Marshall Dahneke turns problems into profits at Performance Health

The disruption

When a company decides to change how its product reaches consumers, it takes much planning; Performance Health didn’t have that time.
“We backed into retail, we didn’t, I will say, proactively pursue retail,” is how Dahneke relates it.
“We woke up one day in 2008 and discovered that Biofreeze had become such a desired mainstream brand that, through gray market diversion, CVS had acquired enough inventory to put it on their shelves nationwide.”
While many companies work tirelessly on a strategy that will impress CVS buyers enough to get their products into the retailer’s more than 7,700 stores, Performance Health was horrified because it had a unique approach and partnership with the clinicians, Dahneke says.
As soon as the news broke, people at Performance Health tracked down the CVS buyer and said, “You can’t sell Biofreeze through retail. That’s contrary to what the brand stands for, that’s contrary to our channel approach.
“So, suffice it to say, legally, they said, ‘Well, we can,’” Dahneke says.
Performance Health then set out to discover who was diverting Biofreeze to CVS so the supply could be shut down. Simultaneously, the company began negotiating with the retailer, offering to create an alternate brand to replace Biofreeze at retail.

The pivot

Now a company pivoting to take advantage of a market opportunity is not rare, but Dahneke had to quickly transition his thought process to the opportunity the situation had presented.
What started off as defense soon transformed into offense. Dahneke recruited the help of a person in the organization with retail experience and asked him to lead a retail initiative, something contrary to the totality of the company’s legacy.
“I pulled him out of the clinical group, we formed the team and said you’re dedicated,” Dahneke says. “You guys are not going to think about clinical, all you’re going to focus on is retail. And that’s what they did.”
The dedicated retail team comprised people from inside the company who had a background in consumer brands, packaged goods, marketing and sales. The company also reached outside, partnering with external firms to fill in the gaps.
Once the retail team hit the streets, they discovered that more people were out in the market pretending to be Biofreeze representatives and trying to get Biofreeze into retail.
“We could catch offenders, we could catch diverters proactively as opposed to reactively to better protect the brand integrity of Biofreeze even as we were establishing and growing a new brand. It really strengthened our footprint,” Dahneke says.
The decision was made to develop a long-term brand in consumer retail that could add additional profitability to the organization — Perform Pain Relief, a sister brand to Biofreeze, which is authorized only for hands-on health care practitioners.
As the retail division was gaining its footing, however, there were some within Performance Health who weren’t on board with the new approach.

The pushback

Dahneke set out to understand the aversion to retail in order to move the organization forward.
“There were very vocal detractors,” Dahneke says. “There were people who said we shouldn’t get anywhere near this, we need to fight CVS and whoever we need to get Biofreeze out.
“When you understand the rationale behind them, then you can begin to construct a positive, proactive growth strategy that doesn’t dilute that core business, but creates new opportunities for growth, new opportunities for brand development,” he says.
The move into the consumer realm, Dahneke says, ultimately helped the clinical business. It strengthened the Biofreeze alignment and partnership with practitioners short term and long term, and led to a renewed investment in the Biofreeze brand.
“I think that was a one-two punch where even the detractors said, ‘Look, let’s see how this plays out.’ And it’s played out, frankly, really well,” he says.
Perhaps the most important realization for Dahneke as the company adjusted to its new strategy was that Performance Health is not a health care company.
“We are not a clinical company. We are a specialty consumer company. And our channel to market happens to be through hands-on health care practitioners. But when you assess the products that we make, they are used principally in the home. So the majority of what we sell to clinicians passes through the clinicians hand to the patient or client to be used in the home between visits,” he says.

The payoff

Biofreeze, Dahneke says, is in a better place now than it ever was, and the company has a new platform for growth, that being retail, through which a number of its clinical brands can enter the market without compromising the company’s clinical relationships.
After the retail business segment’s first year, it was doubling in growth annually for the first few years. What started out as a non-existent business now accounts for some 15 percent of the company’s revenue.
“Five years ago there was nothing. Now it’s a very material, meaningful, contributing segment of our business, not just in revenue and profit, but in terms of a greater eye on design, on clarity of instructions for use, on a greater focus on the consumer,” Dahneke says.
The company’s retail equivalent of Biofreeze, Perform Pain Relief, is now available in CVS, Walgreens, Wal-Mart, Kmart, Safeway and other locations.
It turns out that by embracing the challenge, the company culture and mindset has shifted forever in a positive direction.
“I would say there’s a much better balance within our organization today,” he says. “We haven’t lost our focus on the practitioner, but we’ve really complemented that with a focus on the consumer. Every patient out there eventually graduates back to being a consumer.”

Takeaways:

  • Challenges can be opportunities if you change your perspective.
  • Don’t be afraid of the unknown.
  • Turn your opponents into partners.