Marquis Practice Solutions LLC

"Progressive Insurance shares have gained 36.3% so far this year, compared with an 18% gain in the S&P 500 index during the period." This brief article describes what may be a brilliant example of striking the sweet spot between increasing both the top line and bottom line by using a dynamic marketing mix. The article goes on to note that "the company had 21.5 million personal auto insurance policies in force, up 10% over the year earlier" and that "net premium written jumped 22% to $17.90 billion." Progressive has simultaneously increased transaction count (policies) and revenue (premiums written) over the past year. I know from personal experience that they've likely done this by increasing premiums at lower rates than their competitors and thus gaining market share. So with this in mind, might it be time to consider some pricing disinflation at your #veterinaryclinic, if not outright deflation? The laws of supply and demand still reign supreme so don't go dropping prices without significant forethought & strategy though. Still, with year-over-year visit growth being negative for 2+ years per the AVMA (American Veterinary Medical Association)/Vetsource Data Services Industry Tracker it might well be time to give your overall fee structure some serious consideration with the aim of Purpose-driven Profit Maximization! https://lnkd.in/eVrt4ZAS

Yikes! You wouldn't want to be on the receiving end of a similar "5 on your side"-style investigative/consumer affairs report, and yet some #veterinary pricing practices put some goods solidly in 8,000 to 10,000% markup territory - well above the figure mentioned in this news story. Unless you've been living under a rock for the past two decades you're likely already acutely aware of the fact that many #veterinary clients have been comparing prices of, and increasingly shopping for, prescription products with online pharmacies like Chewy's. This has forced many #vetclinics to reconsider the historically high markups on at least some prescriptions drugs and adjust some of those markups down along with their associated margins. But as you consider markups in your clinic, are you considering the impact of dispensing fees on your effective markups? Let's look at a hypothetical example to see how impactful dispensing fees can be on a realistic markup scenario. ▫️Prednisone 5 mg: 🔹Hypothetical clinic- Clinic cost/tab: $0.02 Markedup price/tab: $0.25 Markup percent: 23/2=1,150% Dispensing fee: $15 Cost per 10 count: $15+$2.50=$17.50 Effective markup: (17.50-0.20)/0.20=8,650% 🔹Chewy: Estimated cost/tab: $0.013 Markedup price/tab: $0.13 Markup percent: 11.7/1.3=900% Dispensing fee: $0 Shipping fee: $4.95 Cost per 10 count: $4.95+$1.30=$6.25 Effective markup: (6.25-0.13)/0.13=4,708% In reality Chewy doesn't profit from all of the shipping fees on these sales, and may even lose money on shipping certain goods, so this "effective" Chewy markup is almost certainly artificially elevated. Now in all fairness you're unlikely to feature on the local Fox affiliate for a prescription product costing clients less than $20 but you just might for products costing one and certainly two orders of magnitude more. So what should you do with this information? 🔹Be cognizant of your markups, and in particular your effective markups, on all goods sold in your clinic. 🔹Over time apply similar methodology to your services and ensure you apply competitive, value-based pricing across the board! Interested in learning more? DM us to set up a no-obligation introductory meeting. https://lnkd.in/eJmz3jD5

"He's taking on Hertz, who have hundreds and hundreds of thousands of cars, and he's got 17 cars and his cars aren't any different from theirs..." In this short video the legendary Warren Buffett describe's Enterprise's early David versus Goliath battle with much larger and well-established global rental car companies. How did Enterprise end up being worth more than all the other rental car companies combined? In part, at least according to Buffett, by "offering the customer friendlier service than they've ever seen." I'd also hazard a guess that their robust treatment of employees in general, and women + diverse employees in particular (see: https://lnkd.in/dHsDXRk) has also helped make them an even greater competitive threat over the years. Lessons for #vetmed? Plenty I'd say, in particular when it comes to small, privately held clinics competing and winning in this increasingly corporate-dominated environment. https://lnkd.in/g_SPuwb6

Surprise, surprise...there's a strong and compelling correlation between year over year #vetclinic revenue growth across the 25 most populous US states and these states' per capita personal income adjusted for purchasing power using the Bureau of Economic Analysis's regional price parities. Incorporating the BEA's price parity adjustment is quite important because a salary of $100k/year goes a lot further in Oklahoma that Oregon for example. While the r-squared of just under 34% in this analysis is not the strongest correlation I've ever seen, it is nonetheless telling when one considers the fact that these figures don't take into account regional differences in income, population density, and vet clinic densities within states, nor the disproportionate year over year changes in the net number of vet clinics across these states. So what action items should you consider on account of this analysis? -Be cognizant of the purchasing power of your clinic's average clients and, if necessary, adjust pricing and/or consider promotions and bundling services to help support them during this period of decades-high inflation. -Keep a close eye out for changes in the local competitive landscape. More vet clinics and other veterinary service providers, like house call services, could greatly impact your clinic's demand, especially in areas with low per capita personal income.

