Pharmacies focus marketing efforts on communities

Growing competition in the pharmacy industry from supermarkets and mass merchandisers has become a headache for traditional drugstores. But they are fighting back by focusing marketing strategies on their communities, as well as offering exceptional in-store service....

Growing competition in the pharmacy industry from supermarkets and mass merchandisers has become a headache for traditional drugstores. But they are fighting back by focusing marketing strategies on their communities, as well as offering exceptional in-store service.

‘The grocery sector and mass merchandiser is going harder into drugs and the industry is becoming fragmented,’ says Wynne Powell, president and COO of London Drugs, Vancouver. ‘It is important for traditional pharmacies to [develop] a personal relationship with the consumer.’

According to Statistics Canada, drugstores nabbed only 59.1% of the health and personal care retail market in the first quarter of 2000, while food and mass merchandise stores swallowed 18.9% and 14.2% respectively.

U.S. big-box chain Costco got in on the action when it carved out space for a drugstore in its North York, Ont., location last March and announced plans to expand the concept further. Other large retailers, including Zellers, Wal-Mart and Toronto-based grocery chain Loblaws, have entered the arena as a means to provide convenience to their customers. ‘Pharmacy items are a frequent purchase in terms of moms’ needs,’ points out Zellers’ senior VP of marketing David Strickland. ‘So it was a natural extension.’

Zellers, which houses pharmacies in 230 of 330 stores, also moved its health and beauty product assortment to an everyday-low-pricing strategy three weeks ago, which will further squeeze traditional drugstores, according to Strickland. ‘There’s going to be pressure on the drugstores to react to everyday low pricing,’ he says. ‘Where are they taking their business, relative to what’s happening in the mass category?’ Strickland says that in the last few weeks, the slashed prices, advertised via flyers and in-store signage, have translated into double-digit growth in the category.

The juggernaut facing drugstores at the prescription counter is a huge discrepancy in dispensing fees. For instance, where the cost at a regular pharmacy averages between $10 and $12, the price is only $4.99 at Loblaws. However, The Pharmacists’ Association forbids price-driven advertising, according to Loblaws spokesperson Geoff Wilson. Hence, both Zellers and Loblaws restrict pharmacy marketing to in-store signage. On the other hand, Wal-Mart focused on service in a recent TV spot, where an elderly woman suffering from cancer describes her trust for and friendship with a Wal-Mart pharmacist.

But John Williams, an analyst at Toronto-based retail consultancy J.C. Williams Group, believes the price battle will have an ‘enormous impact’ on drugstores. But, he says, they can still differentiate themselves with even better customer service, as well as community involvement. ‘A lot of pharmacies communicate service, but really they are no better than Wal-Mart,’ he says. A way to stand out is to house weekly workshops on health issues and implement ‘outreach’ programs that include visiting seniors’ homes and care facilities, Williams contends.

With a new TV and print campaign created by Toronto-based TBWA/Chiat Day debuting in mid-May that will lose the ‘Everything you want in a drugstore’ tagline but maintain a health and beauty focus, Shoppers Drug Mart hopes to bring its overall brand more top-of-mind. ‘The campaign has more of a brand promise and communicates what we stand for,’ says senior VP of marketing and communications Neil Everett. ‘We haven’t supported the corporate brand for awhile, so it was time.’

Everett says that value-added services, particularly for aging boomers, are key to Shoppers Drug Mart’s positioning. ‘Our emphasis is on customers who want service, like disease management programs and 24-hour store access.’ Shoppers runs Health Watch clinics several times a year, and typically lures between 20,000 and 25,000 consumers to each session, which are advertised across several media, says Everett.

Another example of value-added service is the Optimum loyalty program introduced by Shoppers Drug Mart last September, whereby patrons are rewarded for purchases, and receive a 20% to 70% discount when they redeem points. Similarly, Vancouver-based drugstore chain Pharmasave signed up with Sears Canada in February, so that Sears cardholders get one point for every dollar spent at the drugstore chain, while Mississauga-based Pharma Plus has been an Air Miles retail partner for two years. It’s a relationship that has been beneficial to Pharma Plus, according to ad manager Laurie Eles, who reports that over 50% of patrons are Air Miles cardholders.

Shoppers Drug Mart also attends community events, like the Calgary Stampede and the Ottawa Tulip Festival, where its Life Bear mascot makes an appearance. In trade areas where it has a 24-hour or drive-through store, the chain markets itself as a convenience choice via billboards and also customizes each venue to reflect its respective demographics. The Toronto Eaton Centre Shoppers, for instance, recently renovated to accommodate more cosmetics since it’s more of a fashion destination. Compare that to the store at Toronto’s Yonge Street and Eglinton Avenue, which stocks up on food items for convenience-driven consumers.

Likewise, Pharma Plus, with an ad strategy that includes a weekly flyer delivered to about two million households, markets itself at the grassroots level, according to Eles. It also has a branded motor home and mascot, which the chain introduced last year. ‘We’re at the little league soccer game in Mississauga, Ont.,’ says Eles. ‘Every little community has a summer festival or parade and these events are an important part of our program.’

A stimulating store environment is also imperative for Pharma Plus, which organizes promotional events like teen days during March break and in September, whereby staff members blitz high schools with posters luring youth into stores for hair care or nail polishing demonstrations.

In the past two years, 90 of Pharma Plus’ 148 Ontario locations were renovated to make room for a Rexall Nutrition Centre, a store-in-store concept showcasing Pharma Plus’ private label vitamins and herbals. In some of these venues, gift, cosmetics and bargain centres, which look like separate departments with dropped ceilings, were also added. ‘It’s not just straight up and down the aisles, and you spend more time in each area,’ says Eles. This summer, the retailer will also introduce interactive kiosks in six of its stores, where consumers can access promotional and product information at point-of-purchase.

Based in Vancouver, 55-year-old London Drugs sells everything from the usual pharmacy fare to electronics and appliances. With stores averaging about 32,000 square feet, the chain has already defended itself against big-box competitors, says Powell, who points out that 80% of British Columbians enter a London Drugs at least every three months. With 54 stores in B.C. and Alberta, the chain will venture into Saskatchewan with about six openings this year. If all goes well, Powell says he will consider moving into other provinces. ‘The competition is being accelerated in the East, but it is business-as-usual out here,’ he says.

Powell’s advice for other Canadian pharmacies? Focus on ‘personal services,’ he says. London Drugs’ ad campaign communicates a special relationship with customers. Its most recent TV spot, depicting inspirational scenes such as an elderly man fishing with his grandson, sports the tagline: ‘We’re not just about filling prescriptions, we’re helping people lead full and happy lives.’ The personal touch is evident in-store too, where patrons enter private booths to discuss their health concerns with pharmacists.

In its cosmetics departments, shelves hold high-end brands like Lancome, Dior and Clarins, and staff consists of ‘well-trained technicians that can be matched against any department store,’ says Powell. ‘You have to have an in-store experience, because everyone in the market is selling a variety of products. The drugstore business is very tough because margins are so slim. A lot of companies don’t realize how difficult it is.’