Marking down prices on veterinary services is the bane of our profession, so consider an alternative approach.
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 your clients that what you 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 you just because you are giving them a 10 or 20 percent discount, is that the type of client you really want? Even if you answered “yes,” you know you 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 you give away, you 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 your 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 you discount your services to senior citizens, military members or firefighters, I suggest that you just stop. Instead, grandfather these clients by continuing their discount, but do not offer one to new clients. The discounts will go away over time. Your 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 you operate a non-profit charitable organization, you need to limit how charitable you and your practice are. To this end, I have two ideas I often use with my consulting practices.
Decide as a practice which charity organizations you wish to work with in your area. It might be a rehab organization or a rescue group, or maybe you wish to help several groups. Establish a budget for these charity services and then sit down with the organizations and say you have allocated “X dollars” worth of professional services that you will provide. Also say that once the amount has been reached, further services will be charged at normal client fees. If you wish to provide inventory at your cost plus 10 or 20 percent, you can do that as well.
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 non-profit 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 will alert you anytime a doctor charges less than the stated fee. Even if you don’t use doctor charity accounts, I suggest that you 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. You, in essence, are telling pet owners that you 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? You 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 you offer will have a higher perceived value to the client than the discount but will actually cost you 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 your 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:
If you believe as I do that price is indeed only an issue in the absence of value, then you need to decide how you are going to increase the value of your services in the client’s mind. 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 you enhance the value of your services by educating clients about the benefits. 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 your clinic so clients can see that you operate a real hospital, complete with surgery, anesthesia, radiology and a laboratory.
- Create a virtual video tour that will educate them about the quality and excellence of what you do.
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 to truly value your 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.”