Pricing Veterinary Services for Profit and Value

You can be at the top of your profession as a veterinarian, but still have a struggling practice if you don’t make business and marketing operations top priorities.

Studies show that far too few veterinarians understand that effective use of financial concepts is as critical to their success as providing quality care. And yet, the same studies reveal, those who do become experts in utilizing the powerful tools available to increase profitability enjoy superior success among their peers.

A 2011 report by Bayer Health Care’s Animal Health Division and the National Commission on Veterinary Economic Issues examines decreasing client visits and the resulting loss of revenue at veterinary hospitals nationwide.

The Bayer Veterinary Care Usage Study reveals that 62 percent of practices do not use financial concepts to manage their business and that the practices that do employ a range of financial concepts, such as pricing strategies, are two-thirds more profitable.

This demonstrates that what is true for all professionals is also true for veterinarians: There’s no such thing as a good business without a business plan including good financial concepts.

Pricing as a Priority

Researchers with The Bayer Veterinary Care Usage Study found that when compared to other professions such as CPAs, chiropractors, dentists, and physical therapists, veterinarians came in dead last in terms of profit margin at an average of 10.5 percent.

The study identifies six key factors limiting client visits, four of which can be impacted by veterinarians. Of the four, pricing stands out the most. In fact, clients said that the frequency and amount of price increases for animal care affected their spending decisions, and that veterinary costs usually were much higher than they expected.

In slang terms, clients described the experience of ‘sticker shock.’ By contrast, they said they would visit the veterinarian’s office more regularly, particularly for preventive care, if they were aware of ways to save money while retaining quality.

It stands to reason that increased visits translate into greater profit. So the question becomes: what can a veterinarian do to satisfy the client’s need for value, and in turn, get them to come in more?

Just like you, your clients have high expectations for flexibility and personalized services, especially when it comes to pricing and payment. They want options that meet their needs and make them feel valued. They also will respond favorably if they believe they are getting a better deal than what is offered at competing practices.

However, don’t confuse pricing strategies with undercutting or a competition for offering the lowest prices. Rather, you want clients to know that your practice’s cost and quality as a package make for a good value when it comes to money spent.

Pricing Strategies

Though some of the following pricing strategies are underutilized in the veterinary community, they are embraced and successful for nearly every other type of business.

Strategies to consider are:

• Payment Plans: Breaking overall cost into manageable payments makes clients feel empowered and better able to afford products and services. Meanwhile, you can charge a premium because clients see the broken down payments as more manageable and attractive than one larger payment that must be made at the time of service.

• Bundled Services and Volume Discounts: If you aren’t certain what bundled services are, think about your household utility bills. Companies like Comcast and Verizon are experts at enticing customers by offering discounted rates when you bundle together television, phone and high-speed Internet services. McDonalds does this, too, by making it cheaper to buy a burger, fries and soda together on the Value Menu than to purchase each individually. As a veterinarian, you have similar bundling opportunities. For instance, with a regular wellness exam you can offer reduced prices from a menu of complimentary and ancillary services.

• Using Pricing as a Marketing Tool: Prices communicate messages. Your local car wash offers a range of prices for a graduated tier of washes. The message is that the more you pay, the better your car will be cleaned and protected. As a veterinarian, when you know the price scale for services in your area, you can establish a reasonable price at the higher end of the range and send the subtle message of quality: You hit the intersection of quality and value. Drive home this message in your marketing and advertising.

• Charm Pricing: This refers to prices such as $4.99 for a fast-food meal, or $19.99 for a mouse for your new computer. That is, $19.99 is more attractive to consumers than $20.15. As a veterinarian, you may find that you increase client visits by offering a wellness exam and vaccinations at $149.99 rather than $151.67. You can also apply the principles of charm pricing to the pet care products you sell. Again, you want these prices to hit the intersection of quality and value.

Additional Ideas: Some other pricing strategies include targeted incentives for lapsed clients and during slow periods of the year; lowering exam fees for first-time clients; and asking for a premium at peak times of the day or week, and offering discounts for off-peak periods.
Unfortunately, as overhead increases, you may have to raise prices periodically.

The strategies outlined above can help reduce the frequency of increases, as well as make them less noticeable. The bottom line is that when people think your service is worth it, they truly are willing to pay a little extra for your products and services. It’s your job to make them understand your value. And that’s just good business.

Article Written and Copyright © by
Mark Feltz, DVM
Owner
VetNetwork
www.vetnetwork.com

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