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Pricing strategies 2017 nz
- 1. Pricing and it’s effect on Your Bottom Line Robert P. Magnus DVM, MBA 2017 NZEVA Conference, Queenstown, NZ
- 4. The Oculus Learning Opportunities • 4 Day Immersion programs at different locations in the worldBusiness Summits • One-Day, Topic Driven programs not species specificBusiness Workshops • 3 Year Educational Certificate program not species specific at MBA levelBusiness School Business Consulting • Customized solutions and speaking engagements
- 6. Today •Pricing Models •What Works in Equine Practice •Pricing Strategy •Pricing Analysis •Client Loyalty
- 7. What is Good Pricing? Doing the same, or less, but giving more value to a customer and more profit to a business
- 9. What is Good Pricing? Encourages client behavior that benefits the client, business, and the horse
- 10. What is your Biggest Challenge with Pricing your Services and Medication?
- 11. What is your Brand? How are you Perceived?
- 14. 1% Price Increase $5,000 Gain
- 15. 10% Price Decrease (discount) $50,000 Loss
- 17. Pricing Models in Business
- 20. Dynamic Pricing
- 21. Loyalty Programs
- 23. Variable Pricing Fortune.com April 29, 2014
- 24. Monthly Fees / Subscription
- 25. $99/Year 2 day free shipping Video, song and book access Unlimited photo storage
- 26. Shop More Spend More Memberships are Increasing Why?? uk.businessinsider.com 10/21/15
- 30. What Works in Equine Practice?
- 31. Dentistry Promotion Example No Call Fee February only
- 32. 164% increase in dentistry 45% increase in extras 93% increase in billing 9% Discount
- 33. 6% New Clients 10% increase in dentistry over next 3 months
- 35. Practice Strategy Example Dispensed medication & supply sales 1. Retail Price 2. Competitive Pricing 3. Best Pricing
- 37. Result… • Practice Turnover Increased • Dispensed Medication/Supply Turnover Increased • Positive Shift in Professional Service to Product Mix 62%/38% to 70%/30% Net Profit Increased Client Feedback Positive
- 38. Price Change Process - Example First Operations Cost Assessment • How much or little are Costs Changing • What is our breakeven number or percent change Next, Review Top 100 Services & Top 100 Medications/Supplies Sold Test price changes dollar and volume impact Test the impact of individual fee increases on total procedure costs Finally review market pressures, then implement fee changes
- 39. IMPACT $98,004 $163,340 $261,343 Qty New Price 3.0% 5.0% 8.0% Services Code Description Current Price 3% 5% 8% GAIN PRICE CHANGE % PRICE CHANGE $
- 40. Access the Impact On Procedures (pick the top 25 procedures) • Arthroscopy • Lameness Exam • Hock Injections • Embryo Transfer • Eye Exam • Preventive Health Care Visit • Colic Surgery • Neonatal ICU Cases • Etc…
- 41. Price Sensitivity Elasticity or Inelastic
- 42. Current Research • 89% of horse owners would tolerate 10% price increase • 77% would tolerate 20% • 73% feel fees are low compared to value of horses
- 45. Let’s Take a Step Back
- 46. What is Strategy? A description of how we can identify what our clients value and how we can deliver it
- 47. What is Value? Value = Benefit to Client - Cost
- 48. Clients
- 50. What is a Loyal Client? •Engages the practice frequently •Has a positive attitude about the practice •Recommends the practice to friends and colleagues More Profitable
- 51. Probability of Buying Loyal Clients 60% - 70% Lost Clients 20% - 40% Prospective Client 5% - 20% Source: The Loyalty Effect and Loyalty Rules by Frederick Reichheld
- 52. Drivers of Client Loyalty 4
- 54. 2. Brand Image Industry Leader Trustworthy Innovative
- 56. 4. Customer Experience Perceived quality Purchasing process Supportive & caring staff
- 57. Pricing & Customer Loyalty
- 58. Lost Leaders?
- 60. Client Loyalty Build Emotional Relationship
- 61. Hard Benefits
- 63. Bundled & Program Pricing
- 64. What Do We Sell? Knowledge in Units of Time
- 65. TDABC Time Driven Activity Based Costing
- 66. TDABC – dig into the details of a transaction •Labor •Fixed Costs •Variable Costs •Cost of Equipment
- 67. TDABC – examples of 2 procedures in mobile practice •Cost per minute of labor •Cost per X-ray •All the costs associated with the transaction
- 69. Cost of Goods Sold Variable Cost Only sell with a transaction
- 70. Payroll
- 72. Labor
- 74. Cost per Minute
- 76. Operating Expenses & Vehicle
- 80. Total Costs
- 81. Example Client Type •New •Single horse •Multi horse •CC on file •Bad Payer
- 82. Client Type Time New 10 Min Existing 5 Min Single Horse Same Drive Multi Horse Same Drive CC on File 10 Min Bad Payer 60 Min
- 83. Example #1 • New single horse owner • Rides for pleasure • A veterinary assistant travels with you • CC on file • 30 minute drive • 20 miles one way • 30 min exam for “Swollen Eye”
- 84. What would you Charge this Client?
