Emotional price points: The real reason for dropping client visits? - DVM
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Emotional price points: The real reason for dropping client visits?
Veterinarians haven't paid enough attention to this phenomenon when setting fees. Now they have to.


DVM360 MAGAZINE


Oligopolists no more

The Internet has dramatically increased the number of sellers competing with us. This is a disappointment to almost every veterinarian I know. Clients can even get veterinary "advice for a price" over the Internet now. Our once strong oligopoly may no longer exist (see "What's an oligopoly? It was you!" below). The playing field is much flatter and larger.

Many veterinarians have never taken the time to manage their practices properly because oligopolists (businesses that benefit from few competitors) are, by definition, price makers and not price takers. A prime example of a price taker is a farmer who must take the going price for crops or livestock.

Many years ago, we veterinarians were much fewer in number, making us either oligopolists or monopolists. Often, there was only one veterinarian per county. Since we could set our own prices, our profession participated in a positive economic environment with little attention to business management. We've inherited that management legacy over the ensuing decades, and it has hurt our collective bottom lines. Now the Internet has hit us right between the eyes. But maybe that's a good thing. We're finally faced with some overdue changes in our business.

Back to basics

Just because we've been price makers and have enjoyed a typically positive economic environment in the past decades doesn't mean we've been profitable in the usual business sense. A lot of veterinarians simply enjoy their profession. Making money has often been secondary. That's not necessarily a bad thing—it just makes it more difficult to sell or transfer assets to a future buyer.

Poor attention to expenses and prices has created a problems for our bottom line for decades. In addition, labor costs continue to climb as we depend more and more on staff to deliver quality care to our patients.

One particular problem has been our increased profit margins on product sales to help offset labor costs. With the Internet, that won't work anymore. Labor and veterinary salaries must be shouldered completely by the public by way of increased fees for consultation (office visits) and technician fees. Unfortunately, right now the public isn't in the mood for big price increases. But this is the future, and it will have to happen sooner or later.

Despite of the current economy our future remains bright. Veterinarians are unique. We as a profession have a special place in society despite current or future business cycles. We must be very nimble now. The owning of any business is not for the inattentive.

Wrapping up

What's your take-away from Jamie and Sandra's predicament? For veterinarians, it means we need to:

> Improve management

> Set prices appropriately, paying attention to the psychology involved

> Refine our approach to pharmaceutical sales, e.g., setting up our own online pharmacies

> De-emphasize product sales and re-emphasize what we went to school for: medicine and surgery.

In spite of this economy, our future remains bright. Veterinarians are unique. We work in a profession that has a special place in society—recession or not. We have to be ready for change. Owning a business is not for the inattentive.

Dr. Lane is a graduate of the University of Illinois. He owns and manages two practices in southern Illinois. Dr. Lane completed a master's degree in agricultural economics in 1996. He is a speaker and author of numerous practice-management articles and offers a broad range of consulting services. He can be reached at
.

For a complete list of articles by Dr. Lane, visit http://dvm360.com/lane


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Source: DVM360 MAGAZINE,
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