Dr Phillip Palmer, January 2017
Clients are often asking Prime Practice coaches what to do about what they consider to be predatory pricing of large (sometimes corporate) dental practices and the shame of offering rebate-only pricing. They say that this devalues their dentistry and dentistry as a whole.
When one looks closely at most examples of this predatory pricing or these “no gap” offers, it is usually on entry level dental procedures like a scale and clean, x-rays or check-ups. It is very rarely (if ever) offered on comprehensive treatment. While this may be relatively new in the dental field, what we are really looking at is a long-standing consumer strategy in business called the “loss leader”.
A loss leader is a pricing strategy where a product is sold at a very low (sometimes unprofitable) price in order to stimulate sales of more profitable goods or services, or to entice new and existing customers to try a new service. While you may not realise it, we all see and often take advantage of products offered on this basis in our daily lives.
Common examples of this strategy everywhere in our society include:
Milk: There was a lot of press a few years ago about how Coles and Woolworths were pricing staples like milk extremely low to create store traffic. As a result, milk is always strategically placed at the furthest point from the entrance to the shop so that shoppers wanting that cheap milk have to walk through the entire store to reach it.
Printers: Laser and inkjet printers often sell below cost because the ink and toner is where all the money is made. In fact, the ink cartridges and toners supplied with the units at time of purchase are often “short filled” to run out quickly.
Mobile phones: That “free” iPhone or top-of-the-range Samsung Galaxy phone just locked you into an expensive 2-year contract.
Free trial software and video games: You can give away a low-feature version of your software to get people hooked - eventually they’ll pay for upgrades. Many video games are now free to download, but “In App” purchases are required to garner full enjoyment.
Dentistry, in effect, is now being exposed to this well-known, long-standing strategy for customer acquisition.
Practices offering discounted or gap-free scale and cleans, exams and x-rays are saying that they are willing to make less money on these services in order to get patients in the chair and have the opportunity to diagnose and treatment plan more comprehensive work when they do.
Just like milk, pricing the “staples” of dentistry lower, attracts more patients to your practice where they may require additional treatment, now or in the future.
Many argue that offering discounted entry level procedures like this devalues a dentist’s training and work. Having enjoyed my first career as a dentist, this sentiment is easy for me to understand and support. In an ideal world, a dentist’s training and expertise would be priced into every procedure done at a practice. Unfortunately, however, this has become a luxury that lately, is starting to create barriers to getting new patients in the chair. Times have changed.
Loss leader pricing in the dental marketplace isn’t going to go away. In fact, it is probably going to increase in the future and stamping our feet and saying that it isn’t right is like fighting the tide. It isn’t going to change a thing. The truth of it is that in today’s marketplace, many dentists would benefit by looking at carefully adopting some loss leaders in order to increase their total new patient flow and build up their practices.
There are many dental practices accepting health fund “rebate only” for new patients on “staples” and through that strategy, are able to compete very well against the private health funds’ own clinics who offer the same deal.
While that concept may be abhorrent to more traditional practitioners, it is the opposite to most consumers. At the very least, ignoring the fact that the practice is becoming common could be perilous. At the very least, dentists need to have a strategy to counter this practice and it is worth considering that if you cannot beat ‘em, join ‘em. Long term, if all practices adopted this approach, it would actually reduce its effectiveness, particularly in terms of patients flocking to clinics owned by private health insurers. You will notice that milk is now cheap everywhere!
Practice owners should also consider the amount they spend on generating a new patient inquiry versus the actual number of appointments booked. Spending large amounts each month on, say, Google Adwords to stimulate calls from new patients may all be for nothing if the patient fails to make an appointment because one of your competitors is offering a rebate-only exam.
To focus on getting good money out of entry level procedures is to miss the big picture in your business - building a patient base where you can carry out comprehensive treatment.
No dentist is ever happy with nobody in the chair and an empty appointment book! That is the one thing that hasn’t changed.
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