Money Monday – Dealing with the cut price offer
A client sent me a link over the weekend to a cut-price web site in his city, offering a 59% discount on short-term ortho at a neighbouring practice. Understandably, the question followed “how would you deal with this?” The chap in the photograph dealt with exactly the same problem in 1890. John Ruskin was the leading English art critic of the late Victorian era but also observed and commented on the world of business. His famous quote on prices used to be a regular topic of conversation at The Dental Business School workshops over 12 years ago: “It is unwise to pay too much but it’s worse to pay too little. When you pay too much, you lose a little money – that’s all. When you pay too little you sometimes lose everything, because the thing you bought is incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it cannot be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better.” Clearly, little has changed in over 100 years. This is always a race to the bottom – price wars continue until the last business is standing and that business usually has very deep pockets. When a large organisation offers cut-price goods and services it can often be a ruse to get people in their door and cross-sell them other products/services. They take the hit because the losses they incur are just loose change. When a small organisation does this – they usually close/change hands/struggle with their creditors after a short time. A loss leader is never a loss leader – its just a loss. This type of activity is a road to nowhere for those in the small business sector who offer it. The problem is – that doesn’t help you when you are on the phone or face to face with a potential patient who is waving the offer in your face and asking:
why you can’t do the same?
why they shouldn’t take up the offer?
This smacks of the South West and the West End of London and we have all seen the carnage that price wars have caused there. I thought that independent dentistry had weaned itself off Groupon and similar – but here we have a re-appearance of this dangerous phenomenon. As a business coach, I have no interest in working with practices who subscribe to “deals” to get punters in that erode their profit margins and cash flow. In the end – patients looking for the best price will drift – so don’t waste too much time on them. Patients looking for a quality experience will stay with you. Marketing and pricing are the processes by which you eliminate the patients that you don’t want to work with.