Good evening everybody, and thank you so much for joining us for our February practise management webinar, which is kindly brought to you this year by the Veterinary Management Group. I'm Catherine from the webinar there and today we are going to be looking at setting effective pricing fees for veterinary services with Doctor Karen Feldstead. Before we get started, just a quick reminder that you can ask any questions that you have for Karen as you go along.
If you just pop them into the Q&A box at the bottom of your screen. And if we've got time at the end of the presentation, we'll run through them all with Karen. So Doctor Karen Fedelsted is both a vet and a certified public accountant and the founder of Pan Panther.
I hope I've said that right, Karen, . Which is a veterinary management consulting firm. She graduated from the University of Texas at Austin with a degree in marketing, followed by 12 years in accounting and business management and a master's in Management and administrative science.
She qualified in a vet in 1996 and practised both. Small animal and emergency medicine before opening her own consultant firm specialising in financial services for vets in 2001. During this time, she also received her certified veterinary practise manager certificate and her certified valuation analysis credential.
She is currently a member of the VET Partners USA board of directors, has been published in numerous national and international veterinary journals, and has also spoken at many local, national and international veterinary meetings. She is a holder of the Western Veterinary Conference practise Management continuing Educator of the Year award and the USA's Vett Partners Distinguished Life member Award. So Karen, thank you so much for being here with us this evening and over to you please for your presentation.
Thank you so much for having me. So, this whole topic of setting effective fees for veterinary services is a very complex one. It's one that I really have a lot of interest in because I think it's, it's one that we as a profession, certainly here in the United States, you may do it better than we do.
We don't do very well. Our idea of increasing fees is simply to decide what percentage we'll use to, to raise our fees every year. And yet, when you look at That big companies or you look at people who are fee experts so to speak, there's so much more that you can do in, in sophisticated fee setting strategies that we don't even look at.
So, an hour is not a lot of time to talk about all of these, but I think we can at least, start to get people thinking about some of the things that you need to consider in order to to set those fees. So I don't need to go through my my bio again because Catherine's already done that. I will say that Panthera is based on the genus and species of tigers, which is Panthera tyres, and this is the year of the tiger this year.
And I just Something interesting and fun as a as a name for the company, but when I went to get my domain name, the guy at GoDaddy said and the rat. So this is one of those names that had some unintended consequences, but at least it helps people, people remember what it is. So when we start to talk about fees, I think the first thing that I would say is that this is a tough topic to know or a tough area to know what's really going on in veterinary medicine because when you think of the number of fees that any individual practise has, I mean, it's thousands, and then you take the number of practises that we have out there.
What this means is there are many, many, many data points and to be able to say every fee went up 3% or every fee stayed flat, we just, we don't know that. At least with the studies that we have in the United States, part of the difficulty is that all studies are, are not necessarily representative of what's going on everywhere because studies are, are just by nature a subset, you know, a subset, a sample of all of the practises out there. So we really only even gather a fraction of available data.
We have different kinds of practises, so we have general practises and those can. Vary from a high-end internal medicine kind of a practise down to a more low cost affordable type of practise and different things may be going on with these and excuse me, in each of those practises then we also have specialty practises we have emergency practises, we have practises that are associated with animal welfare organisations and of course we have large animal food animal equine practises as well. Most of the studies that we have in the United States.
Are from companion animal general practises simply because that's the majority of the practises that we have there. So it's difficult to totally know what's happening with bees, but I think there's enough information there that we can at least start making some assessments and looking at what could we do better there. There are certainly a lot of studies that have been done in the last 20 years about the impact of pricing on veterinary medicine, and the vast majority.
Those studies indicate that price is an issue for pet owners, that they feel like veterinary medicine is quote unquote expensive, they would spend more on pet care if it didn't cost as much they would purchase more pet medications. If you talk to veterinary team members, most of them think that the cost of care is the primary reason that clients don't return to a practise or don't accept all of the recommendations that were made. Every once in a while I'll come across a study that says price doesn't matter, charge what you want.
Clients are gonna pay for it. I personally don't think the studies I have seen that say that were particularly well designed or particularly accurate, and I'm not saying that there's no pet owners out there that feel that way because there are There are some people totally committed to pet care, have the money to spend on it, but I think many pet owners, most pet owners struggle a little bit with, with price. And then, of course, we've got the pandemic, the, the COVID-19 situation, and that has just blown up everything and everything looks a little bit different than it used to.
I don't think that pet owners' feelings about the price of veterinary medicine have changed a whole lot with the pandemic. There's certainly been a few, so if you're one of the people that lost their jobs, obviously that's gonna impact discretionary spending. At least from what we've seen here, most pet owners They're not necessarily, they don't necessarily think that veterinary medicine is less expensive, but they don't necessarily think it's more expensive.
I do think we've seen pet owners who have spent more money on pet care. One, they're a little bit more aware of what's going on with their pet because they worked from home and they noticed things they've never noticed before. So they realised, hey, my pet needs some care I didn't know about before.
And because they weren't spending money on travelling, on going out to eat, on entertainment, they had the money to spend more on, on veterinary care. Now, that's obviously not something that's going to last forever. My personal feeling is we'll, we'll move back into a time where pet owners are maybe more concerned about the cost of veterinary care than they, than.
