Business coach Alan S. Adams outlines how practitioners can benefit by implementing a pricing structure in their clinics
As with any business, the profit your clinic makes can be hugely impacted by various differentials, including your sales process, regular outgoings, product investments or staff salaries. Regularly reviewing your pricing model, revenue, and costs is a standard procedure of running any company. However, many clinic owners I work with do not give these areas enough attention and risk losing out on potentially higher profit margins.
Pricing your services correctly is the key to a successful business venture. When I started
working with clinic owners, some of the first questions I asked were: how often do you think
about your pricing structure, and when was the last time it was adjusted?
New product innovations are quickly added to the service offered by clinics wishing to stay ahead of the game and offer their patients the latest trends. Despite this, pricing models are not adjusted nearly as much as they should be to ensure ongoing business success. As an absolute minimum, clinic owners should be increasing their prices once a year – even if that’s just in-line with inflation.
If you leave it longer than this – for example five years – you run the risk of two occurrences: a sudden realisation that you need to increase your prices a lot (which could be a potential turnoff for your patients), and lower profit margins for every year you’ve not updated your pricing. How frequently you need to review the packages you offer is entirely individual to your clinic and there is no correct answer, but as an owner you need to schedule time in to review and analyse your costs.
By pricing too low, you risk looking unprofessional and unable to deliver the calibre and quality of the services that some high-end patients may be seeking. Your profit margin will narrow, and you undervalue yourself as a company and as a respected professional. However, if you price too high (without the right positioning and a well-thought-out customer journey), you risk pricing yourself out of new patients, who might favour a more affordable competitor who offers the same perceived value.
Conducting in-depth market research will allow you to understand the industry price for a
particular treatment, but almost as importantly, how long it will take for you or your staff to
deliver it. You can easily wipe some profits from your business if you come in too low a price,
and an appointment takes longer than you
Therefore, regularly think about how much your time is worth (considering your education, qualifications, and experience), as well as the industry ‘norm’ for a service, and adjust your prices accordingly to ensure that you’re making enough profit overall.
Purchasing behaviour is influenced not only by the value attached to a product or service, but also by the way this value is presented to us. The process of setting a pricing structure is more nuanced than simply attaching a price to a treatment and then focusing on how many treatments you can carry out, and how many new and returning customers are coming through the door.
All of the processes you use to encourage
patients to visit your clinic rather than a
competitor’s are a vital part of running your
clinic. By reviewing your pricing structure
regularly and employing gentle and ethical
persuasion techniques, which have been
researched and proven to work by a raft of
esteemed experts, is equally important.
There are many different strategies which can prove beneficial to your profits and bolster your clinic to the next level but, to begin with, there are three considerations to focus on: the number of choices your potential patients have, the order in which those choices are presented, and approaching interactions with patients who are hesitant to commit to a highvalue treatment.
Deciding how many choices to give patients
within each specialised sub-category of
treatments you offer can be tricky. You do not
want to overwhelm them with a long list, but
few options could lead potential patients to
look elsewhere for a better variety.
A study showed students performed better and took less time to complete a multiplechoice test when given three potential answers rather than four or five.1 We also know too many choices can demotivate a person – shoppers were ten times less likely to buy jam when they were given 24 different options to try compared to six.2
How many choices should you offer? There is a lot of research on the subject but a three-tier system works especially well. The argument for this pricing structure is perhaps most succinctly described by distinguished author and therapist Virginia Satir: “To have one choice is no choice; to have two choices is a dilemma; and to have three choices offers new possibilities.”3
This does not mean only offering three treatments, but instead narrowing each type of treatment you offer into three pricing levels. The key to this is that customers have a choice, and three is an ideal number to offer. Another benefit of doing so is that the middle option seems even more attractive to a potential patient. As an example, consider the case of Williams-Sonoma, a company struggling to sell its most expensive bread maker, priced at $275. In response, the team introduced an even more expensive option. The slightly better model priced at $415 was essentially used as a decoy which made a cost of only $275 look even more attractive to those searching for a new bread maker. Sales of the $275 model went through the roof. The model had not changed, but customer perception had.4
To stand out from your competitors, you need to have a premium treatment or offering, which is something new and exciting. You might not get many who go for this option (but if you do, great); it’s there to provide customers with the choice and to act as a price anchor for your other packages.
As an absolute minimum, clinic owners should be increasing their prices once a year
If your prices are displayed on your website, within your clinic, on leaflets or anywhere else, you will have chosen how to order the treatments. It could be you opted to go from A to Z, from lowest priced to highest, or even a random order. But did you know, you could gently influence patients to pick high-value treatments simply by ordering the list differently? A minor change, but one that many esteemed researchers agree will make a difference.
Studies into the influence of ‘price
presentation order’ reap results which
consistently show customers will spend more
when the price descends from highest to
lowest, rather than the other way round.5
of the strategies psychologists have studied
is known as ‘price anchoring’.
Price anchoring sees individuals rely heavily on the first piece of information they are given.6 If the first price they see is £3,500 and below that is a treatment or package for £1,800, the latter suddenly does not seem as expensive. However, if the first was £1,800 and the second was £3,500, this changes the perception of the affordability of the second. Despite this, within aesthetics it’s not as easy as placing a moderately-priced car next to a top-of-the-range model – but you can absolutely influence how motivated patients are to spend their hard-earned money by thinking carefully about the order in which you present pricing information to them.
One of the best ways to approach
conversations with potential patients who
might be hesitant about booking a certain
treatment is to think about value rather than
The price of a product or service resounds in the patient’s mind as a loss – they will effectively be losing that amount of money. By turning the conversation around to the value or worth of the treatment you are offering and its associated aesthetic benefits, you’re instead focusing on what they stand to gain.
Offering a gift before the sales process (or giving an exclusive discount to someone who has declined to purchase at full price) can enact the principle of reciprocity. As part of his globally-renowned work on ethical persuasion tactics, social psychologist Professor Robert Cialdini stated that by ‘doing a favour’ or giving a gift to a patient, they will feel indebted to you and thus more likely to make a purchase.7
It does not have to be a huge gift, giving a free sample of a product you sell within your clinic or offering a ‘try before you buy’ taster of a treatment can trigger the patient’s desire to reciprocate and banish the hesitancy they were previously displaying.
When setting your pricing structure, tapping into customer psychology is extremely important, but it is worth considering your own psychology as a business owner and how this impacts the decisions you make around the value of your treatments and time. If you are the kind of person who is motivated to steer away from loss rather than towards gain, then pricing fear could be withholding you from adjusting the costs of the services you offer. Comparisons between yourself and competitors can also impact the value you place on the treatments you provide. Be aware of your own and consumers’ preferences, personalities, motivations, and reservations – it will give you a distinct advantage when it comes to setting your pricing structure and deciding how best to present your costs to patients.
Assigning a value and then presenting
this to the patient in a way that helps them
understand that value, and what they stand
to gain, rather than focusing on the ‘loss’ of
payment is pivotal. If a patient comes to you
solely based on price, it is very likely they’ll go
elsewhere based on this, and these aren’t the
type of patients you want to attract because
they don’t recognise your value.
Implementing this balance correctly, while
considering the customer’s psychology
discussed above, can reap huge benefits in
terms of converting an individual’s interest
in your clinic into you gaining a new patient
– and then, of course, the work begins to
ensure their loyalty and continued custom.
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