Giving Clients What They Want Most

[Part of this material has been taken from Business Basics for Veterinarians and Management Basics for Veterinarians, and may not be reproduced without written consent of author]

You might think that clients come to you because of your perfect suture lines or the expert way in which your technicians place a catheter – but you’d be wrong! Like all consumers, clients have their own way of valuing veterinary service, and it often has little to do with medical practices. Of course, all clients want excellent medical care for their pets. It’s just that they often don’t use the same barometers of care that veterinarians do.

All consumers look for exceptional value, receiving at least as much service as they are paying for, and preferably a little more. It is this concept of value that is critical to veterinary practice (and to all businesses) and to satisfy and exceed the needs of clients.

One of the most exciting aspects of value in veterinary medicine is that value pricing is independent of cost. Yes, it is independent of cost. In most situations in which commodities are sold, sales price must reflect all of the specific contributing expenses, such as: Sales price = Overhead + Direct Labor + Materials + Profit +/- Commissions

Keeping these formulas in mind is important, because veterinary hospitals can’t provide services for long that fail to provide a return on investment (Profit). They just become a drain on other hospital operations, and hold the hospital back from paying decent wages, hiring desirable staff, expanding services, and investing in new equipment and facilities.

The new paradigm in veterinary practice is not related specifically to fees, or even to customer service alone. It is predicated on customer relationship management, and leveraging that relationship to achieve exceptional results. This new paradigm pervades most industries today. A bank as a place to keep your money is a commodity that inspires little loyalty. The financial institution that integrates your banking, investment, home loans, and credit card activities is a valued partner. So it goes in veterinary medicine.

But - back to value. One of the most important determinants for fee setting is perceived value by clients. Clients do understand that extraordinary care is associated with real expense, but most clients will quickly lose faith in a practice that overcharges for commodities, such as flea control products, heartworm preventatives, or even pharmacy items. Since these are not areas where the veterinarian directly adds “value”, overcharging for these items should be considered a significant marketing faux pas. It might cause clients to consider that all charges are over-inflated. As a good general guideline for product sales, the charge to a client should never be such that you would feel embarrassed or guilty if the client were to learn your true cost. Accordingly, it is very worthwhile to understand true costs and to establish defensible and profitable fees!

Value-added analysis is an important concept in Total Quality Management (TQM) and in Client Relationship Management (CRM). When veterinarians provide services or sell goods, they do so at an expense related to materials, labor and overhead. Interestingly enough, however, the value added is actually independent of the costs. Imagine considering a pharmaceutical dispensing machine, such as used in large hospitals and pharmacies. The price tag is $1.5 million, but the machine counts the drugs, puts them in a vial and labels them, with near perfect efficiency. Based on your current dispensing load, you estimate that this will add approximately $85 to each prescription. While such a gadget is useful, and certainly will save technician time, does it really deliver “value” to clients? The answer is that while clients might be impressed with this expensive piece of technology, they aren’t likely to want to pay more for it because it really doesn’t add to their utility (i.e., they just want the medication and don’t really care if the technician counts the pills, or the machine). By adding functionality, convenience, aesthetics, branding and so forth, value is added that makes the final product or service more valuable to the consumer. The “added value” of a product or service is the value to the client after your intervention less the value before you were involved. Just as the credit card commercials suggest, some activities are “priceless” when compared to others that are a sum of their costs. It is this differential that allows veterinarians to earn a respectable livelihood by delivering true added value to clients – the good health and longevity of their pets.

The important point to keep in mind, and it is worth repeating, is that value to the customer is independent of cost. This is a fact, not wishful thinking. Therefore, in a value-added analysis, one assesses the processes used in client transactions to determine which provide true value and which don’t. We divide these activities into three categories:

Real value-adding activities (RVA) that are important to clients
Medical value-adding activities (MVA) that don’t add value for clients, but are necessary from a medical or hospital perspective
Non value-adding activities (NVA) that neither add value from the perspective of the client nor the hospital

The goal of such an exercise is to see how much of the total cost is attributable to each category, and ideally to eliminate non-value-adding activities and minimize medical value-adding activities (since that value is not appreciated by clients). Since clients will still pay the going rate for the end product, reducing such activities increases profits for the organization. In fact, removing some steps may actually increase value for the client.

For example, in evaluating the processes involved in routine surgery, the clients value most the safe use of anesthesia, pain management, lack of trauma, gentle and individualized care, and getting their pets back quickly. From a medical perspective, there is value in safe anesthesia, having the surgery completed in a reasonable period of time, discharging the patient, without incident, back to the client, and having the client appreciate the services rendered. In reviewing the processes, a practice could make some bold changes to highlight the real value-adding activities, minimize the medical value-adding activities, and hopefully eliminating the non value-adding activities. This is not only cost-cutting, but potentially profit enhancing as well.

Pain management is definitely value adding and pre-emptive analgesic regimens should become part of every elective surgery. Recovery is another value-adding activity that is ignored in most practices. On the other hand, using sutures versus staples or selecting isoflurane versus sevoflurane is a medical value-adding activity that has only marginal value for clients; they expect veterinarians to select what would be medically appropriate for their pet. That is one of the reasons that adding pain management to elective surgeries has sometimes elicited unexpected comments from clients. Many find it troublesome that pain management would be optional and just expect that veterinarians already do everything in their power to alleviate suffering. Why would they not provide pain management for such procedures – surely not just for monetary reasons? Pain management should be included in every veterinary practice and most clients perceive it not only as real value-added, but clearly providing medical value as well.

The recommendation is not that veterinarians should lower their prices -- quite the contrary. The goal is to allocate charges appropriately, earning professional fees for those services in which the veterinarian adds value, and reasonable retail fees for goods for which no intrinsic value is added other than convenience. Since the true profit for veterinarians remains in value-added services, there is significantly more opportunity in concentrating one’s efforts there.