VALUE-BASED Strategic Pricing Tools and Resources*

On August 8 and 9, 2018, the VHMA Critical Issues Summit: VALUE-BASED Strategic Pricing brought together over forty-three thought-leaders from the veterinary services industry. They included practitioners, managers, consultants, and industry opinion leaders. The critical issue addressed during this summit was the question, “How can veterinary practices adopt and implement more effective pricing approaches?” Over one and a half days of presentations, breakout sessions, brainstorming, and discussions, the group pinpointed the strengths and identified the biggest gaps and opportunities for pricing veterinary services. They also learned about state-of-the-art pricing methods and considered how to apply them to the veterinary services industry.

This white paper summarizes the event. It has two significant goals. First, the white paper introduces the core concepts, frameworks, and tools for pricing strategically in the veterinary services industry that were presented to attendees at the summit. Each concept, framework, and tool is discussed succinctly but with sufficient detail to give the reader a clear understanding. The second goal of this white paper is to describe and share the work generated by the attendees with a wider audience of veterinary practitioners, consultants, and managers. Accordingly, the ideas, experiences, recommendations, and conclusions about strategic pricing generated by the veterinary services industry thought-leaders who attended the event are described in this white paper. All summit attendees are coauthors of this white paper to acknowledge their contributions. The content is organized into the following eight sections:

1. Why strategic pricing is important for the veterinary services industry
2. The state of pricing in the veterinary services industry
3. Understanding the role of costs in a veterinary practice’s pricing strategy
4. Understanding customer value for veterinary services
5. Customer focus and value propositions
6. Developing a pricing structure
7. Ideas to improve pricing in veterinary practices
8. Conducting a pricing audit for your veterinary practice

Each section in this report begins by discussing the relevant core concepts, frameworks, and tools (where applicable), then goes on to describes the ideas, experiences, recommendations, and conclusions developed by the attendees. Since all the work of the attendees was done in groups, the ideas developed by particular groups are described verbatim when appropriate. Throughout the report, where not mentioned, the concepts, frameworks, and content about pricing are adapted from the book Dholakia, Utpal (2017), How to Price Effectively: A Guide for Managers and Entrepreneurs. All other sources are cited clearly, including individual contributions of the Summit attendees who are coauthors of this white paper. The report concludes with a pricing audit that veterinary practice owners and managers can use to assess the current state of their pricing method and identify areas where they need to focus and improve.

Download the White Paper

     

VHMA WEBINAR: Strategic Pricing for Veterinary Services: Highlights from the White Paper (February 2019)

     

 Recorded Event Link

Effective pricing decisions are crucial to the business success and long-term sustainability of a veterinary practice. To support data-driven decisions by veterinary practice managers, this study provides a detailed analysis of the economic value that pet owners place on eight veterinary services and service features.

A total of 3,452 pet owners — 1,949 dog owners and 1,533 cat owners completed the study. The study covered a range of geographic (urban/ suburban/ rural, and region of residence) and demographic (gender, age, and annual household income) characteristics.

To assess the economic value placed by customers on veterinary services, the study used a rigorous price discovery method called the Price Sensitivity Meter (PSM) to evaluate how much the pet owner was willing to pay for eight different services: an essential vaccination package, a physical examination, spaying or neutering, a dental care service package, parasite testing, basic laboratory test panel, an X-ray package, and a pet wellness plan.

Three measures of willingness-to-pay of pet owners were assessed for each service: (1) the preferred price which pet owners consider to be an attractive or desired price for the service, (2) the reference price, a summary price that pet owners remember or know from their experience, and (3) the acceptable price range which reflects a range of prices within which pet owners will consider purchasing the service for their pet. Preferred prices are often, but not always lower than reference prices. In this report, the values of these three measures are available for each specific demographic group of pet owners so that users of the study can obtain the willingness-to-pay measures that are most relevant to them.

This report also contains information about how much money pet owners consider as reasonable to spend for their pet’s total medical care each year, as well as just for routine preventive care services, and which additional service features that they are willing to pay significantly more money for.

Download the Pet Owner Economic Value Study

The Veterinary Hospital Managers Association (VHMA) and Veterinary Medical Association Executives (VMAE) – organizations committed to helping veterinary practices thrive – presented a three-part webinar series, New and Improved Pricing Strategies.

Of all the business decisions that a veterinary practice must make, those involving setting prices for products and services are among the most important and impactful ones. No other decision affects the practice’s revenues or profits as directly or significantly as a pricing decision does. Price changes have a direct, immediate, and measurable effect on a veterinary practice’s revenues and profits.

Strategic pricing is not just about making more money or earning higher profits for their own sake. Beyond the economic importance for veterinary practices, strategic pricing has the potential to address significant high-level problems that are endemic to the industry. These involve being able to pay wages to staff members that go beyond the minimum wage and afford a more stress-free and sustainable lifestyle.

Just as important, a strategic pricing framework supports the pet, positioning pets for longer, happier, and healthier lives through more affordable care.

The webinar recordings are available free of charge through the VHMA's OnDemand catalog. One (1) hour of continuing education credit is available to attendees who review the complete recording and complete the session quiz (for each session attended, three (3) credits in total available in this series).

Presenter: Karen E. Feslted, CPA, MS, DVM, CVPM, CVA

Part 1 - Recorded January 26, 2021

What does the research tell us about pricing in veterinary medicine?
Should you rethink your pricing strategy?
How can you tell?

Recorded Event Link

Part 2 - Recorded March 23, 2021

What are the components of an effective pricing decision framework?
How does the cost of providing care fit into price-setting?
How does the concept of value fit into price setting?

Recorded Event Link

Part 3 - Recorded May 25, 2021

What are some new pricing strategies that make it easier for pet owners to say yes to more and better care?
How do you implement them?

Recorded Event Link