A business can seek to have lower costs than its competitors or it can seek to differentiate its offering to target customers. In the case of retail pharmacies, lower costs would result from buying power and spreading business overheads over greater volume (often via more stores). Lower costs then enable lower prices to be used to attract the more price sensitive customers. Differentiation is the active pursuit of uniqueness in the eyes of target customers. This can be achieved by a unique product mix, exceptional service, a different shop presentation, or emphasising anything that is important to the target customer. Porter also suggested that a business can seek to appeal to a broad range of customers or a more narrowly defined type of customer. Figure 3 shows these options.

Types of Customers

On the basis of some limited research, two broad factors emerge that drive the needs of retail pharmacy customers:

• their age and family type, and
• their attitude to health and themselves.

Age and family type are important because they are associated with health needs. For example, mothers with small children, and empty nesters and retirees are the two heaviest user groups. Other groups often regard pharmacies with indifference (e.g., teenagers) or some terror (e.g., middle-age men).

The attitudes of the customer – about their health and wellbeing and about their own personal identity, are also important factors because they influence what type of retail pharmacy will be attractive to them. For example, some customers are actively health conscious and seek information and advice about health issues. (One subgroup of these has been labelled the ‘worried well’.) Other people seem to take their health for granted and may only enter a pharmacy after a visit to the doctor. Some customers have a strong sense of self and seek personal service and quality products. They are willing to pay for these. Other customers have lower expectations about personalised service and are attracted by (i) the certainty associated with high-profile brands, (ii) price-promotions, (iii) institutionalised ‘events’ such as Christmas and Mothers’ Day, and (iii) customer loyalty schemes.

Because customer segmentation is at the heart of modern marketing, there is a need for this industry to better understand the variety of types of customers that populate the potential market for pharmacy products and services. Without this, it is difficult to understand the success and failure of current retail formats and the potential attractiveness of new formats. Also, it is difficult to understand why the low-use segments of customers avoid retail pharmacy.

Retail Design

A simple framework to help to think about retailing is the 5Ps:

• Place – location & number of outlets
• Product/Service – mix, depth and breadth of assortment, brands
• Price – low, value, or exclusive
• People – knowledge, attitude, empathy, responsiveness, etc.
• Position – name, shop layout and presentation, and retailer values.

Each of these ‘Ps’ has to fit logically together to create a business model. An old adage is that to survive a retailer needs to be good at 3Ps, while to win, they have to be best at 3 Ps.

As with most retailing, location is important – especially when convenience is a primary reason for use. The product/service mix is vitally important, as this ‘defines’ most retail pharmacies. The level of service offered can range from self-service (in the front-of-shop) to authentic, personalised service throughout the shop. The product mix of health & beauty, OTCs, home care, et cetera anchored to a dispensary, defines the general or specialist nature of the pharmacy. The perceived price level – as indicated by price promotions (or the lack thereof), product display, and the shop pricing policy (such as everyday low pricing), signal whether price is a competitive attribute. People is where many pharmacies have tried to build a relationship with their customers. The advice and demeanour of the pharmacist and the staff signal whether the shop places more emphasis on the customer experience or the basic task of trying to sell something. Position is all about branding the retailer. The role of branding here is twofold – to help identify the shop as a pharmacy, and to start to set the expectations of the target customer. For example, names like Priceline, Chemsave, Healthsense, Chemmart, Compounding Chemist, Community Pharmacy, Day & Night Chemist, Pharmacist Advice, Pharmacy Direct, Medical Centre Pharmacy and The Medicine Shoppe say what to expect when you enter the store.