Veterinarians are faced with a myriad of challenges in today’s business climate. These include a reduced horse population that is slow to recover, aging clients, more veterinarians/more competition, achieving work/life balance, new vets coming out of school with high debt loads, a different expectation of what an equine practice should be, and poor understanding of how to run a business.
The Equine Business Management Strategies (EBMS) summit in Wisconsin educates vets and practice managers about various aspects of running a better equine vet business. These small-group gatherings are part of a larger group called Oculus Insights (oculusinsights. net), a global, all-species business education group operated by Bob Magnus, DVM, MBA; Mike Pownall, DVM, MBA; and Joop Loomans DVM, PhD, PTV FEI Certified Equine Practitioner.
One of the hot topics for many veterinarians at the meeting was pricing.
Pricing in Vet Practice
“Am I charging enough or too much?” was the main concern of veterinarians when it came to a discussion of pricing. Pownall said that there are questions most veterinarians ask themselves about pricing, but they rarely have facts to support any answers. He said that there are three ways in which vets set prices:
1. Compare prices to those of the competition.
2. Implement annual increases (which often are based on guessing).
3. Use a pricing strategy.
While Pownall said that every practice should have a pricing strategy, if you don’t have one in place now, don’t feel bad. “More than 50% of Fortune 500 companies don’t have pricing strategies,” he noted. However, “Those that do have a pricing strategy have 3-8% higher profits.”
Then he posed this question to the group: “What is a good price, and what does a good price affect?”
Among the discussions was whether the veterinarian should spend time during a call to write up the complete bill and wait to get paid on the spot, or whether the customer should be billed after the call. Some vets said that they could probably see another call that day in the cumulative time spent trying to get bills done on the farm and waiting for a check, cash or running a credit card (if there is sufficient phone service). Others said that they would rather bill immediately, so that they don’t forget any charges, and know that the money is in their hands, so they don’t have to bill and collect.
It was recommended that every client have a credit card on file with the vet’s office with which to pay the primary or any ancillary bills and to ensure that the vet gets paid after he or she leaves the farm. Some vets said that having a credit card on file doesn’t always mean you will get paid because the card might be expired or the charges could be disputed.
When discussing what constitutes a good price, the group listed the following:
- Everyone is happy.
- The client feels like he or she got value, and the vet made money.
- A price is set on providing services rather than just trying to make money on up-pricing products.
- There are maximized profits to your business and maximized perceived value to the client.
- The price is fair to the client and profitable to your business.
- The pricing is repeatable, which means that it is set at a level that encourages the client to come back for additional services at that price.
Pownall said that you are essentially trying to “do the same work, or less, but you are giving more value to the customer and more profit to the business.”
He stressed that an equine veterinarian has two customers: an owner who is paying the bills, and the horse. To be successful in business, “We want to shift our business practices so that we encourage client behavior that benefits the client, our business and the horse,” he said. He also reminded the audience: “Pricing indicates to our clients what they are going to get from us.”
Pownall was asked about the situation where a new veterinarian comes into a practice’s established area and cuts his or her prices to get business. This new veterinarian often is a recent graduate who is hungry and is willing to work a lot of hours for not much money.
“If people discount prices and give stuff away, this can only last so long, and they will go broke or raise prices,” he noted. “The customers they have managed to get because of being cheap won’t like that.”
In other words, that pricing model is not sustainable, and while it might cut into your business for a short time, in the long run the cost-cutting vet won’t be able to remain in business at that low pricing level. Pownall advised not cutting your prices to match the newcomer.
“Math doesn’t lie,” stated Pownall. “When you are the cheapest vet in the area, it’s a battle to the bottom. Someone can always be cheaper. That’s not a good pricing strategy.”
He added that Apple has 92% of the profit in the smartphone industry by selling 20% of the phones in the market.
Pricing in Other Industries
Pownall took time during his presentation to discuss what other industries are doing, and challenged the vets in the room to see whether there were things they could adapt from other business to their practices or in their areas.
This is the practice of giving free premiums (“free-miums”) before the customer has to pay. For example, if you go to a newspaper website, you might be able to read 10 free articles a month before you have to pay.
In a grocery store, the eggs and milk—frequently purchased staples—are often loss leaders, and are placed in back of store so you have to walk through the store to get there. They are products that are priced with little to no profit that “get people in the door.” Pownall said that in our profession, loss leaders might be vaccinations, Coggins tests and some products. He noted that veterinarians in racetrack practices often give away services to sell products.
A groupon is a digital coupon that is sent out to a set group and that offers a special deal on a select item, whether it be ballet lessons, car washes or horse vaccinations.
This refers to a marketing strategy used by businesses to attract customers to a new product or service. Penetration pricing usually means you offer a low price for a new product or service during its initial offering in order to attract clients.
This was explained using the example of ticket scalpers or airline ticket pricing. As demand rises and supply is finite, the prices go up.