"The lesson to learn from Ford’s experience is that bundling our medical tests and procedures so people remember to do them is far smarter than adhering to an erratic series of health commands that people are unwilling to follow" Dan Ariely astutely segues to the above quote after an in depth and intriguing business and philosophical discussion about how both Honda and Ford greatly enhanced customer compliance with post-purchase vehicle maintenance by simplifying their car service offerings. Shortly thereafter Ariely quotes Thoreau as saying "Simplify, Simplify" and goes on to note that "simplification is one mark of real genius." I would concur on all counts here. Indeed, I recall spending at least 5% and perhaps even 10% of my time as a clinician seeing healthy pets for just one or two vaccines when either: a) These pets were up to date on their annual exams and had been in mere weeks before for other vaccines (&/or were due in just weeks to months for 1 or 2 more vaccines). b) The pets were not at risk for the diseases prevented by some of the non-core vaccines in question. So what was the net result? Owners were often surprised to learn that we certainly could consolidate visits and that their pets would only experience a nominal, non-linear increase in the risk of adverse vaccine reactions for pets weighing more than 30 pounds (see figure 2: https://lnkd.in/ehRqMN_c). Upon learning this many owners were thrilled to reduce their pet's total annual visits from perhaps 3 to 4 total appointments to just 1 or 2 - again, Simplify, Simplify! An added benefit - additional appointments were then freed up to serve other patients! The clients in category b) above were generally not unhappy to learn that their pets age &/or lifestyle no longer put them at risk for one or two of the non-core vaccines they were receiving. Nonetheless, some clients were occasionally a little disappointed to learn this news, perhaps wondering how much sooner they might have been able to stop giving these vaccines...Evidently this means that such discussions need to be a) well thought out and medically justified as well as b) tactfully delivered. Still, reducing the overall number of vaccines given to a pet, where medically appropriate, simplifies the pet's care, enhances compliance, reduces potentially unnecessary adverse events and frees up appointments for other cases which could well have higher transaction costs - or simply need your care and expertise more than pets receiving a single, low-yield non-core vaccine. So what about your clinic? Are you employing evidenced-based medicine to help guide your vaccination policies and potentially increase compliance while freeing up valuable appointment slots?

We're big proponents of the Pareto Principle over here at Marquis Practice Solutions LLC. Why? Because the 80:20 rule is broadly applicable on the business side of #vetmed. For example: ~80% of revenue comes from ~20% of clients ~80% of revenue comes from ~20% of the goods and services a clinic sells ~80% of prescription drug revenue comes from ~20% of drugs sold So with this latter example in mind one of our better clients asked if we should examine the 80% of drugs generating just 20% of prescription drug revenue using our proprietary pricing algorithm. The answer wasn't necessary clear at first glance because this might be a low yield proposition - after all why would you spend the time and money to have a consultant look at low yielding products? Well, you might do it because some those low yielding products might actually be high yielding products in disguise. So, was the juice worth the squeeze? We'd say so... We discovered an incremental $16k/year in pure profit hiding in plain sight. So while this represented just 1% of the clinic's total revenue, the fact that it all fell to the bottom line meant that net income increased by close to 10%! Not too bad for a day's work. Better yet - these incremental returns will continue in perpetuity (until eroded by inflation). So the 7-year net present value (NPV) of this discovery with a 5.5% discount rate is just under $91,000.

