Yes, these economic times are unique. Practice growth and profitability goals can seem difficult to reach. Making sure your current patients/guests accept care and/or actually show up for appointments can be a challenge. And attracting new patients/guests can be expensive and daunting.
How is a practice to thrive in these times? Some dentists assume that scaling back—discounting fees and cutting cost is the answer. But beware: these tactics have serious ramifications. Not only can they negatively impact your commitment to clinical excellence, but they can also damage your practice’s reputation in the community. You have invested considerable time, effort and money to develop your skills and your brand/image. Don’t devalue this investment with shortsighted tactics.
Discounting Your Fees –Impacting Your Brand
First of all let’s establish a very basic definition of “Brand”. A Brand is your identity, distinguishing you from all the other options available to consumers. More than just a logo, which is the graphic representation of your business, a brand communicates everything about you. A brand characterizes your business, encompassing what you do and how you do it. Everything you do must reinforce your brand. In his article Discounting Prices Discounts your Brand in MarketingProfs, (http://www.mpdailyfix.com/2008/08/thinking_about_discounting_ret.html), Paul Williams states “The problem with discounts is that customers don't see the price drop the same way you do. As a business person, you clearly understand you are temporarily cutting into your own profit to give a little more to the customer and keep their business. As customers we see it different. The moment you discount, it re-calibrates the perceived value of your products/services. Selling something for $200 today and discounting for $150 tells us you are making more money on the $200 version... And you're still making money on the $150 version... so the $200 version was over-priced. The new perceived value is $150. As a consumer buying something, we get this. As a marketer selling something, we tend to ignore this fact."
Another downside to discounting; it is the easiest competitive move to counter. It is just as easy for your competitor, be it another dentist or any other consumer product, to lower price as it is for you. Therefore, if your practice is based on quality, you will probably never be the lowest cost. The anticipated increase in production from discounting will probably never materialize- you’ll just end up doing the same care at a lower fee and dramatically lower profit.
Differentiation VS Discounting
Businesses with a consistent track record of success, competing in the quality/service marketplace (rather than low cost producer marketplace) understand they need to continually enhance their Brand by providing more value. By providing more value they differentiate themselves from their competitors in the marketplace.
Raising the Value of Your Brand
In the consumers eyes quality relative to price determines value (Q/P = V). If your price is too high relative to quality you will have a low value. If your price is too low, you may actually detract from your value and be perceived as poor quality. Your fees (pricing) are part of your Branding. This is where discounting can negatively impact your Brand.
Understanding Quality
In every business quality is comprised of two components, conformance quality and perceived quality. Conformance quality is the technical aspect, in dentistry it would be the margins, occlusion etc. Perceived quality has to do with the “perceptions” of your patient/guest; the ambience of the reception area, were they seen on time, etc. You are the expert on conformance quality and in the consumers eyes the mere fact you have a dental license implies some acceptable degree conformance quality. Perceived quality is based on the opinions and experiences of your patient/guest. The patient/guest is the expert on perceived quality, therefore perceived quality becomes the significant determining factor in their buying decisions.
Boosting Perceived Quality
You build your practice on conformance quality (clinical excellence) but you market the perceived quality; listening, caring and a variety of services beyond just “doing a crown”. This important concept dramatically influences treatment acceptance and practice growth. To be successful in today’s competitive environment, a practice must offer state-of-the-art services consistent with their quality of clinical care. Together, the entire package creates a higher value to the consumer.
Grow Your Practice.
How do you increase the value of your Brand and motivate your current patient/guest to keep appointments, reactivate the ones that are overdue, attract new patients- and get them all to accept treatment? How do you avoid discounting your fees and possibly being forced into using a cut-rate lab, switching to cheaper materials or lying off a key employee?
Tactics Consistent With Long-Term Success
The key is value added services- make it easy for guests to communicate with your practice and make them feel appreciated. Many progressive practices find the Dental Concierge® turn your patients into guests system with the Loyal Patients Rewards Program consistent with their values of clinical excellence, exceptional guests services and effective cost control. It is the integration of some the very best components of two proven programs: The Dental Concierge® turn your patients into guests- a marketing, management and customer service training program and Loyal Patient™ Rewards- the first and only program to provide dental practices a turnkey, patent-pending, technology-driven patient rewards system. All wrapped into one easy to use system that will enhance your practice’s Brand and increase your bottom line.
Automated Guests Services
Most practice have been using healthcare credit cards with their easy to use technology for many years, and more recently over the last few years automated patient communications with their technology have made significant inroads into practices. The two have become the “standard of care” for most well run practices.
The Loyal Patients Rewards program is just the natural evolution of automated guest services. It automates the communication process with your guests; confirmations of appointments, reactivation of guests, birthday wishes, their practice anniversary, monthly ongoing communications, guests’ surveys, and practice newsletters AND Rewards them for behaviors consistent with their well being. It is the most complete and cost effective, web-based service offered today.
