Do you share a portion of your profits with your customers?
We all receive special offers from companies, such as 10-15% discount on the wholesale price, or even more for dermocosmetic products.
Maybe now is the time, amidst increased eshop competition, to share part of our profit with our customer, accompanied with a targeted communication message.
Cost Leadership Strategy
This article does not develop financial figures and discount theories, or the use of the reserved wealth or pricing policies of various companies to the pharmacists. It is up to each professional to manage these benefits.
This article refers to one of the 2 main ways that give a competitive advantage, and specifically, the Cost Leadership Strategy.
Ultimately, how legitimate or not this strategy is, for the pharmacy channel, which involves the concepts of "scientific profession" and "trade".
But first, let's take a look at the importance, the value and the potential risks from the Strategic Cost Leadership.
According to Michael Porter, there are two main types of competitive advantage.
Cost leadership, i.e. the ability to produce and supply a product at the lowest market price, in our case the supply of a product, and diversification, that is, the provision of products and services difficult to imitate, with the buyer also willing to pay more to get it.
The cost leadership strategy basically starts its way from squeezing the production costs, so that it can be available to the market with a lower price.
In pharmacy’s case, if we look at the "production cost" instead of the "acquisition cost" of a product and take advantage of the timeless benefits that have been built between pharmacies and suppliers, e.g. special offerings, price discounts, item discounts, then we can consider partial or total transfer of this cost benefit to our customers.
Perhaps the most interesting example is that of seasonal products, such as sunscreen, where suppliers offer tempting discounts to pharmacies, even up to 40% on invoices, to achieve better market penetration, but also to overturn the most negative feeling for the consumer.
Therefore, part of it would be an offer to the end customer, targeting both customer satisfaction and market share increase for the brand.
This way, net profit is higher, due to the increase in sales volume.
We should not constantly focus on strict adherence to profit margins and "markup".
Profit is rather a result of turnover increase in items sold.
8 basic parameters to determine the pricing policy
1. The socio-economic profile and potential of customers in our geography.
2. Competition - from other stores or pharmacies.
3. The proportion of market share for each brand category.
4. The brand and its category market share.
5. The brand image.
6. Brand profitability.
7. The profit margin threshold on the selling price.
8. The concepts "market price" (list price) "base price" (low price for common daily products), "offer price" (for seasonal offers).
A pharmacy pursues a cost leadership strategy when it aims to outperform its competitors, achieving lower acquisition cost and, therefore, lower retail prices, typically for common everyday products, targeted to mass markets.
The pharmacy that follows a cost strategy usually targets large target market and seeks large sales volumes, where, through economies of scale, it achieves low acquisition cost.
However, it should be noted here that the entrepreneur "cost leader" cannot ignore "differentiation".
The product or service offered by the company must be comparable to that of its competitors, i.e. characterized by a differentiated approach to the consumer.
For pharmacies, the so-called differentiation refers to the service provided on the good, since goods are similar from one pharmacy to another.
Discount policies bring only temporary benefits that quickly evaporate, since today’s customer wants to feel important and unique to the seller.
This concept should be delivered, not only through by low price, but also by the quality of service provided and the level of empathy given to the customer.