If you are running a pharmacy point-of-sale (POS) system, you are most likely collecting data that can be of great value to increasing store performance by helping you make educated decisions about merchandising, inventory, and promotions. While the first step is getting good data in, you then need a way to analyze it. Epicor Senior Product Manager Keith Lam talks with ComputerTalk’s Will Lockwood about how business intelligence and analytics apply in POS, how they work both with and independent of loyalty programs, and what to look for in trends and best practices to help you make efficient use of your analytics.
ComputerTalk: Let’s start with the background on what business intelligence and analytics mean in the POS context.
Keith Lam: Business intelligence and analytics let you look at your POS activity, but more importantly, they give you a detailed look at your customers. At Epicor, we believe that pharmacies really want to focus on their customers.
CT: When people talk about using POS to focus on their customers, they often think of loyalty programs, right?
Lam: Yes, and for good reason. All the big boxes have loyalty programs, and they’re sub-segmenting their customers and analyzing their shopping habits and the trends. When I look at independent community pharmacy I see an advantage, and that is that they really know their customers personally. Independents have that connection and they have customer service, right? That’s a great place to start. When independents look at loyalty programs, they can take the approach of asking, “How can this help us better personalize the experience for our customers?” They can do that by collecting the data and seeing what it says. That’s where business intelligence and analytics come in.
CT: So loyalty programs are about rewarding and retaining your customers, but then when they are harnessed to business intelligence tools, they can become about learning from your customers, too?
Lam: Right. If you can capture the information from the POS and track to a certain customer, then you can sub-segment these customers. From that you can analyze their data, like what are their buying patterns? What time of year, what time of day did they come in? Who are your most loyal customers?
This last question is a good one to ask, since you can tier your rewards programs based on it. You don’t have to offer every customer the same rewards. You can do more for your best customers.
CT: What tells you a customer is a good one? How often he or she comes in?
Lam: Well, you will know how often they visit, certainly. But you can also look at them by revenues, by co-pays, and by margin, as well. Then you can prioritize these different data points and segment your customers to promote them differently. For the people who are good margin, good customers, you might give them a promotion when you see they aren’t coming in as much, for example. Maybe you give them access to special hours or special events. You reward them well.
And then there are customers, and I always use my wife as the example here, she’s a coupon cutter and a promo lady. She will go into a store, buy the promo, and leave. When you analyze your customers, you can decide not to give the promo-only shoppers any promotions unless they are buying other things.
And when you set up rewards by segment, you are making your best customers feel special and you aren’t expending the same resources on other shoppers.
CT: What about people who don’t sign up for a rewards program? Does business intelligence help you learn from these customers as a group?
Lam: Yes, you could look at some data on your promos and discounts. If I have a flyer for 20% off today, I want to know how many people are coming to use it, whether they are loyalty members or not. Did the promo or discount increase my margins and increase my revenues? Also, if I have a specific coupon with a barcode, I want to track that coupon to see what people bought with that promo. I will also learn what other things they bought. So even without tracking customers specifically, you can sub-segment your promos to see what works and what doesn’t.
CT: You mentioned finding out what items people buy together. How important is this?
Lam: We feel this information is very important, and it really leverages the data you are collecting at the POS. The Epicor product that retailers use to document and analyze this information is called Epicor Eagle N Series Market Basket. For example, when a customer comes in for a prescription, do they buy aspirin 90% of the time or ibuprofen 80% of the time? Market Basket analysis lets you look at that data, and it helps you market products better, it helps with inventory, and it helps you merchandise your store better. Any user with the Market Basket module can access this information.
I have a great anecdote about the impact of business intelligence that involves Market Basket analysis. There was a customer with three stores, and they ran a Groupon promotion at Christmas time. When they analyzed these coupon customers and did the Market Basket analysis, they found that customers in one store had an affinity for poinsettias. In the other two stores, these same coupon customers weren’t buying poinsettias. What was going on? Well, it turns out that the poinsettias were up at the cash register at the location that sold the most poinsettias, but not at the other two. So they could actually increase the ticket value for every customer just by moving the poinsettias to the front of the store. That’s exactly what the other locations did. With the Market Basket tool they were able to spot the difference and then see results through business intelligence.
