Two key words to bear in mind when setting prices

Posted by Mark Olcott, DVM on Mar 16, 2016 9:50:30 AM

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The temple of Apollo at Delphi famously had a simple inscription over the door: “Know Thyself.”  Easy to dismiss as a superficial cliche, this is actually a very insightful maxim heeded by few.  It’s especially relevant when choosing how to price your services because it’s usually forgotten by well-meaning managers who develop tunnel vision for the numbers.  Comparing themselves to other hospitals locally, regionally, and even nationally certainly has it's place but those tactics should be undertaken only when you have a solid understanding of what your overall practice strategy is.

Hope is not a strategy

Most veterinary professionals don’t think of pricing as part of their overall marketing plan, but correct pricing for products and services is critical to long term success and profitability.  If you don’t charge enough to cover your costs and leave a healthy profit, your business will suffer.  For example, maybe you are starting to realize that you’ve been working hard for 40 years and have no retirement savings to speak of other than your practice, which isn’t worth as much as you had hoped because it isn’t very profitable.  Or maybe key staff members are leaving because they haven’t had a raise in 5 years.  As an aside, the “dead wood” and embezzlers never leave, but that’s a topic for a different day.  In this regard, employees are like clients:  many don’t tell you the REAL reason they’re leaving because most humans are inherently conflict avoidant.  They just smile and “vote with their feet”, but you never learn the reasons why.  This is one reason that exit interviews are such a great tool.  (You are doing these, right?)  

Rather than get into how to set prices for vaccines or office visits, which is information that is readily available elsewhere, I think it’s more important to take a step back and ask yourself some more fundamental questions.  Questions you may never have asked yourself before.  Questions like:  What is your practice’s overall strategy?  Do you even have a strategy?  Do you want to be a low cost/low touch provider?  If so, you’ll probably be very busy and may generate a lot of revenue, but you need to have laser focus on your costs or you will be in big trouble.  The Southwest Airlines/Wal Mart model obviously works, and there are some veterinary providers who navigate this road very successfully.  The simple fact is that there are far more “C and D” clients than “A and B” clients, and fewer providers are going after them.  

On the other hand, you can decide to be a high cost/high touch provider, like Nordstrom.  You wouldn’t go to Nordstrom expecting to find low prices, but you fully expect fantastic service and high quality products.  Veterinarians who choose this option can charge a premium for their services, and their belief is that high quality service and patient care will bring in those “A and B” clients who are not necessarily budget conscious, but expect concierge service.  If you choose this path, you must be constantly vigilant against surly reception staff, dirty exam floors, and inconsistent messaging.  It’s easy to say that this is the path you want for your practice, but it’s far more difficult to actually “walk the talk.”  

What is the price of regret?

Finally, remember that you don’t want to get stuck in the “mushy middle” of trying to offer high quality AND low cost.  It can’t be done, and your brand will suffer as you struggle along, wondering why your revenue is flat.  Pick your strategy and implement it, but make sure all your actions are consistent with this strategy, or your staff and clients will notice.  For more on the topic of strategy, start with “Good Strategy/Bad Strategy” by Richard Rumelt, or anything by Harvard’s Michael Porter.  Shoot me an email for additional recommendations, and good luck!

Topics: Grow Your Veterinary Practice, Marketing For Veterinary Practices, For Practice Managers