They are now I think there's certainly been some practises who say hey you know this is a supply and demand issue and right now we are so busy that if people want our care they can pay more for it. I don't think we know yet what price increases have looked like in the United States over the last couple of years when we looked at them for 2020. I don't think we thought price increases were a whole lot more than they had been pre-pandemic, so in 2019 and in 2018, we don't have the data yet for 2021, but the Veterinary Hospital Managers Association who collects some of that every year will be asking that question in the next couple of months.
So, you know, and I struggle a little bit with this because it may be easy to say, hey, right now we can charge whatever we want because people want what we have to offer. That's probably not sustainable. And then do you hit a point where we get back to a more normal time frame, now your practise, your, the, you have practises where their fees are super high, and is that gonna be a problem?
And I think we struggle with this. I don't think we know all of the answers there. So, in the most recent study that I've seen about how pet owners feel about the cost of veterinary care, it's that they continue to be money conscious.
So they're not less money conscious with the, with the pandemic, but they're, they're still as conscious as they were before. And you can see some of the quotes that, that came out of this, . You know, one person says, my dog injured her back when she was 3 or 4.
They wanted to do a surgery. It was really expensive, a $1500 bill. I opted out and rehabbed her myself.
Then, of course, if you work for a veterinary practise, that may sound horrifying, right? Because what does somebody know about rehabbing, rehabbing their pet. But when people are faced With an expensive veterinary bill that certainly becomes becomes an option there.
So, I think it's something that we're gonna continue to struggle with and while setting fees may not have been everybody's priority this year and last year because they're struggling with all the challenges of the pandemic, it's, it's going to be an issue we have to continue to look at. I think one of the things that's first of all important for practises is to decide whether pricing is an issue because there are certainly some practises out there that they are charging appropriate prices. The clientele is happy with the value they get and happy with the prices, and they probably don't need to spend a whole lot of time thinking about pricing strategy.
However, I think there are. The flip side of that is there are definitely practises that do have to. One of the ways to help assess that is to do an analysis of some of your key data from the last, say, 3 years.
And so if we're starting now in 2022 to think about this, we would look at 2019, 2020, and 2021, and then. Year to date this year as well, 2022, though we don't, we only have a month of 2022 so far. So what we want to look at is the absolute numbers and the growth that we're seeing.
One in top line revenue, and I think you guys call that turnover, the number of transactions or the number of invoices. The average transaction charge, the number of new clients that practises are getting, active clients, and one of the things that I think is most important to look at is compliance with recommendations. And so if we're recommending that a pet get its teeth cleaned, what percentage are actually accepting that recommendation?
And then we also need to have an understanding of what kinds of fee increases we have done over the same time period here that we're looking at our practise data and also look at inflation for that same time period so that we can say, OK, we did. This level of, of fee increases, we had a 6% fee increase and there we saw the number of new clients dropping. So somehow you can try and correlate what actions you're taking with what's going on.
Now, this is Somewhat imperfect as an analysis because we just don't have the sophistication in our systems to directly tie a fee increase to what happened with consumption. I can remember reading about the Coca-Cola Company and their fee . Their fee system, if you will, and their fee department is so sophisticated that they can implement a 5% increase in a can of coke, and they know overnight what that does to consumption, whether or not people buy more, buy probably not.
More but by less or by the same and so they just have the technology and the volume to be able to analyse that we don't have that that usually that technology and that sophistication but still you get more information by looking at this and if you don't. One thing also important is to understand the profitability in the practise because. No matter what other data we look at, and we can have other data points that look totally fine.
They seem reasonable, but if we are not a profitable practise, then it doesn't matter what all these data points, other data points are telling you because really the, the profitability is the gold standard of the . Of the measurement of how well a practise is doing economically. Profits are what's left over after all of the normal and necessary expenses of a practise are paid at fair market value rates, and That is not the same as net income, the bottom line earnings on your profit and loss statement, your income statement, because there are almost always adjustments that have to be made, and we can talk about that for several hours, so I'm not gonna go any further into that except to say knowing what your true operating profitability is, is, is critical in any kind of analysis.
So in this example here, this is a practise I would look at and say pricing may be a problem after analysing the kind of data that I just talked about there. So this is a practise that has had kind of sluggish revenue growth. Now in 2020, higher than the prior two years, some of that's probably a, a pandemic.
Benefit that they've gotten that many practises have had. But you look at the number of new clients in this practise and it's declined even during that, the pandemic during which practises have been so busy. You look at compliance with recommendations and it's, it's not even average, right?
Not even 50% of clients are accepting. The recommendations to have a dental done or for a heartworm test. And this is a, a practise with at least what we consider in the US to be an average profitability.
Now, So there's something going on at this practise that needs improvement. It may not be pricing, it could be something else. It could be for client service.
It could be poor communication with pet owners, but it can also be pricing, and I think it's important that we don't eliminate pricing as one of the potential problems in a practise, but recognise that if we aren't seeing the growth that we hope to see and we think we should be seeing. That may very well be an issue. This would be an example of a practise that I wouldn't worry about pricing at least today, and you don't see very many like this, but this is a practise with very, very strong revenue growth, particularly once we moved into the, the pandemic there, good client compliance with recommendations, so the dental.
Recommendations, the heartworm test, and a very strong profit margin. So if I were this practise, I probably wouldn't worry too much about what I was charging because right now the practise is growing, clients are accepting those fees, you're getting new clients in, but that doesn't mean that this practise will always be in this. Situation.
