Recently, I was listening to a talk about how to move part of your practice online. The doctor being interviewed did an excellent job developing numerous packages to promote to her patients. She even had a membership program.
As a result, she has been able to discontinue taking insurance payments and to go to primarily a fee for service model. During the lockdowns, when the rest of us were forced to close our offices and stay home, she was still able to maintain a significant part of her income through her online sales.
Given all of that, when I was listening to her, I saw that she was doing a terrible job marketing her programs. I know that if she makes just a few small changes she could double or triple what these programs bring in. These mistakes are costing her about $100,000 a year.
One of the big mistakes she is making has to do with pricing her products. I just came across an article written by a friend of mine on how to price products and services. It was written for information products, but a lot of the points he makes are relevant to private practice.
Here is a link to the article if you want to read the whole thing.
One mistake people make when pricing their services concerns price elasticity. The basic idea is that if you increase your price your sales will drop and if you cut your price your sales will go up.
This means if you can get a certain number of patients to take you up on a package, dropping the price in half will get you a lot more patients.
This is true. However, if you cut your price in half you will need twice as many patients to make up for the lost income. Studies show that cutting the price in half only increases sales by no more than 20%.
There are times that charging too little can hurt sales. I once heard a story of a carpet distributor who told his sales rep:
“This carpet sells for $20/yard everywhere, except Brooklyn. In Brooklyn it sells for $50/yard”.
“Why?”
“Because in Brooklyn, everyone thought $20/yard means it’s a cheap carpet and no one would buy, so we had to raise the price to $50/yard. Now sales are great there”.
Probably, the most common problem in pricing is not charging enough. For physicians that means you will work a lot harder and make a lot less than you should.
Ultimately, what you decide to charge should be based upon the value you are giving to your patients. When you perform an elective procedure, or create a special program, how does that transform your patient’s life? What is that transformation worth to the patient?
The general rule in pricing is that whatever you deliver should be worth ten times what you charge. Then as long as you deliver what you have promised, your patient is getting a bargain.