Fee, fi, fo, fum: Smart pricing doesn't have to be a fairy tale

Fee, fi, fo, fum: Smart pricing doesn't have to be a fairy tale

Bring your veterinary practice's fee structure to the next level by using a value-based strategy.
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Oct 01, 2009

In an economy where clients want to barter a few meager beans for your cream-of-the-crop services, the idea of cultivating a healthy fee schedule may sound like a fantasy. And if your practice is taking the ax to hours, benefits, and maybe even employees, you may think freezing fees or rolling back prices are your only viable options to keeping the farm, so to speak. But giant markdowns can actually cause you more harm, in both the short and the long term.



Besides the obvious profit you lose out on by discounting, price reductions hurt you because they condition clients to expect lower prices. This mindset makes it difficult to increase prices later because clients are more likely to perceive future increases as much larger than the discounts. And they most likely are—to make up for the profit lost during a price reduction, you must raise the fee more than that of the original discount. For example, a 30 percent reduction may require a 43 percent increase later just to bring the price back to normal.

Rather than falling for the tall tale that discounts keep clients happily ever after, climb your way to a thriving practice in the sky by adding value to the services and products you provide, and charging appropriately for them. Here's how.

USE A FEE FORMULA

Determining the price of value isn't easy, and that's where Benchmarks 2009: A Study of Well-Managed Practices, conducted by Wutchiett Tumblin and Associates and Veterinary Economics, comes in. We surveyed more than 200 value-based fees (those requiring doctor time and knowledge) to gain insights into how some of the best practices across the country price their services. While the fees, in dollar terms, may vary from region to region, we found that the relationship between the exam fee and all other fees is similar. To evaluate and compare your practice's fee structure, see "Price services based on value".

COMMUNICATE YOUR VALUE

Once you have an idea of how much your services are worth, it's time to communicate that value to clients. Certainly, pet owners may be declining necessary pet care because they're facing financial limitations. But it's possible that your low compliance rate may be the result of a communication gap between your healthcare team and your clients. To identify whether the right messages are getting through, try videotaping your outpatient appointments (with the client's permission, of course). Then view the tape and evaluate the doctor's and technician's presentation style, message, and body language.

Observe the client's body language for signs of confusion or misunderstanding. Is he or she receiving a clear and specific recommendation? Does the client have time to make a decision? Is he or she encouraged to say "yes" to necessary healthcare? Discuss the results with the entire team to create awareness and develop an action plan you can incorporate into daily practice. Conduct this exercise on a regular basis and note improvements along the way. Remember, every client encounter is an opportunity to affirm the value of your services. But to do so, everyone in your practice must deliver a clear, concise, and consistent message to clients.


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