Pricing Veterinary Services for the IAEP 2016
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Transcript of Pricing Veterinary Services for the IAEP 2016
Pricing Veterinary Services
Mike Pownall, DVM, MBAwww.slideshare.net/mpownall
Veterinary Pricing
3
Competitive
• Annual
• 30 Responses• 61% Raised Prices within 1 year• 9% Average Increase
We’re Not Alone
>50 %
3-8 %
Prove It
What is Good Pricing?
Doing the same, or less, but giving more value to the customer and more profit to the business
What is Good Pricing?
Encourages client behavior that benefits both client, business, and pet
2.6 5.3
Pricing Challenges
1% vs 10%
1% Price Increase
$5000
10% Price Decrease
$50,000
Freemium
Freemium
Loss Leaders
Penetration Pricing
Dynamic Pricing
Dynamic Pricing
Variable Pricing
Fortune.com April 29, 2014
Monthly Fees
Pay for Performance
Full Price Transparency
Comparative Pricing
Price Elasticity
…change in price affects demand...
Price Elasticity
• 89% of horse owners would tolerate 10% price increase
• 77% would tolerate 20%• 73% feel fees are low compared to
value of horses
Dynamic Pricingin
Vet Med?
Dentistry Promotion
No Call FeeFebruary only
164% increase in dentistry
45% increase in extras
93% increase in billing9% Discount
6% New Clients
10% increase in dentistry over next 3 months
Strategy & Pricing
What is Strategy?A description of how we identify what our clients value and how we can deliver it by competing with a sustainable advantage
over our competitors
Value
Value = benefit to client - cost
Client Value
UPSTREAM DOWNSTREAM
VALUE
Client Value
UPSTREAM DOWNSTREAM
VALUE
Client Value
UPSTREAM DOWNSTREAM
VALUE
Clients
everytable.com
The Loyalty Effect
What is a Loyal Customer?
• Engages the practice frequently• Has a positive attitude about the practice• Recommends the practice to friends and
colleagues• Less price sensitive
More Profitable
Probability of Buying
Loyal Clients 60% - 70%
Lost Clients 20% - 40%
Prospective Client 5% - 20%
Source: The Loyalty Effect and Loyalty Rules by Frederick Reichheld
Drivers of Client Loyalty
4
AttitudeCustomer/Patient Focused
Customer Experience Perceived quality
Purchasing processSupportive & caring staff
Brand ImageIndustry Leader
TrustworthyInnovative
Perceived Value Product Service
Pricing & Customer Loyalty
Hard Benefits
Soft Benefits
Bundled Pricing
Customer 1Willing to
Pay
Customer 2Willing to
PayExpected Sales Most Likely
Service 1 $18 $12At $18 will sell 1
At $12 will sell 2
$12
$24
Service 2 $17 $21At $21 will sell 1
At $17 will sell 2
$17
$34
BundledPrice
$35$0
$33$66
$29$58
5%
off all services & meds in year
Paid in Full by March 31Account must be current
50%
$99/Year2 day free shipping
Video, song and book accessUnlimited photo storage
Shop more – 2xSpend More – 40%
Membership is increasing – 50%
Why??
uk.businessinsider.com 10/21/15
What do We Sell?
