OnDemand WTP Pricing Research

Are You CalculatingYour Prices Correctly? | VMD Today

Is there a better way to calculate fees? According to American Animal Hospital Association CEO Mike Cavanaugh, DVM, DABVP (Emeritus), pricing is a critical issue. “Developing a pricing strategy as a component of a practice’s strategic plan is an investment in future success,” he said at the Veterinary Hospital Managers Association (VHMA) Critical Issues Summit in Chicago this past summer. “Pricing is a great example of something we can’t keep doing the way we’ve always done it.” Regardless of how your practice has priced goods and services in the past, it is time to reassess your strategy. Your success relies on it.

WHAT’S WRONG WITH MOST PRICING STRUCTURES?
Most practices determine pricing using a cost-based method in which price is determined by estimating costs and adding a predetermined markup percentage.1 Although this is an easy method, it ignores some important factors.

The other strategy commonly used is the “mystery shopper” reconnaissance mission. This adds another layer to the pricing strategy by adjusting prices based on what competitors are doing. Again, this method is simple but flawed.

One of the biggest and most common hurdles to properly pricing veterinary products and services is discounts—the dental discount, the wellness bundle, the senior discount, the first-time client discount, and many more. The problem here is that most practices do not track whether these discounts help improve client loyalty or increase revenue.

WHY CHANGE?
When establishing prices for your practice, it is important to consider trends both within your own hospital and throughout the industry. For example, pet care expenditures, mostly in the pet food and veterinary care categories, have been increasing each year.2 And although practice revenue and pet visits both have grown in recent years, the rate of that growth slowed between 2016 and 2018.2 The increase in total pet industry expenditures was much higher in 2016 (10.7%) than in 2018 (3.7%).2

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Are You CalculatingYour Prices Correctly?.

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