Retail products
How to calculate a value-added markup
By Steven Copperman

Retailing in your office can add value to your practice and dollars to your bottom line. And it’s not hard to do!

Retailing is easy, but before you enter into it, do your research — just as you would before starting any venture. Consider three questions.

• How much value will retailing add to your practice? Remember: Value is in the eye of the consumer, and it results from satisfying a want and/or a need.

Food, clothing, and shelter are daily necessities, but different individuals put various levels of value on them.

Healthcare may fall into the same category. Your patients are consumers. No matter how they pay for their care — through insurance, by cash, or as a gift — they invest their time in you and look for their own perceived level of value in return.

In most cases, the services you extend offer more than enough benefits for your patients. Retailing products that complement your treatment plan offers an avenue to provide even more benefits (value) — including enabling your patients to purchase products they need from someone they trust.

• Are increased profits attractive to you? As you satisfy your patients’ needs by providing a level of chiropractic care to help maintain an overall harmonious functioning of their body systems, you may offer products that you have studied and believe in. If you retail in small or large scale, your profits will increase.

Those increased profits enable you to spend more on marketing efforts, add additional modalities, or go on a family vacation just to make you a “better you.”

• What products should you offer? The answer may jump out at you as you determine which products you often direct your patients to buy; which you give to your patients at no charge; which products you and your staff personally use; and which products your suppliers recommend.

Pillows, supplements, analgesics, exercise balls, and back supports are just a few examples of products that are successfully sold by chiropractors across the country.

CALCULATE THE MARGIN

Once you have decided which products to offer, how do you establish reasonable but not “greedy” mark ups on your retail goods?

1. Consider expenses associated with retailing. Large retailers consider a number of factors in developing their pricing strategy: space needed for display; labor and workers’ compensation insurance; employee benefits; technology; marketing and advertising expenses; the cost of sales and customer-service staff; demographics; and other overhead expenses.

Because they have to consider so many things, dedicated retailers have to put a high mark up on products — often 100 percent to 125 percent!

Although many of these factors do not apply to your practice, some do. You should not hesitate to mark up your products adequately to cover these expenses and come out with a profit.

2. Determine your goals. How much value do you want to add to your patients’ care and then how much do you want to profit?

Let’s say you have concluded that you would like to add rehabilitation modalities to your practice, and you would also like to add $500 per month in additional retailing revenue, $250 of which would be profit.

3. Consider appropriate products to attain the goal. Which products complement your practice and your patients’ needs?

In the rehab scenario, exercise balls would complement the practice. This product strengthens, stretches, and tones all major muscle groups. It helps enhance coordination and balance, and improves flexibility.

Exercise balls typically come in many sizes suitable for most body proportions.

4. Decide on an appropriate mark up. Your cost may be from $10.99 to $15.99 from a chiropractic supply distributor.

At a cost to you of $10.99 and with a suggested retail of $19.99 (a 90 per-cent mark up), you would only have to sell 25 exercise balls per month to reach your goal. If you added analgesics, pillows, back supports, and supplements to the display shelf in your lobby, you would exceed your $500 goal with little trouble.

Is $19.99 a good price — for you and your patients? In most retail stores, exercise balls are usually priced from $15.99 and up. To verify the price, though, visit some of your local retailers to look for comparable products and their pricing.

5. Take into account your patient demographics. When assessing mark ups, review your patient demographics. Are they primarily Medicare recipients, Medicaid recipients, injured workers, or all cash customers? Each category may have a different ability (and desire) to purchase retail products.

6. Consider exclusive products. Manufacturers continue to make every effort to keep their products exclusive to the medical profession. You have worked hard to earn professional pricing and the right to sell them exclusively to your patients.

You have conviction in the sale of retail products at the onset because of your beliefs in what you do, but you will increase that conviction when you know you are saving your patients time and money.

In many cases your chiropractic supply distributor can provide suggested retail prices based on success stories delivered to them by their customer base. But do not hesitate to confer and ask for referrals of other chiropractors who have been successful retailers.

Assess your goals, rely on your product supplier, research your patient base and local retailers, and you will be able to formulate a successful mark up that will provide value to your patient base and added dollars to your bottom line.

SIDEBAR:
Answering price objections

Steven Copperman is the general manager of Meyer Distributing Company, headquartered in Twinsburg, Ohio. He can be reached at 800-472-4221 ext. 5298 or at scopperman@meyerdist.com.