So one of the things I would say, in addition to doing this analysis is you need to do this analysis at least once a year because you need to identify, are there trends that are, are trending downward. So this year, we may feel our prices are OK, but next year, that may be something that we have to look at a little bit more carefully. One of the next things that we need to think about when we think about prices, we tend to think that pricing is an economic issue or a finance issue, and we don't always look at the fact that pricing has to tie in with other decisions and other choices we make in the practise.
And so if you've ever taken a marketing course, you have probably talked about the marketing mix. And you've talked about the four Ps of, of pricing or the four Ps of marketing. And when we talk about the four P's, so obviously one of those is price, but one is product, one is promotion, and one is place.
And the concept here is that these all have to correlate. So you can't say I'm gonna charge a high price for an abdominal ultrasound, but when you bring people in. You don't really have anybody that's qualified to do the ultrasound or to read the results, and so the client doesn't get a strong sense of confidence about what you're telling them, or you're not promoting that as a high-end service or that a service that really has value.
You just suggest to clients that this is an option, something they can do without really talking about why it's important to the pet. Or place so you have a small clinic it's not a very attractive facility and yet you're charging high-end prices for things and clients in general if they're gonna pay high end prices they're going to expect better communication they're going to expect that the facility is is better the client service is better so all of your offerings or all the components of your offerings. Have to tie together in order to support prices of any level whether it's higher prices or more average prices but you can't just look at prices and an entirely separate thing and say well a typical practise charges whatever it is they charge for an abdominal ultrasound and so we can too because if you're not offering the value and the support for that price, that's not gonna work.
When you talk about the four pillars of pricing, and this comes from a book that's actually available on Amazon, very reasonably priced, easy to read book on pricing that I would definitely recommend, and it's The, the four pillars there are cost, customer value, reference prices, and value proposition. Cost is pretty obvious. We know what that means.
We'll talk a little bit more about cost and the impact on pricing in a minute. Reference prices. We tend to think that that means what are published prices out there for veterinary services.
I, I don't know what options you have for published fee references or fee fee manuals in the UK. We've got a couple here in the United States, but what our published fee manuals are is what practises are charging. Reference price really means what our clients expecting.
What do clients think the price of a particular service is gonna be and we often don't know that, but that's important to understand when we're trying to set our own prices because if we're gonna charge more than a client is expecting, then we're gonna have to be able to support the value related to that. When we talk about value proposition and customer value, these are actually two separate concepts. Value proposition is a big picture concept, so it applies to the company as a whole, and the definition of that is a focused and targeted explanation, providing the main reasons why a customer should buy this company's product instead of a competitive offer.
And so that could be something that a customer looks at it and says this is a. A high-end store and I'm always gonna get good customer service and I'm gonna get excellent veterinary care and a very good value, a lot of convenience in coming to to this practise. They're gonna treat me well versus say a store that I think of here in the United States like Walmart, which is typically a low-end store, low prices.
Not great customer service, but people are willing to do it at least some people are, because the, the cost is so much cheaper for them. And so value proposition is where do you fit in that whole range and you need to know where you fit in that whole range to then decide, OK, what kind of prices because it's not gonna be possible in the long run to say we're gonna offer high end. Care, convenience, communication, client service and charge a really low price.
You'll probably go out of business. . The other aspect here when we're talking about value is customer value, and that specifically relates not to the company as a whole, the practise as a whole, but to an individual product or service.
So we're talking now about a spay or we're talking about a heartworm test or we're talking about flea and tick preventive. And when we think about customer value, we think about each product as a bundle of features that provides quantifiable functional and hedonic benefits to a customer. And then that's gonna tie into what we can charge for that, and we'll talk about the functional and hedonic benefits in just a couple of minutes.
Value pricing framework. This is taking those pillars that we talked about and then linking it to the process for, for setting or changing fees and then the kinds of measures that we would use to say has our pricing been successful? And so you can look at that middle section there and obviously we're gonna use these pillars, the cost, the value, the reference.
Prices to set new prices changing existing prices and then also actually collect that price so part of the whole pricing framework is we have to make sure that we may say OK we charge $40 for 40 pounds for a particular service but then if, if we discount that to the client we're not actually collecting. 40 pounds we're only collecting 30 pounds or whatever it is. So price realisation is important as well.
And then typically we're going to measure the success of our pricing via sales revenue, turnover, profit margin, but also customer satisfaction and employee satisfaction. And I think it's really important that we keep those in mind because you may have a customer that comes in, they bring their pet. You do whatever it is you're gonna do for the pet.
They pay for it, they don't complain, but they go home and they don't feel particularly good about the value of what they got. And those are people that won't come back. And when you look at their employees surveys, I mean, excuse me, the customer surveys, the client surveys, they probably won't be very strong average at at best there.
So, . You could have high sales revenue initially from price increases, but ultimately because of a lack of customer satisfaction, you're not gonna be able to maintain that and I think employee satisfaction is critical too because employees are are there every single day talking to the pet owners about what it is that's recommended to be done for the pet and if they can't genuinely support that. And support why it costs what it does, that's gonna, clients are gonna pick up on that and they won't ultimately choose to to follow the recommendations.
Cost here in some ways we would like to just use cost to set prices because we say, all right, here's all of our cost and then we're gonna add a profit margin on top of that, some kind of a markup, and that's what we'll charge and it's very, it's an intuitively attractive method of setting fees because ultimately, obviously if you don't cover your cost, you're gonna go bankrupt and. Unfortunately, we can't use this independently of other approaches. So, and I think the biggest problem with this is that if we are not running our practise efficiently, then we're going to pass those inefficiencies down to clients because we're just marking up the cost that it.
