MARKING DOWN PRICES ON VETERINARY SERVICES IS THE BANE OF OUR PROFESSION, SO VETERINARY PRACTICES CONSIDER AN ALTERNATIVE APPROACH.
Editor’s Note: The following column originally ran in the August 2018 issue of Today’s Veterinary Business, which directly reaches over 50,000 veterinarians and office managers.
I don’t understand why the veterinary profession discounts its services. To my way of thinking, a business that discounts services is basically saying that customers are being overcharged the rest of the time, so now the services are being charged appropriately. When was the last time you got a discount from your physician, dentist, surgeon or chiropractor? According to a study done by the Canadian Federation of Small Business, veterinarians discount more than any other business.
How often are discounts given?
The federation came up with these numbers:
- Pharmacists: 0 percent.
- Accountants: 0 percent.
- Lawyers: Less than 5 percent.
- Dentists: 7 percent.
- Orthodontists: 8 percent.
- Car mechanics: Less than 10 percent.
- Physiotherapists: 10 percent.
- Chiropractors: 14 percent.
- Veterinarians: 41 percent.
It’s time to stop
Personally, I find it offensive. Discounting demeans our profession and tells clients that what veterinary practices do is all about money instead of about the professional service and quality of care.
Some would argue that discounting is a marketing tool that brings in new clients or increases their number of visits. I remember attending a session at a national conference where two management speakers were advocating using discounts to increase “door swings.” I sat there in disbelief.
If a pet owner comes to a veterinary practice just because the practice is giving them a 10 or 20 percent discount, is that the type of client the practice really wants? Even if the answer is “yes,” you know the practice will lose that client as soon as someone else offers a 15 or 25 percent discount.
For the most part, clients who show up due to a discount are continually shopping for a better deal. They rarely become bonded clients.
Many of the practices I have consulted with simply stopped discounting. Amazingly, they have not lost clients. In fact, they enhanced their profitability. These practices had been giving away their profits.
It is an accepted fact that for every dollar a practice gives away, they need to generate $4 to make up for it. How is that possible? Think about this: When you discount a service, you still have to pay staff and doctors, you still have the overhead costs and, of course, you still have the cost of the inventory items used.
If you look at practice valuation, this holds more significance. Every lost revenue dollar can lop $4 to $5 off a practice’s valuation.
If a veterinary practice discounts their services to senior citizens, military members or firefighters, I suggest that they just stop. Instead, they should grandfather these clients by continuing their discount, but do not offer one to new clients. The discounts will go away over time. The veterinary practice team can simply say, “Rather than increasing our fees to cover the cost of providing discounts, we decided to discontinue discounts so we can keep our fee schedule fair for all our clients.”
Go the charitable route
I know our profession needs to give back to the community and help animals in need, but unless they are operating a nonprofit charitable organization, veterinary practices need to limit how charitable they are. To this end, I have two ideas I often use with my consulting practices.
Veterinary practices need to decide which charity organizations they wish to work with in their area. It might be a rehab organization or a rescue group, or maybe they wish to help several groups. They should establish a budget for these charity services and then sit down with the organizations and say they have allocated “X dollars” worth of professional services that they will provide. They can also say that once the amount has been reached, further services will be charged at normal client fees. If a veterinary practice wishes to provide inventory at their cost plus 10 or 20 percent, they can do that as well.
Another idea is to create a charity account in each doctor’s name within the practice computer system. Then fund each account with a $2,000 credit. For example, I will set up an account for Dr. Jones and label it “Dr. Jones – Charity Account.” I will inform Dr. Jones that she can use the account in whatever manner she wishes. If she wants to help a client who can’t pay the bill, she can deduct the payment from her charity account. If the client can pay half and if Dr. Jones wants to help by taking the other half out of her account, she can do that as well.
Dr. Jones doesn’t need to ask the practice manager or practice owner for permission; she can do this on her own. Once the charity account is depleted, she no longer can provide charity services. The account may be replenished each year. I recommend $2,000 to $3,000 a year per doctor.
This doctor-driven approach gives associate veterinarians some autonomy in how they wish to use their charity accounts and at the same time makes clear that the practice is not a nonprofit organization and that care must be taken in how much charity services are provided.
A practice tip here is to use the fee exception report in the practice management program to charge against the charity account. The report has an alert anytime a doctor charges less than the stated fee. Even if a veterinary practice doesn’t use doctor charity accounts, I suggest that they print the fee exception report weekly or monthly and tell the doctors how much profit they gave away.
Some practices use discounts to incentivize clients to take advantage of services or products being promoted. An example is offering, say, $40 or perhaps 20 percent off a dental cleaning done during Pet Dental Month. Once again, I must disagree with this marketing strategy. Veterinary practices, in essence, are telling pet owners that they overcharge them throughout the year but now are charging appropriately for the service.
Instead, why not promote Pet Dental Month by offering a product or service? They could offer a complimentary bath, a day of boarding, a grooming service, a home dental care kit or a bag of food. Many times, the product or service offered will have a higher perceived value to the client than the discount but will actually cost the veterinary practice less. Another advantage is the client might not be familiar with the complimentary product or service and, once she experiences it, she might take greater advantage of the practice’s services in the future.
I live by the statement that price is only an issue in the absence of value. You also should be aware of the following formula:
Value = Benefit
The formula displayed above states that you have only two options: You can either increase the benefit or decrease the cost. Unfortunately, many people in this profession have chosen the easier and simpler road of offering discounts or not charging for the first office visit.
Instead of discounting services, I suggest that veterinary practices enhance the value of their services by educating clients about the benefits. They can try this:
- Explain what is involved in a dental procedure.
- Show a video on dental procedures so that the client can see and understand all that is involved.
- Give a tour of the clinic so clients can see that they operate a real hospital, complete with surgery, anesthesia, radiology and a laboratory.
- Create a virtual video tour that will educate clients about the quality and excellence of what the practice does.
I would much rather spend time and money educating clients about the quality and excellence of my practice than discounting or giving away services. Isn’t it time for veterinary practices to truly value their services and stop giving things away?
Practice Smarter columnist Mark Opperman is president and founder of Veterinary Management Consultation Inc. and co-author of “The Art of Veterinary Practice Management, Second Edition.”