When Cleveland’s monster drug store chains rolled out their cannons to do battle, executives at Medic Drug stayed clear of the melee.
As CVS Pharmacy and Rite-Aid fought for control of corner parcels of commercial property across Northeast Ohio, Cleveland’s last family-owned pharmacy chain sat back patiently and waited for the dust to settle.
“Competing for that real estate was a very big thing between the major chains in Cleveland,” says Mitchell Zlotnick, Medic Drug marketing director. “There were bidding wars for those parcels that we couldn’t even think of participating in because of the ridiculous price being asked.”
Instead of trying to cash in on the new industry preference of freestanding, high-traffic locations, executives at Medic Drug drafted their own plan. Then, when Rite-Aid moved out of its Van Aken Boulevard location in favor of one of the company’s newly acquired lots of land, Medic Drug swooped in and acquired the empty storefront.
It is this kind of smart expansion, as well as sidestepping costly industry fads and a commitment to customer service, that has ensured Medic Drug’s success and survival. However, doing battle with Cleveland’s pharmacy giants is no small task.
For one, sweeping changes in the way insurance companies pay for prescription drugs have cut into pharmacy profit margins, squeezing smaller companies like Medic Drug a little tighter than the rest. That leaves Zlotnick with the challenge of making Medic Drug stand out in a market in which every competitor has deeper pockets.
For him, it all comes down to offering niche products and services to separate Medic from the pack.
Capitalize on your strengths
Medic Drug’s driving philosophy has always been to offer exceptional customer service, particularly when it comes to handing out advice about medication and other health issues.
“Finding our special place in the market was generally based upon service and taking care of people as we would someone from our own family,” says Zlotnick.
Today, the company uses its service record as a weapon against competitors which offer lower prices on front-end products such as over-the-counter medication. Instead of trying to provide the best price for a bottle of aspirin, Zlotnick focuses on the tradition of a friendly and knowledgeable staff to build traffic to the store. After customers get through the door, front-end sales take care of themselves.
“Having the lowest price is not a good leg to stand on,” he says. “There is always going to be somebody who is cheaper. Price is a very weak niche to stand on. It’s an important component, but it’s not the only component.
“You can have a great price, but if you don’t have the service behind it, you’re never going to see that customer again.”
Another distinct advantage is the ability to do complete Medicare billing, which allows people with diabetes, for example, to receive their health supplies without any out-of-pocket expense. That perk led Medic Drug executives to delve into a full line of health supplies and resulted in the creation of a separate home health care supply business.
“We’re a medical equipment provider, but of course, we’re also a drug store,” says Zlotnick. “We started to create a symbiotic relationship between growing the home health care business and growing the pharmacy, and that’s really how we got into it. Now a very large part of our business is home health supplies and the smaller players have gone by the wayside because they can’t obtain large contracts.”
Know your customers
When Zlotnick helps scout for new locations, he tries to determine what kind of store a particular neighborhood needs. For example, if there isn’t a hardware store nearby, maybe the new pharmacy will stock fuses and tools as part of its front-end merchandise. If there isn’t a supermarket nearby, groceries may make the most sense.
The Coventry Road location is a prime example of this concept. Since the neighborhood lacked a nearby grocery store, Zlotnick focused on an expanded grocery section and stocked the cooler cases for the large portion of business from students.
“As more and more different types of competition come into the marketplace, you look to fill niches an area seems to be lacking,” explains Zlotnick. “Sometimes you’re a gift and card store just because an area doesn’t have that, so you become that specialty for the market.
“Of course our primary business is pharmacy, but for the front end, we want to make sure we have the right mix. And we want to cater that to the individual neighborhoods.”
Keep your ear to the ground
When it comes to finding new products to bolster profits, Zlotnick is constantly on the lookout for new ideas. Often, he will get an idea while watching television or reading a magazine. Finding a new product is not always easy, Zlotnick warns, but a little research can go a long way.
“It’s hard to go out and say, ‘OK, I’m going to find a new niche,’ but I went out and handpicked magnet therapy before anybody knew what it was,” he says. “I actually had trouble finding vendors because there were only a certain amount of players. It was six months to a year later that I had companies calling me left and right.”
But by the time those calls flooded his office, it was time to start looking for another niche product. The problem is that once magnet therapy hit the mainstream, competing chains also sold the products.
“We were ahead of the curve on that one,” says Zlotnick. “That was a niche we started, then it became a me-too niche, so it’s no longer a niche. You just look for that next thing. You keep your ears open and you’ve got to listen.
“If you hear somebody asking for something special, sometimes that can trigger a niche.”
The search for new products, though, holds a certain risk: What if customers don’t respond? That’s why Zlotnick always does a little research first. Most of the time, that involves placing pamphlets or posting signs inside the store to gauge customer interest.
“There are different ways of putting your foot in the water,” he says. “Without putting your wallet in the water.”
Focus your marketing dollars
When it comes to the realm of advertising, Medic Drug is simply outgunned. Originally, the chain avoided head-to-head advertising with its competitors. If CVS went to a print campaign, it turned either to television or the radio. If Rite-Aid mounted a serious television campaign, Medic Drug might focus on newspaper advertising.
“The biggest threat they bring in is number of stores and dollars for advertising. We have a tough time matching that,” he says of the competition. “We have to come up with new and creative ideas about how we’re going to get our message out there and bring people into the store, which may not be through what they would consider traditional channels like magazines, televisions and radio.”
But the chance for a completely different kind of marketing popped up a few years ago when Budweiser bowed out of its sponsorship deal for the Cleveland Grand Prix. Medic’s collective ears perked up, and instead of investing in traditional means of advertising, Medic executives pooled that money for a one-shot sponsorship of the Cleveland Grand Prix once every year.
The deal bodes well for Medic, and the company works in special tie-ins with the mid-summer event. Zlotnick says it has done a lot to raise the company’s profile.
“I would strongly suggest that a local business that wants to be recognized as being part of Cleveland should find a way to get involved in some sort of Cleveland-oriented event,” he says. “This is the thing that really let people know we were from Cleveland. It really as done a great deal for us. It’s really put us on the map.”
And that, says Zlotnick, is the key strategy to competing against the big boys – making sure consumers know your name.
How to reach: Medic Drug, (440) 449-7722
Jim Vickers ([email protected]) is associate editor at SBN.