Or the amount that it costs us to to provide the service, whether or not we do it well or efficiently or not, but we mark that up and pass it down to clients. Clients to a large extent don't care what it costs us to provide the service. What they care about is value, and they look at what others charge as well.
And and if they are not seeing value in what you do. They don't care what you're charging for that, and if they perceive that they can get the same product or service elsewhere for a cheaper price, then they're going to go elsewhere. Now sometimes we know because we're in the profession that what they get elsewhere truly isn't the same.
The quality of the medicine may not be the same, but most clients or many clients I should say cannot make that distinction. So if we're gonna charge more for something that clients perceive as a commodity, we have to be very, very good at communicating to the client why they should pay more, why what we're doing is, is better. So some practises will use a true cost-based method to set all of their prices.
I don't see that very often because it's incredibly time consuming. To try and say, OK, we've got, you know, 4000 services and products in our practise, and we're going to allocate cost to them, facility cost, employee cost, overhead cost, and then add a add a markup. So I tend to see cost used more for individual services if we're setting a new service or we're modifying the the, the price of a service.
So I wanna talk about a couple of ways here that we can, we can look at cost. This next concept that I'm gonna talk about, the example that I'm using is drug price increases, medications, but this concept applies to largely any expense in your, in your practise. But one of the things that we've been seeing here in the United States is we certainly have some medications, some preventives where the price has gone up very dramatically.
And so we tend to remember those, and I think this is just kind of human nature. We're like, oh my gosh, all my heartworm preventives went up 8% or some number. So we're gonna have to raise our fees 8% to make up for that.
But when you look at the overall increase on All medications, all preventives, all supplies, the increase is a lot less. And in fact, actually, if we looked at 2019 and before, those increases overall were probably in the 2% range. Now definitely was a little higher for us in 2020.
The other thing we have to remember is that drugs and medical supplies in many practises are just. I mean it's just one expense, right? So it might be 20% of total revenue, so it's not that all expenses in the practise went up 5% or whatever number.
And so if we increase something by 8%. But those expenses are only 20% of our total expenses, and they only went up 2%, then a good part of that fee increase will drop straight to the bottom line to our, our profits. There's nothing wrong with that as long as we can support it, and it's not putting our prices in an area or a range that is gonna turn clients away.
I think the biggest thing that I would say out of this is I think we overestimate. How much the prices, the cost to us to do business increases. Now, we're certainly in a time where inflation seems to be, not seems to be, is a lot higher than it, than it used to be.
So some of what I said, the differences may not be as dramatic as they were a couple of years ago. I don't think the, the inflation that we're seeing now is expected to last forever. So I think this is still an important, an important concept.
And so I used as an example drug prices, but this is an example here. So let's say with laboratory services, those costs to the practise of providing lab services goes up 5%, and lab services make up about 4.5% of the revenue of the practise of the turnover of the practise.
Staff compensation goes up 3% because we're given 3% raises. Staff compensation is about 21%. Of total, total revenue, total turnover.
Benefits are about 2% of total revenue and let's say benefits are going up 10%. We see dramatic benefit increases because our healthcare is, is such a challenge here. That may not particularly apply to you guys, but the concept still applies.
When you look at the actual increase in cost of the practise of providing these services. Really, the cost of the practise only went up 1%. And yet we may increase our fees 4%, 5%, 6%.
So again, it comes back to a lot of that increase will drop down to the bottom line. Nothing wrong with that as long as you can support it, but I think you want to be careful when you're looking at your fee increases and say, what do I really need to increase my fees by to cover our increase in cost and what then is going to be It's gonna be true profit margin. And you may have more flexibility, particularly if you're worried about increasing fees, you can feel more comfortable that you can cover your cost increase without having to increase fees as much as, as you may think you can, you have to.
Another aspect of cost has to do with relevant and irrelevant cost. So when we're just looking at the cost related to providing one service, then only some cost of the practise are going to be relevant. And so if we're talking about adding a new kind of blood work, let's say a new combination of a package of CBC, some kind of a chemistry, T4, whatever.
Our, our rent cost will not change just because we offer a different kind of blood work, you know, one new kind of service. Typically our staff costs will not change, our doctor compensation costs will not change. So only the costs that will change are considered relevant cost in making this one decision.
All costs are relevant if we're talking about all of the services provided by the practise, but when we're just looking at at individual items that we may change our fees on, we can eliminate some of the, the, the costs that we have to pay. So let me give you an example here because I think it's a little easier to follow. So this is a practise that.
Put together an annual blood work recommendation that included a CBC, a large chemistry, so 16 to 24 chemistries, and a T4. And the cost to the practise of providing this to a client is, and I kept this in dollars because I'm ultimately gonna compare it to a, a fee manual, a fee reference that we have and it's in dollars, but the, the dollar amounts don't really matter. It's the, it's the concept that's important here.
So the CBC Cammen T4 is $73. That's what has to be paid to a reference lab for that. Supplies are roughly $2 credit card processing fees are $3.
So the practise has to pay $78 in order to provide this service to a client. The prince has a typical markup of 125% and so the price that they're charging the client is roughly $165. That covers the cost and it also adds some to the bottom line.
We have a fair amount of. Doctors that are on production pay and I'm not sure if that's similar in the UK, but if you have doctors on production pay where they're getting a percentage of the service sold to the client, then you would have to include that as a cost incurred as, as well. So, unfortunately, in this practise, not many people were accepting that recommendation because they're like, wow, that's a lot of money, $165 or whatever on top of what I paid for an exam fee and a heartworm test and the vaccinations.