Rewards That Really Do Motivate
Rewards programs have been proven to influence purchasing decisions and engender loyalty. The Loyal Patients Rewards program is derived from a similar program many Fortune 500 companies have used successfully for years; it automatically promotes tracks and delivers valuable rewards. These rewards are earned for behaviors consistent with guests well being and in appreciation for their loyalty to the practice.
The Rewards program is more than just a reminder or promotional communication. This “Value Added” service presents a more compelling reason for patients/guests to read your communications and to return for care, it offers rewards. With the buying power of major companies behind them, a practice can now reward clients $1000‘s in rewards - all for a fraction of the actual cost. These rewards can be used instantly - no waiting to accumulate points!
Quality Care Is the Focus, and Profitability Is the Result
Most progressive practices never take their focus off the pursuit of clinical excellence, and implementing the Rewards program is a consistent step in the evolution of a well-run practice. Learning from the experience of other advanced organizations, dental practices can now utilize programs like these not just for the good of their valued guests, but also for their own benefit, by cutting costs while efficiently utilizing their team.
Four Simple Steps in Proven Business Tactics
With a conservative approach to the practice’s financial performance, let’s take a step-by-step approach to increasing the value to your guests by implementing this new service.
Practice Profile
- One dentist working 184 days per year (4 days per week × 46 weeks per year) at $3500 per day = $644,000 or $438 per hour.
- Two hygienists, both working 184 days each, $1000 per day at $125 per hour = $368,000.
- Total annual production = $1,012,000 per year, or $84,333 per month with a 35% net income.
1.Reduce no-shows/cancellations in general practice.
Focus: Current patients, New Patients.
Implementation: Enroll current patients into the Rewards program for their convenience, using rewards to reduce cancellations or no-show appointments. Offer Rewards program to new patients prior to their appointment to decrease no-show rate.
Eliminating two missed appointments, one hour each, per week would result in an annual increase in production of $40,296 ($438 per hour × 2 appointments × 46 weeks = $40,296). This estimate does not include the lost potential of additional treatment or lost referrals.
2.Reduce no-shows/cancellations in hygiene department.
Focus: Current patients, New Patients.
Implementation: Enroll current patients into the Rewards program for their convenience, using rewards to reduce cancellations or no-show appointments. Offer Rewards program to new patients prior to their appointment to decrease no-show rate
Eliminating two missed appointments, one hour each, per week, per hygienist would result in an annual increase in production of $23,000 ($125 per hour × 2 hygienists × 2 appointments × 46 weeks = $23,000). This estimate does not include the lost potential of additional treatment or lost referrals.
3.Reactivation of current patients/guests.
Focus: Current patients.
Implementation: Re-enroll inactive patients back into the practice utilizing the Rewards program.
Average new patient value ranges from $1200 to over $4500 depending on the practice. If we estimate an inactive patient has at least $2500 of needed care and we only reactivated one additional patient per month, it would still result in an additional $30,000 in increased production (1 reactivated patient = $2500 × 12 months = $30,000). This could also yield more referrals to the practice.
4. Increase new patients.
Focus: Current patients
Implementation: Consistently and automatically reward patients/guests enrolled into the Rewards program for recommending the practice to family and friends.
We have persuaded our current active patients to keep appointments and utilized the system to reactivate patients/guests. Now is the time to gently and consistently encourage them to regularly recommend the practice for more new patients. If a new patient is worth $2500, and referrals yielded 2 more new patients a month, that’s an additional $60,000 in production per year (2 new patients × 12 months × $2500 = $60,000).
These four simple steps, which utilize proven business tactics applied to a dental practice, can have a total potential impact of:
1. Reducing no-shows/cancellations in general practice = increased production of $40,269
2. Reducing no-shows/cancellations in hygiene department = increased production of $23,000
3. Reactivation of current patients/guests = increased production of $30,000
4. Increasing new patient referrals = increased production of $60,000
Total increase = $153,269
Total increase in net profit from steps 1– 4 = $53,644
Since this is an increase in production, the current profitability percentage of 35% would result in an increase in profits of (35% of $153,269 = $53,644).*
*(If all fixed costs were met prior to this increase, only the variable cost would be incurred on this increased production— i.e. lab, supplies. Therefore a higher percentage of profit may actually drop to the bottom-line.)
These calculations on profit are intentionally conservative. Just in case you think the numbers were overestimated, cut them in half. Now you’ve got a potential net profit increase of $26,822.
How much would a practice be willing to invest to earn another $26,822 in profit?
How much would a practice have to grow to see this potential increase in net with discounted fees?
Would you invest $289.00 per month for a $26,822 increase net?
For more details on the Reward program and the rewards available contact;
maccario@ dental-mba.com or http://www.loyalpatientsinc.com/ |
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