Successful business owners maximize their profits by setting prices that their customers are willing to pay rather than their competitors.
This is an area in which most vets and practice managers have a lot to learn, says Dr. Karen Felsted, President of PantheraT Veterinary Management Consulting.
“I think we all agree that we are not overly sophisticated in our pricing methods and that we need to learn a lot about what pet owners want, what they want to spend and what we can reasonably ask for,” said Dr. Felsted during her presentation at the annual AVMA business summit, which practically took place from October 26th to 28th.
To help veterinary practice owners in this important area, Dr. Felsted highlighted pieces of new research into the price sensitivities of pet owners and the types of veterinary services they value.
Economist Utpal Dholakia, PhD, is the lead author of The Veterinary Hospital Managers Association, Study of the Economic Value of Pet Owners, which surveyed approximately 3,500 cat and dog owners of various ages, household incomes, and geographic areas.
The study, explained Dr. Felsted, uses a common price sensitivity method to assess customers’ willingness to pay for products and services and to determine the economic value consumers place on those products and services.
Pet owners were asked how much they would pay under three conditions: preferential rate or the ideal cost a pet owner would like to pay; Reference price or the cost that pet owners consider a reasonable amount; and acceptable price range, or the price range within which owners are considering purchasing certain services.
Ultimately, the study shows that veterinary service costs are still an issue for many pet owners. “It’s a rare practice that doesn’t say they get a reasonable discount on the prices they charge,” said Dr. Felsted.
She presented the results for three service areas that are commonly provided by pet general practitioners, although eight areas are covered in the study, which is available on the VHMA website.
We like the idea that all practices offer a golden standard of care and all pets get it, but realistically there are many pet owners who cannot afford a standard of care. It’s not a choice here. The thing is, they really can’t afford it.
Dr. Karen Felsted, President of PantheraT Veterinary Management Consulting
Owners expectations and veterinary fees are most closely correlated in the area of physical examination. For example, the preferred price for a physical exam in dogs was $ 51 and $ 49 for a physical exam in cats. The reference price was between $ 57 and $ 59. The acceptable price range was $ 50 to $ 76 for dogs and $ 41 to $ 66 for cats.
Dr. Felsted found that the preferred price ranges closely match the actual price ranges in the 2018 edition of the American Animal Hospital Association’s Veterinary Fee Reference.
Owner expectations and veterinary fees are becoming more unequal in the X-ray field. Dog owners said their preferred price is $ 66 and the reference price is $ 80. The preferred rate for cat owners was $ 51 and the reference rate was $ 75. Depending on the type of package, the AAHA fee reference lists the price range for X-rays between $ 148 and $ 175.
“So there’s a pretty big difference here between what pet owners say they want to pay for and what we actually charge,” said Dr. Felsted.
Although comparisons between the VHMA study and the AAHA fee reference were difficult, Dr. Felsted that in the field of dental care there is the greatest separation between animal owners and veterinary practices. In the VHMA study, the preferred and reference prices for dogs were $ 75 and $ 90, respectively. For cats, the preferential price was $ 65 and the reference price was $ 77. According to the AAHA reference, the average cost of dental services is over $ 500.
“Anyone who’s worked in veterinary medicine and has an idea of what dentures cost knows that these (owner) prices are ridiculous, right? You can barely open (the pet’s) mouth for $ 75, ”she said. “But we clearly have a big break here.”
The demographic breakdown of the VHMA study showed that dog owners were generally willing to pay more for veterinary services than cat owners. Pet owners in cities and suburbs were willing to pay more than pet owners in rural areas. Pet owners between the ages of 19 and 29 were also willing to pay more than other generations. All of these data points are consistent with previous research, noted Dr. Felsted firmly.
The VHMA study also looked at the services dog and cat owners are willing to pay more for. The study assessed 16 services that typically add value to the customer experience. The top three services were overnight stays, which was number 1 for dog owners and number 2 for cat owners. Home visits that were No. 2 for dog owners and No. 1 for cat owners; and extended hours on evenings and weekends.
“We talk a lot in veterinary medicine about how to add value to the customer experience and provide the things pet owners want,” said Dr. Felsted. “But is that something owners want to spend money on, or is it a value that owners have?” Do you think should be included in the fees I charge?
“At the very least, it means we need to understand what pet owners value in this particular practice and are willing to pay more for it.”
Dr. Felsted believes that the profession should recognize that veterinarians need to provide a range of veterinary services at matching prices rather than a single standard of care.
“We like the idea that all practices have a gold standard of care and that all pets get it, but realistically there are many pet owners who cannot afford a standard of care,” she said. “It’s not a choice here. The thing is, they really can’t afford it. “
That doesn’t mean veterinarians should cut their fees. “I never think this is a particularly good answer for customers who are tired of paying,” explained Dr. Felsted. “I think that means we need to review our pricing strategies and recognize that there are some opportunities for cheaper care practices in some communities.”