Knowledge in units of time
TDABC
Time Driven Activity Based Costing
TDABC
• Labor• Fixed Costs• Cost of Equipment
TDABC
• Cost per minute of labor• Cost per X-ray, Ultrasound,
etc• Cost per mile
Cost of Goods Sold
Only sell with a transaction
Payroll
Labor
Payroll
Payroll
Payroll
Operating Expenses&
Vehicle
Digital Radiographs
Digital Radiographs
Digital Radiographs
Digital Radiographs
Total Costs
Client Type• New• Single horse• Multi horse• CC on file• Bad Payer
Client Type TimeNew 10 Min
Existing 5 MinSingle Horse Same Drive
Multi Horse Same DriveCC on File 10 MinBad Payer 60 Min
Example #1• New single horse owner• Rides for pleasure• CC on file• 30 minute drive• 20 miles one way• 30 min exam for “Swollen Eye”
Total Time = 90 minutesVet - 90 x $0.75 = $67.50Tech - 90 x $0.42 = $37.80CSR - 20 x $0.31 = $6.20Total labor Cost = $111.50Driving - 40 km x $0.41 = $16.40Transaction Cost = $24.91Total Cost = $152.81
Swollen EyeProfit for basic eye exam
$0
Lameness Workups• 4 horses at trainer barn• Absent owners
• 2 have credit cards • 2 are new clients with no info
• 30 minute drive• 20 miles away• 1.5 hour visit• 8 X-rays total
Total Time = 150 minutesVet - 150 x $0.75 = $112.50Tech - 150 x $0.42 = $63.00CSR - 2 x 15 x $0.31 = $9.30
- 2 x 60 x $0.31= $34.10Total labor Cost = $218.90
Driving - 40 miles x $0.41 = $16.40Transactions - 4 x $24.91 = $99.64X-Ray Cost - 8 x $25.28 = $202.24Total Cost = $537.18
Lameness ExamsProfit for 4 Lameness Exams
$164
What is Good Pricing
Doing the same, or less, but giving more value to customer
and more profit to business
What is Good Pricing?
Encourages client behavior that benefits both client,
businessand horse
Dynamic Pricing
Incentivize through scheduling
Swollen Eye$0 Profit
2.5 hours of vet work = no profit5 hours of driving = no billing
7.5 hours & no profit15% of vet time
What if….
Bundled 5 calls togetherReduce Call Fee by
50% ?
For Example2 hour total drive time rather than 5
$70 x 5 hours = $350$70 x 2 hours = $140 Saving $210
Reduced Call Fee EffectCall fee = $60
5 calls x $60 = $300
5 reduced call fees = $150$210 - $150 = $60 Profit
Swollen Eye2.5 hours of vet work = $60 Profit
2 hours of driving = no billing
4% of vet time
Reduced Call Fee Effect3 extra hours in week @$192/hour156 extra hours in year = $29,952
6% increase in sales• Lowered vet & tech cost• Lowered transaction cost• Increased profit• Happy & loyal clients
EfficienciesClient typeCODBetter schedulingBetter use of HR
Dynamic PricingTime of year• DentistryLocations • Reduced call fee
Measuring Client Loyaty
The Net Promoter Score
Past Customer Surveys
Useless
• Inconvenient• Intrusive• Annoying• Nothing measureable• <10% response rate
The NPS
• Promoters (9-10)• Passives (7-8)• Detractors (0-6)
Promoters – Detractors = NPS
The NPS• Promoters (9-10) 30%• Passives (7-8) 60%• Detractors (0-6) 10%
Promoters – Detractors = NPS30%(P) – 10%(D) = 20% NPS
Good Profit vs Bad Profit
The NPS
• 4 questions• constantcontact.com• Surveymonkey.com• Target clients• Results shared
Results
• Ave NPS score = 84%• Ave response rate = 33%
Challenges
• Time• Repeating clients• No industry standard
100 Pennies• Insurance• Accounting/Legal• Facility• Equipment Repair• Telephones• Bad Debt
• Inventory• Vet/Tech Wages• Office Wages• Advertising• Vehicles• Benefits
Profit??
Inventory
23%
Vet/Tech Wages
33.6%
Office Wages
14%
Advertising
1.3%
Vehicles
3%
Benefits
1%
Accounting/Legal
1%
Facility
5%
Equipment Repair
.07%
Telephone
1%
Bad Debt
.05%
Profit??
8.5%
Pricing Tips • Strategy• Discount carefully• Train staff• Log complaints• Measure• Be creative
• www.oculusinsights.net
www.slideshare.net/mpownall