Dissecting the discount

Dissecting the discount

Are incentives worth cultivating new and loyal clients who may be worth 10 times the original investment?
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Sep 30, 2015

Talking about discounts with veterinarians is like talking about politics with your in-laws—it opens up a can of worms you wish you’d never opened. There continue to be strong, often highly emotional responses about discounting or incentivizing as a marketing strategy in veterinary practices, which is why Veterinary Economics surveyed more than 300 veterinary professionals to get a better handle on the controversial topic.

The survey looked at four types of discounts in practices: for new clients, referrals, specific demographics and missing clients. Here are highlights: 

Do you discount for new clients?

Many respondents say they don’t use new-client incentives as a marketing tool, but admit to leaving it to “doctor discretion” or “when the client has already generated a decent bill,” neither of which are strategic, objective approaches that provide real value for the practice.

The other half of respondents—who don’t offer new-client incentives—say they believe “it devalues our services” and sets future expectations for more discounts. The fact remains, however, that regardless of an improved economy, more and more pet owners say that cost is a serious issue for them in picking and staying with a particular veterinarian.

Many respondents said they don’t offer new-client incentives specifically because they offer superior service. Here’s a question to consider: How will you know if you can’t get them in the door?

Do you reward clients for referrals? 

Similar to those who offer discounts to new clients, many respondents said they don’t promote their incentives for clients who refer. With little risk and the opportunity for significant reward (based on what we know about the value of new clients resulting from personal referrals), this lack of promotion seems strategically counter-productive. Everyone likes to be rewarded for doing something good, and the benefits to the practice far outweigh the minimal costs associated with that type of recognition.

While there were similar responses for not offering this incentive as there were for new clients (“I don’t have to rely on gimmicks to get referrals from my good clients”), it’s important to measure this to be sure. What was most interesting is that a large number of respondents who don’t offer a referral incentive said they recognize the value of those incentives and expressed interest in implementing this type of program. Unfortunately, their reasons for not doing so to-date were purely logistical, with “difficult to track” and “lack of organization” as the most commonly reported roadblocks.

Do you target certain demographics? 

Practice owners who see little apparent value may still think offering discounts to seniors and other special demographics is worth the goodwill it provides. Or they may fear that discontinuing the discounts would generate animosity from the handful of pet owners who use them. Whatever the case may be, the data shows that the most common type of discounts being practiced aren’t necessarily the most strategic approach for a practice to increase service usage or client loyalty. 

Based on the lower financial value these discounts offer, if a practice isn’t currently offering these discounts, it may not be the best strategy to pursue. The exception would be if there are some truly unique demographic considerations practice management plans to capitalize on. Limiting these discounts to slower days or certain times of day would also make them more profitable, because there won’t be any increase in overhead costs.

Do you entice missing clients—those who’ve been away for a while?

The survey question on missing clients generated a lot of understandably passionate responses from veterinarians and their team members about the fact that it seems counter-intuitive to reward clients who are disloyal to the practice.

Only 16 percent of respondents said they make phone calls to directly offer this promotion, which leaves room for opportunity. However, the personnel costs associates with making all those calls would need to be weighed and measured against any possible increase in client visits and gross revenue. 

Reward behavior

Any discount, whether to attract new clients or incentivize current clients, is about rewarding desired behavior. If you truly don’t have any need to offer incentives, then don’t. If you feel it’s “wrong” to discount, then you have a right to that opinion, but make sure yours is not just an emotional response because you feel it devalues the work you do. (Does it devalue the work millions of other Americans do when they offer discounts to get clients to use their product or service?) Make sure you aren’t offering random, unadvertised discounts that do nothing to foster growth or loyalty. Base your decision on data, not emotions or guesswork.

It’s time to accept the fact that there are costs associated with acquiring new clients, whether through direct incentives or by incentivizing others to make referrals. The key is to measure that cost and determine whether it is acceptable. Is it worth a $10 credit to a current client for making a referral—plus a complimentary exam for the referred client—to have the opportunity to add a loyal fan to your list of clients who will continue the cycle by referring others? Sure, a few pet owners hop around from one clinic to another for an incentive, but that’s not the norm. The lifetime value of a client far exceeds this initial investment. According to SCORE (a volunteer nonprofit organization dedicated to educating entrepreneurs and helping small businesses), loyal customers are worth at least 10 times the investment to get them.

Ultimately, the key is for every practice owner to consider potential opportunities and make well-informed, strategic decisions with regards to client incentives. These decisions should always reflect attention paid to clients, capabilities, industry evolution and competition. When done right, a sound incentive strategy can benefit all parties—the pet owner, the pet and the practice.  

Jessica Goodman Lee is a practice management consultant for Pinnacle Integrated Veterinary Solutions.