And so, even though the practise felt that they were doing a good job in communicating the need and the importance of the blood work, a lot of people were not accepting it, and it seemed to be price that was turning them away. So the practise decided to change the offering. So they, they do two changes here.
One is to change the offering and one is to change the price. So instead of using a CBC large Full chemistry and a T4 as they're offering. They changed it to a CBC, a mini chem, so 8 to 12 chemistries instead of 16 to 24 and no T4.
And of course, you have to feel as a practise that this is medically appropriate. In this practise they did because they're still gonna get some baseline initial information about how the pet is doing. Obviously, if they, they find some things that are out of line, where then they can recommend further blood work, but at least they're getting an initial understanding of whether there's some kind of problem with the pet.
And even if everything comes back normal, which is obviously the best outcome, there's, we can give pets and pet owners the ass assurance that the pet is. Is healthy at least from what we can, we can see. Now the cost of the practise is $53 instead of the $78 that the CBC large cam and T4 was.
So then the question becomes, OK, what are we gonna charge the client for this? So remember we were charging the client before $165 when we looked at the AA, the American Animal Hos. Association fee reference what we found is for this new offering, so the mini cam, the CBC, no T4, there was a huge range in prices charged to clients and it ranged anywhere from $76 to $147.
And so the point here is all this practise has to do is cover the $53 in order to break even. And, and anything else on top of that is gravy. And so that then comes into the idea of is pricing something to improve volume a good move financially and I think we tend to think that volume is not a good strategy in veterinary medicine.
And yet, I think it can be a very good strategy. So if we look here, we can see that. The CBC full chemistry and the T4, if you, if the practise sold 52 of these a year, so that's essentially one per week, then they would have revenue of about $8500 profits of $4500.
If we switch to the CBC mini cam and No T4 and we look at what we think usage would be, the number sold would be at different price levels, we can ultimately decide which one adds the most to our profits. So let's say we charge $112 for the CBC mini cam. And we only do the same number we did before.
Well, now our profits are less, so that's obviously not a good move. But let's say we charge $112 and we double the number of clients that are willing to accept that recommendation. Now our profits go up from.
$4500 to 6100 $198. If we charge even a little bit less $103 and now we're able to quadruple the number of these tests that we do, our profits go up to $10,000 and then if we drop it to $76 so even lower, and we're now able to do 6 times as many. In this example, the profits go down.
Now, this is just an example. This is not a guarantee that if you, you know, drop your price by this amount, your number that you're gonna do is gonna increase by, you know, 2 times or 4 times or 6 times. Some of this is gonna be trial and error, and we have to play with it a little bit.
But the point I'm trying to make is that volume can be a good thing, not only because more pets get the care we would like them to get, but also because it, it helps the practise financially. And I think the biggest thing that we have to take home out of this. This is that volume is not a no no.
The concept can very much make sense in veterinary medicine. We don't have a tonne of price volume data in veterinary medicine, and I think it's also important to remember that when we talk about price volume data, we can't just look at the, the price. And the number of sales of a particular service or product, we've got to look at overall how much a client spends during a visit because that's what they're looking at.
And so that comes down to the idea that the highest average transaction charge is not always the best goal in a practise. So I wanna talk a little bit about how clients judge value. And, and I think when, when a business's offerings are difficult to understand, then clients are looking at customer service and there was a great article in the Harvard Business Review.
This is probably a 10 or 15 year old article, but they are judging or they're using service to judge the quality of the medicine and of course that makes no intuitive sense whatsoever and You know, if you're a veterinarian or part of a veterinary team, it's a little disconcerting that if somebody doesn't answer the phone on time, they're gonna make a decision about whether you offer good medicine or not. But that's what all customers do when they don't know how to judge the actual, the actual product itself. And most pet owners don't know how to judge the quality of the medicine, just like many of us don't know how to judge whether or not the car repair shops or, or fixes our car appropriately.
So we've got to have a strong understanding of how our practises are different, and then we have to be able to communicate those differences to pet owners and so we're looking at points of parity and points of difference. Points of parity are areas that we are pretty much exactly like every other practise in the community. So we offer small animal.
General services. We offer food animal services whatever points of difference are things that we do differently from other practises in the community and that may have value to clients so we may be open longer hours, we may be open on a Sunday, something that clients would like and value but not every practise in the community does. We wanna make sure that when we're doing our marketing and we're talking to clients, we are emphasising.
The points of difference, the ones that have value more than the points of parity. There's no nothing to be gained from trying to talk up an aspect of your practise that is just like every other practise in, in the community. And so I've got several other slides here.
I'm gonna go through these relatively quickly in the interest of time, but just to give you an idea of the kinds of things that you wanna. You wanna think about and I think the slides are gonna be available so you'll have that later. Certainly your location, is it easy access for people, the convenience you have online pharmacy, extended hours, pick up and delivery of animals, foods, meds, high-level care and client service.
You may have unique offerings, so concierge medicine, you offer repo services, sports medicine, you may be a species. So you may only see a certain kind of species, so you're a feline only practise or you see an extensive amount of exotics. Your hours are more convenient.
You know, you may be in, in the United States, we have a fair number of practises that are aha accredited, but it's anything that is of value to clients and sets you aside or set you apart from other practises in the community. And, and I said that it has to be something that's a value to clients and I think that's an extremely important point. A study that was done in 2019 in the US asked pet owners what kinds of services would you be willing to pay more for because there's no point in offering additional services that clients.