- 85. Total Time = 90 minutes Vet - 90 x $0.75 = $67.50 Tech - 90 x $0.42 = $37.80 CSR - 20 x $0.31 = $6.20 Total labor Cost = $111.50 Driving - 40 km x $0.41 = $16.40 Transaction Cost = $24.91 Total Cost = $152.81
- 86. Swollen Eye Profit for basic eye exam Our Fee = $125.00 Our Profit = -$27.81
- 87. Example #2 Lameness Exam • 4 horses at trainer barn • Absent owners • 2 have credit cards • 2 are new clients with no info • 30 minute drive • 20 km away • 1.5 hour visit • 8 X-rays total
- 88. What would you Charge this Stable Visit?
- 89. Total Time = 150 minutes Vet - 150 x $0.75 = $112.50 Tech - 150 x $0.42 = $63.00 CSR - 2 x 15 x $0.31 = $9.30 - 2 x 60 x $0.31= $34.10 Total Labor Cost = $218.90 Driving - 40 km x $0.41 = $16.40 Transactions - 4 x $24.91 = $99.64 X-Ray Cost - 8 x $25.28 = $202.24 Total Operational Cost = $537.18
- 90. Practice Cost – Activity Based Costing $219.90 $537.18 $756.08
- 91. Lameness Exams Profit for 4 Lameness Exams Client Cost = $1,020 $264
- 92. What is Good Pricing Doing the same, or less, but giving more value to customer and more profit to business
- 93. What is Good Pricing? Encourages client behavior that benefits the client, the business and the horse
- 95. What if…. Bundled 5 calls together Reduce Call Fee by 50% ?
- 96. For Example 2 hour total drive time rather than 5 $70 x 5 hours = $350 $70 x 2 hours = $140 Saving $210
- 97. Reduced Call Fee Effect Call fee = $60 5 calls x $60 = $300 5 reduced call fees = $150 $210 - $150 = $60 Profit
- 98. Reduced Call Fee Effect 3 extra hours in week @$192/hour 156 extra hours in year = $29,952 6% increase in sales • Lowered vet & tech cost • Lowered transaction cost • Increased profit • Happy & loyal clients
- 99. Work Flow Efficiencies Client type Better scheduling Better use of HR Opportunities for Other Services
- 100. Client Surveys
- 102. Useless • Inconvenient • Intrusive • Annoying • Nothing measurable • <10% response rate
- 104. The NPS • Promoters (9-10) • Passives (7-8) • Detractors (0-6) Promoters – Detractors = NPS
- 105. The NPS • Promoters (9-10) 30% • Passives (7-8) 60% • Detractors (0-6) 10% Promoters – Detractors = NPS 30%(P) – 10%(D) = 20% NPS
- 106. The NPS • 4 questions • constantcontact.com • Surveymonkey.com • Target clients • Results shared McKee-Pownall Equine Services Customer Feedback Survey 1. How likely is it that you would recommend our company to a friend of colleague? 0 - Not at all likely 1 2 3 4 5 - Neutral 6 7 8 9 10 - Extremely likely 2. If you scored us above 8 on the above question, what is the primary reason for the score you gave us? 350 characters left. 3. If you scored us below 8 on the above question, what is the primary reason for the score you have us? If you would like to discuss your recent visit and how it impacted your score, please add your name and number. 350 characters left. 4. How long have you been a client of McKee-Pownall? 1 year or less 1 - 3 years 3 - 5 years 5 + years Finish
- 107. Sample Questions
- 111. Results • Ave NPS score = 84% • Ave response rate = 33%
- 112. Challenges •Time •Repeating clients •No industry standard
- 113. Understanding the Cost of Running an Equine Practice
- 114. The Staff 100 Pennies = 100% Turnover
- 115. What % of Turnover is Profit? How Many Pennies?
- 116. Inventory Cost
- 117. Veterinary Salaries
- 118. • Inventory _____ • Vet/Tech Wages _____ • Office Wages _____ • Advertising _____ • Vehicles _____ • Benefits _____ • Insurance _____ • Accounting/Legal _____ • Facility _____ • Equipment Repair _____ • Telephones _____ • Etc…. Continue…Expense Catagoriea
- 119. How Much is Left Over = Profit? Share Practice %’s • Show seasonality • Share cost of medical equipment • Illustrate Owner Options • Pay off debt • Invest in new service or technology
- 120. Take Home Messages •Develop a Pricing Strategy & Philosophy •Build and Value Client Loyalty •Educate & Train Your Staff •Try ABC for 5 Common Procedures •Measure and Compare •Be Brave!
- 121. Questions!