A few days ago, I discussed how to achieve a breakthrough with the head of a small mineral water brand in Shaanxi. He had identified several target consumer groups, and we conducted a step-by-step analysis covering product differentiation, target consumers, distribution hubs, channels, promotion models, market support, and cost investment. Ultimately, my recommendation was: ignite sales in the hospital channel.

Take the hospital channel in Zhengzhou as an example. According to surveys, bottled water alone sells no less than 300,000 cases annually, demonstrating the huge consumption potential of hospital outlets.

Hospital channel sales are mostly concentrated in gift boxes and bulk purchases. Continuous deep cultivation of the hospital channel is crucial for distributors to adjust their product mix and gross margins. Today, let's discuss how to break into the hospital channel.

-01- Step 1: Understand the Following Five Issues

1. Most products in the hospital channel have gift attributes. That is, the user and the buyer are usually not the same person. The usage logic and purchase logic need to be analyzed separately. Brand owners and distributors should start from the user's perspective (physiological needs) and shift marketing efforts to the buyer (psychological needs), redefining consumers to avoid targeting the wrong customers. It's worth reminding: marketing should not be like blind men touching an elephant.

2. Hospital outlets have inherent cooperative relationships, and they may not be willing to cooperate directly. Resistance may come from hospital logistics department relationships, store manager and staff nepotism, secondary distributors' credit sales, or benefit transfers.

If you want to establish cooperation, first understand the situation to avoid high costs. You can initially leverage the resources of existing suppliers to get into the store, build relationships, then gradually take over the outlet, expanding from one point to the whole area.

3. Hospital outlets have small sales areas and limited product variety. Your product's entry may risk similar products being delisted.

Before entering, analyze the profits and costs of similar products, and calculate your core advantages as precisely as possible; otherwise, outlets won't replace existing products. Also, pay great attention to securing prime display positions, as different positions can lead to vastly different sales.

4. The special nature of hospitals poses great delivery challenges. Outlets don't stock up, so deliveries are frequent. Additionally, stores require timely delivery, so multiple deliveries per day are common.

5. Building relationships is difficult and requires dedicated service. Salespeople may be expected to do non-sales tasks, sometimes for extended periods. Also, because business is good, store staff may occasionally ask for freebies or promotional items.

-02- Step 2: Select High-Potential Outlets in the Region and Create Model Stores

1. Identify high-potential outlets High-potential hospital outlets generally have the following characteristics:

  • Many potential consumers: Large hospitals have many doctors, patients, and even more visitors.
  • Dense in-hospital outlets: Convenience stores, restaurants, small kiosks at both ends of ward floors, etc.
  • Priority to top-tier hospitals: Consumers in top-tier (Grade 3A) hospitals have relatively higher spending power.

2. Visit with a proposal Don't make exploratory visits in the hospital channel. Be clear on two points: First, the channel is highly competitive, and 90% of product entries involve costs. Second, it's not easy to meet the store manager, and even harder to have a quiet few minutes, so come prepared with a plan—a plan written into the agreement.

The agreement should specify:

  • Fixed costs: Including entry fees, fixed display fees, promotional intensity, quarterly or annual rebates, etc. (These costs require thorough competitive research to be turned into terms; otherwise, a failed first communication makes future negotiations difficult.)
  • Exclusive distribution for a specific product: Ensure that a particular product can only be sourced from you.
  • Price system stability: Hospital channel sales are high, so prices may be lower, but products must not be resold to disrupt market pricing. Also, retail and case prices must be clearly stated to prevent stores from overpricing and affecting sell-through.