I would like to see if the client's not willing to pay more for it and I'm not, I don't I mean I don't mean to say we won't ever improve our service just because a client won't pay more for it but if we're trying to become a practise that has more value in clients' eyes, we have to certainly assess. Is there enough additional value that they will, that that will support higher prices, particularly if we feel like price is an issue in our practise. One of the things I thought was most interesting out of this study, this VHMA study was that The highest or one of the two highest was the highest I think for dog owners and the second highest for cat owners service that clients would be willing to pay more for was a, a practise that offered overnight care, and most of our practises don't.
The the client. Are referred to emergency clinics, to after-hours clinics. And, and, and, you know, certainly if you're a pet owner, you'd rather take your pet to your own practise with doctors, you know, somebody that has access to the records, you know, has an understanding of the, of the pet's history.
And yet we don't offer that in in most of the practises in the US and yet we want to charge higher prices, but we're not offering the thing that clients want the most. And that's just one example there and I mean there's a lot of legitimate reasons for not offering overnight care. During a pandemic time when we just simply don't have enough doctors to to staff our practises, but the point is there if we wanna use increased value to support higher prices, it has to be something that the client thinks has value, not just something we think has value.
And then we also have to think about how we're gonna communicate that value. And when I'm talking communication, I don't just mean, well, we'll post it on our website or Facebook or newsletters or whatever, but we have to make sure that the words that we're using. And the examples that we're using actually do communicate these, these differences in value that we have.
So, a couple of examples here I've seen some practises here that focus very much on competitively priced preventive care services and so it's not just the price because the client may not see the price until the end when we hand them an estimate, but their whole facility. Says the same thing. It's an uncluttered facility.
It's very streamlined, it's not fancy. So sometimes it's exposed pipes in the ceiling, it's concrete floors, but the message that's being sent is we're not spending your money on fancy facilities, so we can give you a better price on the services that we offer. And of course this all comes back to the marketing mix that we talked about that how we provide services.
To also tie in with with the price. But this is also clear in their marketing materials as well and in the client experience. We also have a group in the US called Veterinary Emergency Group or Ved.
They're relatively new group in the last few years. And if you look at their website, they are very much focusing on things that are of value to pet owners. So one of the things they say on.
There is 4th we approach pets on their own terms, sitting on the floor to treat them so they'll feel more at ease and having their pets be at ease at the practise is something the vast majority of pet owners worry about. So Ved is, is taking the approach that we're gonna do specifically what you want and we're gonna tell you straight out in our marketing on our website that we do this. Another thing that I thought was interesting is that most of the photos on their website.
Or have doctors cuddling the pets. So it's not doctors doing surgery or drawing blood or running lab work, but it's the, it's the doctors hugging the pets, petting them, whatever. Because again, pet owners want to feel that the people who work in a veterinary practise love the pets and will take care of them the same way that the pet owner will.
So I think that has done a really good job of communicating. Here's what's different about Our practise, the pet owners because it's not enough just to be different. You've got to make sure that pet owners understand that otherwise they won't come to your practise and they won't be willing to to to pay more for it.
So I mentioned functional and hedonic benefits a couple of minutes ago and I wanna talk just briefly about, about this. Functional benefits are benefits that stem from a product or service's core purpose. And we'll define that in a second.
Hedonic, but we'll give examples. Hedonic benefits are intangible benefits that produce an emotional response. So the functional benefit, I mean these are easy.
We all know what these are because this is what we do, right? We practise medicine. So, a functional benefit would be.
You know, a vaccine and it prevents illness. Or we, we're gonna sell you, a preventive and that helps with the management of a, a chronic condition, flea allergies, arthritis if you're doing Rimiil or some kind of anti-inflammatory. Other functional benefits can be products that keep a family safe from zoonotic diseases, obviously a service or a product that we offer that cures a medical problem.
But hedonic benefits are going to be these intangible emotional benefits. And so some of the categories of the intangible benefits are things like convenience. It's easy for people to come to the practise and get their needs taken care of or they have.
A feeling of satisfaction and pride from taking good care of their pet, or they're reassured that the pet is comfortable, happy, and well, both during the experience they have at the veterinary hospital, but also at home, or they get empathy from a veterinary team. And what's interesting about the hedonic benefits is these often cost very little to a practise. And yet we don't tend to pay a whole lot of attention to them or to make sure that we're providing them to pet owners and customers, pet owners are often willing to pay quite a lot to get those benefits to feel good about taking their pet to a particular practise and yet we tend to focus on making sure that we communicate with pet owners about the functional benefits.
Well, it's important that you get this vaccination so that. Pet doesn't get parvovirus or, or that you use this preventive so your pet doesn't get heartworms or whatever. But we need to focus more on emphasising these hedonic benefits, and that will help support the prices that, that we charge.
So, a little bit more in examples of hedonic benefits. So if we're talking about Helping preserve and extend the relationship between a pet owner and a pet, and that's a hedonic benefit to a pet owner. So how do we do that?
Well, one of the things that we can do is that when we're talking to pet owners about why we think they should do something, we translate that recommendation into specific benefits that are important to clients. So we don't just say things like your pet needs to have its teeth cleaned, but we talk about how the pet's mouth smells or we talk about the fact that it's drooling every time it eats and how if we can clean the pet's teeth and get rid of the infection, then the pet is gonna be doing better and that's something that makes pet owners happy as well. Security, people wanna know that their pet is well taken care of when it goes.
