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Issue: 58 - Oct 15, 2013
When Discounting Works and When it Hurts
By: Jan Miller
Veterinary Best Practice

Discounting in veterinary medicine has been so commonplace that I doubt practice owners and managers even give it much thought anymore.  It’s just a technique allegedly to bring in more clients and improve a poor financial situation or the prospect of one.

Honestly, I believe discounting has become a fear based reaction to the belief that you are not good enough for someone to pay full price.  Sadly, there are few things in your practice’s “toolbox” of operations that speak louder to clients than how you set your fees.

You’ve heard over and over again:  People believe they get what they pay for.   If people believe they get what they pay for, what message do you send when you continue to reduce your fees by discounting?  You are telling them that the quality of care they receive at your practice is less than the care they will receive down the road.

When I go into a Nordstrom Rack or a Marshalls or any outlet mall, I do it for one specific reason: to get something cheap.  The entire time I am at a discount store I am aware of “getting what I pay for”[1]

When I want something of quality, a product I can count on, I never go to a discount store.

Frequent discounting, especially in a service industry, has the effect of confusing your clients about what kind of practice you are.  For example, if you see yourself as a high end veterinary practice but are constantly discounting services to get clients in the door, it’s very likely you are the only one who sees yourself as a high end practice.  Overcoming frequent and indiscriminate discounting is a very deep hole that you may never be able to successfully climb out of.  It becomes your reputation, your brand, whether that was your intent or not.

Have you become a discount store in the eyes of your clients and prospective clients?  Do you want to be?  These are two very different questions.

Discounting can have its place if done properly and with a plan.  These are the guidelines to managing discounts:

  1. Discounting should always be the exception and never the rule.  If you find you are routinely discounting something in your practice, stop.  If you have printed literature in your practice that highlights a discount, get rid of it. 
  2. Any discount must have a clear and measureable objective that addresses a current need.    This is an important point: discounts must address a current need and not an ongoing problem.  For example, do you have heartworm or flea and tick products that are ready to expire?  Are there any other products that you do not seem to be able to turn over as quickly as you hoped?   If so, discount them to avoid either having to throw them out or have them take up valuable shelf space.  Have you seen a decline in new clients?  Perhaps you are not competitive in the needs of the “starter patients.”   How many spays and neuters have you been doing?  Not many?  The usual reason is that you are pricing yourself out of the business or have given up trying to compete with the low cost clinics.  You don’t have to compete but you do have to be competitive.  Perhaps a promotion on spays and neuters?  Maybe around kitten season? If you find that it works, consider revising your fees on these procedures permanently.  You need these “starter patients”. 
  3. Your discount objective should be easily explainable to the clients who receive the discount and the clients who do not receive the discount.   I am not suggesting that you have two classes of clients.  That would be professional suicide. But if you have a time limit on the discount, stick to it.  If it is for a certain item or procedure, stick to it.  When a client attempts to bargain or negotiate with you to make an exception or a substitution, you can state clearly why and when you discount.  Don’t bend on your rules. 
  4. Know your own practice brand or your discounting habits will define your brand for you.  If you want to position yourself as a high end provider, don’t discount.   (Some products may be an exception to this rule because of item #2.)  If you want to position yourself as a value priced provider, frequent discounting or a fee schedule that plays to that brand is appropriate.  Important note:  most “value” priced practices are promoting loss leaders like spays, neuters and vaccinations.  Their fees for all other services are generally equal to or higher than the competition.  Could you learn something from this strategy?
  5. Define in advance what your expectations are with regard to discounting anything.
    1. Do you want to be seen as a practice that is always running a sale?
    2. Do you want bargain shoppers as your primary client base?
    3. If what you need is more client volume and increased cash flow, perhaps you should consider bundled services.  A modest discount on wellness plans may be a good solution.  The tradeoff is a win-win.  You have, hopefully, priced your plans to assure an adequate profit margin.  Your wellness plan client receives a discount plus the ability to pay monthly.  You also receive a loyal client for the duration of the wellness plan.  Of course keeping them longer is up to your customer service and quality of care.   If you need help with wellness plans, click here.  
    4. Are you introducing a new service or technology to the practice?  Perhaps a time limited discount on studies performed on that new ultrasound unit just to let clients know you have it?  Did you add boarding?  Maybe “one day free on stays of 3 days or more” promotion for the first 20 reservations?

If you find that the discounting you have done, or are doing, is not achieving the desired results, stop.  Doing more of an ineffective strategy will not improve the outcome.  If you are experiencing low patient volumes, evaluate the whole continuum of possible reasons.  It may not be your pricing at all.  Most of you will discover that pricing is rarely the reason for poor client numbers.  It is usually something operational or personnel related.  Discounting will not overcome hours of operation that do not meet client needs; it will not make poor customer service better; it will not make you a better communicator.  A leap to discounting as a remedy for poor financial performance is a short sighted strategy with long term consequences.

[1] There is a very enlightening book out titled “Cheap: The High Cost of a Discount Culture” by Ellen Ruppel Shell (click on the name to go to the page).