3. Refine outlet setup

  • Focus on key products: Due to limited space, not all SKUs can be sold. Choose products that best match the channel's characteristics and meet consumers' differentiated needs. After selection, ensure the best display position for the main product.
  • Invest in distinctive shelves: Given the hospital's special nature, users and buyers differ, so attracting attention is key. Invest in shelves or special display points with brand logos. Customize shelves based on store conditions to maximize product display area.
  • Thematic materials: Hospitals are important windows for brand communication. Design unique visual effects for packaging, such as slogans like "Wishing you a speedy recovery" or "Wishing you good health" combined with the brand logo. This makes gift-givers feel the brand's thoughtfulness and recipients feel the giver's care, truly resonating with consumers and enhancing word-of-mouth. Of course, basic merchandising is essential.
  • Four follow-up items for display:
    • a. Number of new store displays developed
    • b. Number of stores with exclusive display contracts
    • c. Number of displays (shelves, coolers, floor stacks, etc.)
    • d. Number of special display positions/multi-point displays

4. Staffing, visits, and performance evaluation

  • Staffing: Based on the special nature of hospital outlets (high sales, concentrated outlets), allocate staff according to monthly sales and profit contribution to ensure stable relationships.
  • Visit requirements: High-quality outlets should be visited twice a day during peak season (e.g., mineral water in June-August may require three visits a day to ensure timely cooler restocking). Ordinary outlets should be visited at least once a day.
  • Performance evaluation:
    • a. Sales targets: Hospital channel sales come from effectively squeezing competitors, so this reflects sales capability. It should account for no less than 50% of performance.
    • b. SKU assessment: Few SKUs can enter hospitals, and entry costs are high, so SKUs must not be lost or out of stock. Assess achievement by individual SKU.
    • c. Merchandising assessment: Display position, SKU requirements, merchandising materials, and safety stock should be included in checks, accounting for no less than 30%.
    • d. New outlet development: Aim for no blind spots in the hospital; secure all outlets within a specified time.
    • e. Heavy rewards for growth: Use the "three comparisons" principle—compare with the same period, previous month, and competitors. Any growth earns significant rewards.

-03- Step 3: From Easy to Difficult, From Large to Small, Rapid Replication

1. Review the development process of the model hospital Conduct a focused discussion on the development process of the model hospital, including but not limited to store situation surveys, competitive research, relationship building, agreement drafting, outlet setup, staff evaluation, cost investment, and rate analysis. All participants should discuss and document the process to deepen team memory.

2. Gather information on all hospitals in the region Conduct a detailed regional hospital market survey, including but not limited to hospital size, number of outlets, distributor situations, manager details, whether they carry your product, your product's sales, policy support and pricing, whether they carry competitors' products, competitors' sales, policy support, and pricing.

3. From easy to difficult, from large to small, rapid replication Once the model store is established, speed is essential. Replicate quickly, following the principle of easy to difficult and large to small. Neither team morale nor the model store's market influence can afford delays.

Regarding market costs, as long as it's a one-time investment (not recurring), speed is more important than spending a bit more. For personnel rewards, make bonuses truly enticing to the development team. For relationship costs, make store managers and staff pleasantly surprised.

In short, prioritize speed. Once the hospital outlet standardization is done, you'll feel like "why didn't I do this earlier."

4. Increase influence to radiate to surrounding markets The hospital channel is a special channel. Doing well in one hospital can influence the surrounding market (in fact, nearby outlets also sell around the hospital). Leverage the momentum of hospital outlets to expand from point to area and quickly connect the dots.

Summary: Developing the hospital channel involves three points: First, pilot testing to find an operating model that fits the market; second, replication to quickly copy the successful model to all hospital outlets in the region; third, influence to create a model area centered on the hospital.

For brand owners, segmenting the market may include designating a hospital distributor, especially in provincial capitals. If the hospital channel is developed effectively, sales can rival an ordinary county-level market.

Finally, let me communicate with readers: This series of articles focuses on breaking down market actions, discussing a specific market point, with the aim of imparting operational experience to grassroots managers.

For example: How to run a successful themed promotional activity? Steps for launching new products? How to develop the campus channel? How to acquire target consumers? How to improve a "bad market"? How to develop urban business districts? Several ways for distributors to reduce costs and increase efficiency, etc. These are all summaries of frontline practical experience. I hope more distributors and grassroots staff can see them and make a small contribution to FMCG operations during the pandemic.

Extended Reading: If you wish to communicate with the author Tips will be paid 400-2000 yuan once adopted.