5 Essentials of Strategic Discounts

November 12, 2019

In many aesthetic surgery practices, “Price” is the is the least understood of the 4 Marketing P’s. Instead of setting fees and creating pricing offers using proven business methods that align with the practice brand, most aesthetic practices “do what everyone else is doing.” Often, that includes acquiescing to patient pleas for discounts when they fear the surgery schedule won’t fill.

We think your practice will be better served by using evidence-based pricing. In this blog, I’m going to cover the essentials of offering one such pricing strategy: strategic discounting.

Strategic discounting is a business-savvy way to offer the right type of discount at the right time, with the goals of building loyalty and repeat visits.

In contrast, reactionary discounting is what happens when the staff or surgeon “cave in” to patients when they ask for a lower fee. This type of discounting does not deliver any long-term benefit to the practice, and in fact, may be detrimental to your brand. Because if you are willing to reduce the quote by 15% just because a patient asks, you risk building a reputation for attracting transaction buyers.

According to the research of Dr. Paul Wang, of Northwestern University’s Kellogg School of Business, transaction buyers are those who are primarily motivated by price. An example is the patient who shows up with three quotes from competitors, and asks that you match the lowest one. Transaction buyers are not loyal. They come for the price, and they’ll leave for the price. It doesn’t matter if you roll out the red carpet and give them a white glove experience. They don’t care about that. Price is what they value.

Relationship buyers, according to Wang, are a very different bunch. They find shopping around for the best bargain inconvenient. So, when they find friendly, reliable services and products that they trust, they stick with them. They are loyal, and appreciate the brands and services who recognize and value them. They aren’t attracted by bargains. They want a relationship. And they often become long-term, loyal patients who return to the practice year after year for additional services and products.

Back to strategic discounts. These are the types of discounts that interest the relationship buyer – the one who is more likely to become a loyal, long-term patient. They are a more effective way to build your practice and there are 5 essentials to offering them:

1. They are used to solve a specific business problem.

For example, to introduce a new nurse injector and build her appointment schedule. Or, to pay for a product line or technology that hasn’t quite gotten the traction you had hoped it would.

2. They are proactively offered.

Patients don’t ask for strategic discounts – your practice offers them. This keeps you in the driver’s seat instead of reacting to a patient’s discount request.

3. They are targeted to a specific demographic or a specific procedure.

Strategic discounts are not offered to everyone. They are highly targeted because they are being used to solve a particular business problem. (See #1.)

4. They are used with discretion.

Strategic discounts are intentionally structured to have an “exclusivity” factor. This works far better than offering a far-and-wide discount promotion to everyone. A strategic discount is not intended to be posted to Facebook or offered to the entire email database.

5. They must be tracked and evaluated to assess their business impact.

The bottom line is that strategic discounts are always intended to solve a specific business problem. (Again, see #1.) To that end, you must track and review them to be sure you’ve reached that goal.

An example of a strategic discount that meets these essentials is an introductory discount for a new laser. The business problem to be solved is scheduling an increasing number of appointments for the new laser and recovering the costs of the equipment and activity associated with marketing it. You could proactively offer a limited time discount on a package of laser treatments – targeting it only to patients who have received neurotoxins and fillers, or other medspa services. You’d make the offer in-person – to those who have come in for an appointment – as well as call those who’ve had such services but haven’t been in for an appointment for the last year. All of these patients already have a relationship with you. The strategic discount being offered is a wise incentive for them to come in and try something new.

Before you begin offering a strategic discount, plan ahead for tracking the transactions. Using the new laser as an example, create an Adjustment category in the practice management system. In this case, you could call it Laser Intro-Fall 2019. Each time a patient redeems the offer, charge your full fee for the service or package, then apply the amount of the strategic discount to this Adjustment category. After the limited package offer is over, generate and review an “Adjustments Report” and compare the total amount in the Laser Intro-Fall 2019 category to the revenue generated by the special offer.

In addition to reviewing the monetary success of the discount, evaluate the behavior of the group who took advantage of the offer. How many scheduled something else, in addition to the laser package? Did any of them schedule a consult with the surgeon? Often, a strategic discounting strategy will be effective both in building revenue specific to the goal, as well as new revenue from additional services and products purchased.

Author - Karen Zupko, President
An internationally recognized thought leader and speaker, Karen Zupko advises physicians and healthcare managers about the challenges and trends impacting the practice of medicine. Click here for more info about the author. 

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