⇑ Screen captures show some of the detailed analytics available via Market Basket analysis and Loyalty Manager Manager
CT: Getting back to loyalty programs for a minute, what kind of data should pharmacies look to collect from members? What can they expect customers to be willing to share?
Lam: It depends on the customer. Many times, when people sign up for loyalty programs they don’t want to provide all their demographic information. So the first thing is to get the basics. You get a phone number and an email address, and maybe a mobile number for texting. Birthday information is good data to have if you want to offer a birthday coupon to customers. Additionally, age data is useful because many studies show, for example, that millennials shop differently from baby boomers and Gen Xers. If you can collect age information, then you can use that to further sub-segment your customers. So if the millennials really want to be more social and be part of a group, then you might not just give them points or discounts, you might host special events just for them. Or you may create groups for them to join.
CT: This sounds pretty powerful. So let’s say you have some sub-segments by age and you do a Market Basket analysis, then you are going to find, even within your best customers, more and better ways to reward them with specific offers.
Lam: Yes. You could say, “Hey, because you’re in my loyalty program you get the first look at new products and promotions.” And you have a good idea of what they’ll be interested in.
CT: This is interesting stuff. How does a busy independent business make this a practical course to pursue?
Lam: Great question. Business intelligence and analytics have to give you information in a way you can actually use. With this in mind, we’ve built numerous dashboards into the new Epicor Eagle N Series retail business management solution that automatically show you graphs and charts of important information based on retail best practices.
Users of the solution can get up to speed quickly and see the impact on your store’s performance right away. Once you can see which products have shopper affinity, you can take action. This tool can be greatly leveraged on end cap space. You can put products together there to test and see if there’s an affinity, and if they can increase your margins. Or you can look at shelf placement: If you move a higher margin product from the bottom to the top shelf or the middle shelf, do people buy that more?
CT: And all this is POS driven, of course.
Lam: And something that you can even do without a loyalty program. We talked about how important loyalty programs are, but at a minimum you want to be able to use business intelligence in your POS system to see what merchandising and store layout decisions can impact your margins in a positive way.
It’s the same for coupons. If you look at Rite Aid, Walmart, and Walgreens, they have coupons every day. They are also analyzing how the coupons are working. That’s easy to learn from: If you send out a coupon for 20% off, did your margins increase or did you just give away money? It’s the same for any kind of promotion. You want to be able to learn from it.
CT: How long does it take to get actionable results from this kind of data? Is it a matter of days? Of months?
Lam: If you have access to data analytics, you can pretty much get immediate feedback on promotions. There’s a rule of thumb saying that you need at least 25 different customers who are buying a product before you can establish a trend. Business intelligence provides that data for measurement.
CT: Okay, great. We’ve covered a lot of ground here. What else is important for pharmacists to know about POS business intelligence?
Lam: Well, one thing is to look at what the big players are doing with their loyalty programs and to learn from best practices. Recently, we’ve seen many big boxes move away from points-based loyalty programs. For example, there’s a big chain here in northern California, and they do not use points in their loyalty program. Customers have a loyalty card, and then you get discounts off certain items. And if there are points, then they are part of a tiered system with specific rewards for each tier. Rite Aid is a great example of this. But overall, we’re seeing that as more and more pharmacies integrate loyalty programs into their business, they see points as a liability. I mean that literally. Points are a balance sheet liability that you have to account for in your financials. From that perspective, points equal dollars, and you have to hold those dollars as a liability on your books for a certain amount of time. That can be difficult, so pharmacies are saying, “Maybe we should just print a coupon as the reward, and have it expire in 30 days?” Or they are taking the route of telling loyalty customers, “You’re in a certain tier, so you get special pricing, or you get to attend special events.” Moving away from a simple points-based system also lets you do something different and something personalized for your customers. You don’t have to do what everyone else is doing. Your loyalty program should make your customers feel special and also differentiate your business. CT