To the veterinary hospital. So that means things like let people visit their pets when it's hospitalised overnight and let people leave toys and blankets. And I know there's certainly practises out there who think this is all a hassle, and it is, in all honesty, but it's so important to pet owners that we need to make sure that we're providing that.
And I, I had a cousin once who had to have a pet have surgery. A specialty practise here in the United States. A great specialty practise.
I mean, the surgery was well done. The kitty did, did great, but she was never allowed to visit. She wasn't allowed to leave a little mouse toy for, for the kitty or to leave a blanket.
And she just did not end up feeling like her kitty, who had never left this woman's house, was going to have a good experience at the hospital. And that's one of those examples where you say, but wait. And, the surgery was great.
The cat recovered well, etc. Etc. But the pet owner didn't feel good about it because they just envisioned the kitty being back in a, you know, a cold sterile hospital environment and no blanket in the, in the cage and didn't get to see anybody that the kitty knew.
And so the pet owner would be more likely to go to a practise that . Let her visit the pet and let her leave the toy in the blanket, and that would make her feel better about the whole experience and be willing to spend more money. And we could talk about all of the different hedonic benefits and some of the specific things that you can do.
I think, you know, if we're talking about a hedonic benefit, being a pet is physically pleasant. To be around, you know, it's clean, it smells, smells good. Then bathing the pet before it leaves the hospital.
I think we've all heard stories about pets that go home and, you know, they peed on themselves and they didn't get washed off, and that doesn't leave a good impression, or free nail trims. You know, I think some clients are, are not refu or refusing to have nail trims done at a practise. Because they've gotten more costly than they used to be, but if we do a free nail trim, something that's easy to do, takes 2 minutes from our, our team members, but is a, is a nice benefit to the pet owner, it's worth the fact that we don't necessarily charge for that.
Now, I'm not talking about a Rottweiler that takes 6 people to sit on to cut its nails. Obvious. There's gotta be some charge for that, but I'm talking about the easy ones to do there.
Some of it is just talking to, to pet owners and so I'm so sorry about Fluffy. If it's appropriate to hug a client because they're upset about a diagnosis, you can do that. Obviously, you have to, to think about the physical contact, but, but it's certainly expressing empathy by, by words.
So we've talked about some of the overall things that we have to think about in implementing effective pricing strategies. One area that I knew there wouldn't be time to go into here, but I wanna talk about it and I wanna give you some resources for is very specific pricing strategies. So for example, one is called good better best pricing, and that means that we're gonna offer clients 3 alternatives and one offers the minimum group.
Of services that the client needs. The next would be a better alternative, and the third would be a best alternative. And I think one of the ones or one of the examples that people think about the most is boarding options.
So a minimum level of boarding would be the cage, it gets walked a couple of times a day and it gets fed. Better might mean that the pet obviously gets a cage, but it gets a bigger cage and it gets walked. More frequently.
The third alternative, the best pricing might be that obviously the pet gets a cage. Maybe now it gets a run instead of a cage. It gets walked more times, it gets treats during the day, it gets a bath before it goes home.
And obviously, there's additional services in each of those packages, and each package costs more, but there's something about offering 3 packages at the same time to clients that Tends to encourage clients to pay more. One, they can clearly see how if they spend more money, they get something better. It often moves people up from good to better because when people don't know what to do, they'll just pick the middle, right?
But so you, this is different than offering add-on services. So instead of just saying, here's your minimum, but but then here's 7 different add-ons you can have, it's, it works better. If you can actually put it into these 3 packages and present the 3 packages to the client at the same time.
And this is just one of those psychological things that that we, that probably are not totally well well understood and don't make us a lot of logical sense, but we know when we talk to, to pet owners, it's not just pet owners, it's consumers of all kinds and offer things in a certain way, they're more likely to do. More and, and I don't need to talk about doing more just that means that that's more money for the practise, but it's better for the pet. So there are many, many examples as well of good, better, best pricing there with medical services too, so it's not just things like boarding and grooming.
If we're talking about pricing strategies, there's some things you can do with service and product bundles, with subscription pricing, with promotional pricing, and what I want to show you is if you go to the VHMA website, they have a whole bunch of best practises guides for all of these different kinds of pricing strategies that I've just mentioned here and lots of examples in there about how you implement those, how to do them well. So this is well worth, going and downloading some of this. You can also download the results of the study that I talked about that, that asked about what kinds of increase.
Value would you be willing to spend money for? And there's a part of the survey too that I didn't talk to that also tried to identify reference prices. So what kind of price are clients expecting for veterinary services?
The biggest thing that came out of that study is what clients are expecting to pay is significantly less than what we're charging. And again, there may be some differences there between the US and the UK, but I think it was a really important concept because if clients are coming in and expecting to pay $100 100 pounds for something and you charge $200 somewhere we gotta be supporting value because they're not gonna, they're not gonna see that. The sorry, bouncing around here.
These are the two books I mentioned to by Paul Delachia that are available on, on Amazon, and they're easy to read books with interesting information on pricing overall and how to incorporate it into, into a business. And then the last thing that I want to say is that pricing isn't the only way to increase profits, and we tend to look at that as being the best way, if not the only way. I think we look at it as the best way cause it's easy to do.
