps I do not mean that sort of narcotic.  I was actually thinking of prescription medication which we all have to buy (hopefully not too often).

I heard a great story from an FMCG seller friend of mine recently.  He told me about the trouble faced by a successful pharmacist client of his when he expanded his store network.

This chap had grown his business from a single shop to four through a combination of hard work, good locations and a forensic understanding of what his customers desired.  With this successful track record behind him, when the opportunity came to acquire a new store location he grasped it.  Why would it not be a success?  After all, he had spent over 12 years running his pharmacies, honing his proposition and working out what worked and what did not.  It was simply a case of taking this expertise and knowledge and applying it at the new location.Pills

Except this time it did not work.  In fact the new pharmacy performed poorly from a sales and profit perspective.  Income from prescriptions was on plan-only to be expected given the new store’s proximity to the town’s general hospital. It was the cross-sales from high margin, impulse purchase areas such as soaps, toothpaste and hair dye which were causing the problem.

The pharmacist could not understand it since he had previously been immensely successful through following the same retail formula in all four of his previous stores.  He was replicating his established model such as store layout, stock selection and staff training.  He looked closely at his customers and confirmed that they were very similar in terms of demographic to those in his other pharmacies a mile away.  But they were simply not buying products in the way he expected or wanted.

So he went back to what had made him successful in the first place.  He went back to his customers and started closely observing and examining what they were doing when they were in the pharmacy.

PharmacyAnd what did he see?  He saw focused, task oriented individuals striding through his front door and to the back of the shop like Usain Bolt striving for the 100m tape.  Because they were coming straight from a hospital appointment, customers were preoccupied with getting their new medication and would march directly to the dispensing counter at the back.  Once they had been served however, their whole demeanour changed as they visibly relaxed and wandered back through the shop, looking at the products on the shelves but not stopping to purchase anything.

He immediately understood.  Once the customers had received their prescriptions they mentally ‘checked out’ of the pharmacy as their mission had been accomplished.  They also physically put their wallets and purses away and, hence, their likelihood to purchase became less.  It was clear to him that he needed to reimagine a new environment, more in tune with this particular customer scenario.

The answer, in common with many unordinary solutions, was simple and obvious in hindsight.  Through the experience of his established stores, he knew how to maximise cross-sales by presenting the right types of product as the customer walked through the door (in a similar way to how supermarkets always have the fruit and vegetables in the first aisle).

So he shut the pharmacy for two days and turned the shop around-both physically and financially.  By mentally envisaging the dispensing counter as the front door, he reconfigured the shop as if a customer had just entered it once they had received their medication.  He placed the products he knew would appeal to customers right in their eye line once they had their prescriptions-or while they were waiting.  Hence he provided a solution more congruent and in tune with how his customers were feeling as they came into this particular pharmacy, with a corresponding increase in cross-sales.

Going back to the customer, applying some creativity, and using the available resources (prior insight about his customers) to help solve the commercial problem.

So perhaps selling the drugs is always the easy bit.  It’s the cross-sell that the drug dealers might want to think about.


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