Two Dreaded Letters

Saying and hearing “no” after receiving or making a request is unpleasant for most. In fact, it is so unpleasant that many will go to great lengths to justify agreements that clearly should be rejected.

For example, late on Friday afternoon a provider is asked by a referral source with a history of bad referrals to make a delivery of a low-cost, low-margin product to an address 35 miles away from the warehouse. Should the provider say “no?”

One manager recently declared it was an unconditional policy of his company to say “yes.” Such decisions may be debated for a long time to come, but there are two indisputable truths: These situations are unprofitable. There is no excess profit to support wasteful decisions in home medical equipment companies.

There is a solution, however, that can get you to the equivalent of “no” without ever being asked to say the dreaded two letters. The solution is easy to state but not so easy to achieve: Don’t let your company get in a position to be asked the question. Following are some practical ways to create an environment where questions that should be answered with “no” are rarely, if ever, asked.

• Be sure about the solutions that should be offered. The solutions you should offer must align with the vision, values and competencies of your company, and with the needs and resources of your customer. Once those are known, the solutions that meet the test should be prioritized according to profitability. Profitability is impacted by both the cost of goods and the cost of people doing the things necessary to process the sale (i.e., intake, delivery, billing, collecting, purchasing, warehousing, etc.). Since the cost of labor is greater than the cost of goods, it is imperative to consider all of the labor costs associated with the product. It is also important to remember that the profitability of a product is not the same with all payers. Some payers require activities that others do not. So, even if the reimbursement is the same, the profit may not be. It is best to measure the profit of a product by payer or payer type.
• Market only the solutions that should be offered. Once the desirable product-payer combinations are identified, the marketing team can do its magic. The marketing that works to reduce unprofitable situations should be tightly focused on what your company does well, and who you can do it well for (including the geography and payer type). Of course, compensation for your marketing reps should be aligned with the most desirable referrals and should eliminate compensation for undesirable referrals. In some cases, it may be appropriate to eliminate product lines. Many providers have done it over the years and succeeded in spite of the fear that they would lose referrals for not having as many product lines. The most profitable companies in the industry are those that are specialized.
• Ask for the business you want from the sources that can give it. Who a company offers a solution to is as important as what is offered. When you have done a good analysis, it can answer both who and what. With this information, you should categorize the referral sources that: 1) are requesting the most desirable referrals; 2) could but are not; and 3) are not in a position to make desirable referrals. From this information, your marketing team must reallocate its time and effort from the third group to the first. There is one step remaining on the second group. They need to be divided into (a) who will change, and (b) who will not. Develop a plan to change those who can request desirable referrals but currently are not, and move those who cannot be changed to the third group.
• Craft alternative solutions for the customer. Providers who do the best job of helping people are good at educating prospective customers with information about solutions for problems they don’t solve. Some providers have had good success in making alliances with other providers to be an alternative source based on geography, payer type or product.

In conclusion, here is a summarizing thought said two different ways:

If you only ask for what you want to say “yes” to, you can avoid saying “no.” Or, if you don’t want to get wet, stay out of the water.

Read more Better Business columns.

Wallace Weeks is founder and president of Weeks Group Inc., a Melbourne, Fla.-based strategy consulting firm. You can reach him at 321/752-4514 or [email protected].