But we can increase marketing and increase demand. Understand that right now increasing demand is not what practises are looking for because they got more demand than they can handle, but one day it'll be different again. Certainly reducing expenses, improving productivity, reducing bad discounts and mischarges and offering payment options can all help improve profitability and and at the same time keeping pricing stable.
So I'm gonna go ahead and stop there. And happy to answer questions. Karen, thank you so much.
This is such an important area, isn't it, for practises to get right and your presentation was really thorough with lots of great advice, so thank you. We've had some questions that have come through. First up we have a comment, really interesting stuff, thank you, Karen.
Do you think these principles apply equally to charging for veterinary nurse consults? We'd like to offer VM consults, but are worried that owners won't see the value if they don't see a vet. Yeah, I do.
I think that's a really interesting question because I think you all do a whole lot more with veterinary nurse nurse consults than we do here in the US and I think you do, I think you already do from what I understand about it and a few practises I visited there in the UK, I think you do a better job in charging for it as well. But yes, I think the principles apply equally well, . Across the board, whether we're talking about veterinary visits or we're talking about nurse visits.
And, and I think that, so to the Part of this question that says we're worried owners won't see the value if they don't see a vet. You know, I think you, you clearly have to sort out what kinds of things. A client, a pet owner, is going to be comfortable not seeing a vet for, and you know, some of them are easy, so nail trims and maybe drawing blood or a weigh in or something like that, .
Whereas there's gonna be others where clearly they do need to see a veterinarian. And so some of that may be a little bit of trial and error, but I definitely think that this is an area that practises need to be focused on, particularly when we're at a time frame where we've got more clients that want to be seen than we can deal with and we're having trouble hiring veterinarians. I mean, I think we're having trouble hiring nurses and technicians as well, but .
Yeah, anything we can do to be more efficient and see more clients is a good thing. OK, brilliant, that's great, thank you. Another comment that's come in, where do you start with getting feedback on what your value proposition is?
Yeah, that's a great question. So, you can do a couple of different things. One, I think you want to have a structured Analysis of all of the other practises in your community that you would consider to be your competitors.
And so you can do a couple of things there. You can look at their websites, you can drive by and look at their facility, . You know, you can, you can gather the information, just random comments that you hear, clients say about other practises.
You can look at their online reviews, you can look at their, their Facebook. Occasionally I've seen practises that will actually have one of their employees take their own pets and go into another practise. Just for an appointment and the the practise with the employee will pay for that but they have their employee take a pet in for an annual exam or whatever and then when they come back to the practise they work at they they fill out a little bit of a questionnaire, a little bit of a debriefing to see, OK, what did you think of that experience?
So I think there's lots of ways of gathering that information. And then you, you want to sort out, OK, where, what do we really do better? If you don't do anything better, then that's your first step, right?
You've got to decide what you wanna do better in and if you are doing things better, and I think every practise has some things that are their strengths, then you have to say, OK, how does that tie in with our pricing and are we really communicating to clients well enough that we . That we do this better to support the pricing and one other thing I would say, I always think having some kind of a staff meeting and asking your team members, what do you think we do better? Because I think team members always have opinions, right?
And it may be different from how the management team sees it and I think that's helpful too. That's great, Karen, thank you. And just another comment, I know we're running slightly short of time at the moment, somebody's commented, very interesting point to take away, thank you, Karen, around clients using service to judge the quality of medicine.
So just a little comment there from, from, yeah, I think it's . It it's a really hard one, right? Because You know, if you're a, a techni, I mean a nurse or a doctor or anybody on the veterinary team, it's a little bit hard to say, well, You know, Because you don't like our hours, you think that we don't know how to do surgery or something like that.
And yet, I don't entirely know how to get around that. To some extent, we can talk a little bit more about the ins and outs of the medicine that we're providing and why a certain recommendation is important, but bottom line, it's very difficult for clients to judge that. And so, I don't see how we can get around the fact that service has to be good.
The client experience has to be good because otherwise, The client's going to go somewhere else. And I think, I, you know, for me, when I think about it, like I know nothing about how my car works, OK? And so if my car needs to be repaired, I have no idea whether they do a good job or not.
And so, I judge the car repair place because They have a comfortable room I can sit in, and they have Wi Fi and I can drink a Diet Coke while I work on my laptop. And I'm like, this is a great place, you know? And they may have fixed my car, right?
And they may not have, but I don't have any other way of judging it. And I'm not saying that that's logical, or that it should be that way, but I think we have to recognise it is. So I don't know if I'm answering that question.
Yeah, I know what you are, Karen, thank you, absolutely. Just one final, final point, somebody's commented, loved the idea of asking staff whether they think we're good value or not. Do you think this would reduce the risk of vets undercharging?
I think that's a great point. I think it's gotta help, right? Because I think sometimes we forget what great value we offer.
And so, yeah, I think having active conversations about those on a regular basis has to help. Is it gonna be the only thing that keeps people from undercharging? Probably not.
I'd certainly have some other, other things in place like doing medical record audits, but, yeah, I think it has to help. OK, brilliant, that's great, Karen, thank you so much. We are out of time but we, we do have you back later on in the year, so we'll look forward to that to your next session.
I believe it's in August time. So thank you once again. Thank you to Dawn and Theo from the webnet vet team for your behind the scenes support this evening.
And once again, a huge thank you to our partners at the veterinary Management Group who've made this series possible. So thank you, Karen. I hope you enjoy the rest of your day and thanks everybody, and we hope to see you soon.
Thank you very much. OK, take care, bye bye.