This is a “club” type of pricing, where you pay one set price for a set of services per month, whether or not you use them.
In this type of pricing, you don’t pay for a service unless there is some pre-determined performance parameter met. Attorneys who don’t charge clients unless they win a financial settlement in a lawsuit would come under this example.
The participants broke up into small groups to discuss how these types of pricing models could be applied in veterinary medicine and shared their discussions with the larger group.
As an illustration, Pownall said that his practice used penetration pricing to increase business in his slowest income month, while building overall business.
Pownall wanted to coax clients to have dentistry exams and treatments done in the winter—specifically in February, which was the slowest time in the practice’s financial year.
So his practice initiated a “no-call fee” for dentistry in February, and the result was a 164% increase in dentistry that month. But there was also a 45% increase in extra services from those dentistry clients and a 93% increase in billing for what was about a 9% discount on a dentistry bill.
“In our area, the farm call fee is a shopped item—meaning clients call various vets to see what they charge for a farm call,” said Pownall. “But they almost spent as much on other stuff when we dropped the fee. That was the first time we made money in February, and 6% of the new clients it produced stayed with us. We also saw a 10% increase in dentistry over the next three months. On top of that, we increased our reputation as dentists in area.”
One veterinarian in the audience mentioned doing something similar. That practice also wanted to do annual dental exams in its slowest income month, so the owners did a Facebook promotion offering 25% off dentals, but owners had to haul in to the clinic. That allowed veterinarians to avoid driving and farm call time while giving the clinic staff a chance to show off other services.
The haul-in dental sale was successful in terms of people wanting the 25% off services, but also in return business. The practice owners felt that they had reached people that weren’t served by that practice in that clinic.
The next year, they only offered a 10%- off deal for the same services in order to avoid training clients to wait until that time to get dental services cheaper.
Wellness plans and plans with set fees for general, senior or performance horse annual care usually have stipulations that clients have to pre-pay by January 15, but the fee covers that year’s vaccines, dental exam and float, as well as fall vaccines. No farm call fee was associated with the visits.
Other types of penetration pricing could include clients coming to an open house at a clinic, then receiving a discount on some future service.
The Monthly Plan for Vets
For large stables, promoting a pre-set veterinary time each week could save the veterinarian time and the stable money, Pownall noted. “I’ll be at the stable for two hours every Monday at 9, and they pay for that time no matter if I see one or five horses,” said Pownall. “Then I charge on top of that for any services I provide.”
An example given for this model was that in one practice, a horse needed a surgical procedure that the vet had never done before. He offered to buy the horse for $1 and if the procedure went well, the client would buy the horse back for the cost of the procedure. If not, the client wasn’t out any money in attempting the new procedure.
One veterinarian in California who was doing intracytoplasmic sperm injection (ICSI) just charged board. Then, if the mare got pregnant, there was a set charge. For each stage of pregnancy achievedthe client would pay an additional fee.
This is hard to duplicate in the veterinary industry because it is difficult to track demand for a specific service. Billing for emergencies, with higher fees for late-night or non-client horses, was one example given. Another was doing Coggins tests and health certificates in the spring, when there is high demand. “Based on your past history, you can determine some of these high-flow times,” said Pownall.
One example of dynamic pricing from the group was based on the speed of turnaround time for a Coggins test. If a client wanted the results within 24 hours based on the AGID test, then a certain price was charged. However, if the client needed the test results sooner, an ELISA test could produce the results in only 2.5 hours, but the clinic had a higher charge.
“Charge more for emergencies that aren’t current clients,” advised Pownall. “Have that noted on the bill. However, in our practice, if they become a client within next 30-60 days, then we drop that emergency charge. If, in that time, we have done vaccines, dentistry or something similar, we feel we have developed a relationship.”
He added that if his practice is covering for another vet (in a non-client emergency), it doesn’t charge that nonclient emergency fee.
Pownall said his practice sometimes offers free oral exams, then charges for any work that needs to be done. Something similar that his practice does is actually a fundraiser for human cancer.
In “Mow-vember,” men’s cancer awareness month, men (including celebrities) allow their facial hair to grow to draw attention to cancer awareness. That month, Pownall’s clinic offers a sheath cleaning when the horse is sedated for a dental exam as a fundraiser for human cancer research. The client doesn’t pay the vet practice for the sheath cleaning, but he or she is required to give a donation to cancer research.
Powell said that this fundraiser is good for clinic moral and client interaction, and it also allows the client to see the need for sheath cleaning.
There are a lot of companies outside of the veterinary industry using a variety of marketing methods to secure higher incomes. Some of the models in this article might be directly applicable to your business or area or could help you come up with other ways to increase demand for a service and make more money. While you should be wary of discounting, there are ways to provide some sort of discount or other benefit and maintain your practice’s profitability.