VALUE-BASED Strategic Pricing Tools and Resources

Of all business decisions that a veterinary practice must make, those involving setting prices for new products and services and changing prices of existing 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. Paradoxically, quoting or changing the price of a service is one of the easiest things a veterinary practice owner or manager can do. Because of this dual immediate and significant impact, pricing decisions need the owner and practice manager’s full attention in a sustained and strategic manner.

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.

Learn to price more effectively with the valuable and foundational resources available through VHMA, including a comprehensive white paper that evolved from the groundbreaking VHMA Strategic Pricing Summit led by Rice University marketing expert Utpal Dholakia, Ph.D., as well as the definitive study on the value pet owners place on veterinary services.

Understand, implement and see how VALUE-BASED Strategic Pricing can lead to better pet health, enhanced compliance, and improved profits.

VALUE-BASED Strategic Pricing for Veterinary Practices WHITE PAPER

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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

Strategic Pricing PET OWNER ECONOMIC VALUE STUDY

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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

VALUE-BASED Pricing Strategies and Tools WORKSHOP

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Implementing a pricing strategy isn’t just about deciding what percentage to use to increase fees. Pricing is a marketing issue and is just one component of the traditional 4 “P’s” of the marketing mix: place, promotion, product, and price, all of which must be considered in price determination. Value-based pricing intuitively makes the most sense in setting prices. Value-based pricing, however, is hard—how do you determine how much value a particular service and the related client experience provide to a pet owner? Because of this, not many practices clearly understand how to integrate value considerations into their pricing decisions.


Other factors besides value must always be considered too in making a pricing decision. Inputs to that decision include costs, customer value, reference prices, and the business’s value proposition. And of course, price execution has to be considered: What are pet owners willing to pay? Are prices regularly discounted? How are payment options integrated into the practice?

Appropriate pricing success measures must also be used. Of course, practice revenue and profits are two of these measures, but client and employee satisfaction with the prices and related value are also critical.

Although few practices will completely revamp all of their prices at a single time, increased understanding of pricing strategies can help practices improve what they are doing.

The workshop will address the following issues and topics that are key to implementing an effective pricing strategy:

  • Scrutinizing your practice: is pricing a problem? Do you need to change your approach?
  • Identifying components of the pricing decision framework and how to apply them to your practice.
  • Understanding specific strategies
  • Functional vs. hedonic benefits
  • Service bundles
  • Good-better-best pricing
  • Others
  • Avoiding common pricing mistakes.
  • Using reference and market prices.
  • Implementing new pricing strategies.
  • This interactive workshop will provide numerous opportunities for participants to apply the information to their own situations. Examples and exercises will be include
Presenter: Karen E. Feslted, CPA, MS, DVM, CVPM, CVA

Multiple team members from each practice are encouraged to attend.

6 Continuing Education hours are available.

Seating is limited at each event.

Workshop details and registration

Best Practice Tools

Creating a VALUE-BASED pricing strategy can be a complicated process. When implemented effectively it can result in benefits for patients, clients, and the practice. When your practice is ready to embark on the journey to implement VALUE-BASED Strategic Pricing, take it step-by-step and consult these best practice tools to break down the process into manageable, easy to implement steps.

  • Good-Better-Best
  • Loss Leader
  • Low Incremental Costs
  • Price Bundling
  • Sell Complimentary Products
  • Subscription Pricing
  • Training Team Members
  • Using Value Propositions

Download Best Practice Tools

Case Studies

In the current economy, veterinary practice pricing is out-pacing consumer inflation, discretionary spending, and the rise in household incomes, it is critical that practices reevaluate their pricing practices and examine how developing market insight driven pricing strategies can lead to overall improvement in practice performance and better care for pets.

If your practice is not currently systematically implementing a pricing strategy based on market-oriented insights, VHMA invites you to play an important role in bringing this vital topic to the forefront by volunteering your practice to be the subject of a case study. Participating practices will collaborate with the VHMA to identify issues, develop solutions, implement value-based pricing strategies, and measure consequences. 

The results of this research will be shared with practice owners and managers so they can better understand how to successfully change their pricing practices to ensure long term health and viability of their practices.

If you would like your practice to be considered for a case study complete this brief questionnaire no later than, Monday, June 15th. 

Case Study Application