“Shares are likely stuck at current levels until clear evidence emerges that top-line growth has definitively bottomed and [Chewy] is back to adding new customers — both of which we cannot underwrite at this point” (https://lnkd.in/e9rqy3JK) I posted about the Great Normalization in terms of demand for pet and vet services as well as other discretionary goods and services a few months ago over on my personal LinkedIn account (https://lnkd.in/eFX4vtr5). Indeed, it's a topic I've been posting about for over a year now (https://lnkd.in/eHhTcP9u). Alas, as more and more confirmatory news comes in about this mean reversion & macro-induced slowdown, I'm starting to wonder if Chewy CEO Sumit Singh's quote that we can expect "a return to normality in 2025” will indeed bear fruit. One might also ask, what kind of normality? He's most likely talking about a return to long-run average US #pet and #veterinary industry revenue and comp transaction CAGRs. That's not an unreasonable assumption, save for the fact that I believe that the pandemic pulled forward pet ownership and related industry demand by 5 to 7 years and that most folks who purchased a dog or cat in 2020 or 2021 will not be looking for another anytime soon. That's not to say that I expect a calamitous decline in the US pet & vet industries. Rather, I maintain my long-held belief that caution is warranted in the years ahead and that over-investment is almost inevitable.

"One area, though, already looks ripe for reform: the seemingly fat revenues from medicines. "We have seen data from some large vet businesses which suggests that medicines account for around 20-25% of their revenue,” says the report." This Guardian article, and related ones, have been doing the rounds the past few days - and rightly so (https://lnkd.in/edJKuyMM). While US, and likely UK, #veterinaryclinic owners and consolidators alike have been well aware of the growing online threat from pet pharmacy players like Chewy, many have been slow to change their business practices. In fact we've seen cases where some practices seem to be doubling down and increasing prices and thus profit margins to rather extreme levels on certain Rx drugs. It's almost as if they were trying to recoup every lost margin dollar from defecting customers by extracting those dollars from those clients who contine to buy these drugs from the clinic - a recipe for accelerated Rx revenue loss, and apparently consumer watchdog investigations. So what can be done? A great place to start would be putting a little more thought into Rx pricing than: Price=Dispensing fee + X% markup This kind of basic pricing structure, even one with several tiers (several Dispensing fees &/or Xs), still fails to adequately address competition and fair pricing across drugs that cost clinics from $0.01/unit to $50+/unit and are sold in quantities of 1 to 100+ units. That basic math just simply doesn't work. For more info and some helpful tips on this check out minutes 25:30 to 30:00 or so of this recent webinar: https://lnkd.in/e5QJ-edS

Yikes, what a quote! How does it sit with the practice managers and independent #veterinaryclinic owners out there? So many prices in vet med are set based on cost alone. Drugs are marked up with relatively little thought to their value to the client and patient alike but with much thought to their underlying unit cost. Vaccines are generally treated no different and laboratory testing certainly isn't either. Even more difficult pricing decisions, such as pricing complex dental or surgical procedures, are also often built on a cost-based model. As Rafi notes in his book the 1% Windfall however, customers don't care what it cost you. Customers care about the value your goods and services provide them. Failing to take value into consideration can lead to disgruntled and overcharged clients as well as to leaving considerable amounts of profit on the table - sometimes even in the same transaction or even across different quantities of the same product! When did you last overhaul your clinic's prices? Was value a key consideration of these deliberations? Don't fear if you haven't taken a long hard look at pricing yet, we're here to help from simple, single category projects to a complete pricing overhaul. Reach out via DM today to learn more about our services and yes, about our own value-based consulting fees as well.

The trials & tribulations of dynamic pricing...Wendy's brief foray into the potentially highly profitable world of dynamic pricing appears to have been cut short. What is dynamic pricing? 🔹Simply put it's the idea of actively adjusting prices based off levels of supply and demand. This can occur on a seasonal basis, as often happens with say hotels in vacation destinations like Florida, or even on a minute-by-minute basis as happens with Uber's pricing and that of many online retailers. What's the history of dynamic pricing? 🔹Both dynamic pricing and the closely related concept of surge pricing have been the bedrock of many industries over the past 30+ years. 🔹These strategies started nearly 40 years ago with the deregulation of the US airline industry. 🔹The hotel/hospitality & trucking/freight industries soon followed suit seeing the positive effects on airlines' net income. Why is it a good idea (in theory)? 🔹Supply and demand - basic economic theory dictates that as demand increases so too does the buyers' incremental willingness to pay 🔹As demand softens, reducing prices can help increase demand and more fully and efficiently use capital and labor resources by evenly distributing demand and workload across the day (week, month &/or year) Is dynamic pricing suited to particular industries? What about #vetmed? 🔹It's best suited to industries with variable demand patterns, industries in which price changes can be implemented & conveyed quickly (think online retailers or retailers using electronic price tags), and industries with relatively large fixed or semi-fixed costs like high real estate/capital costs and relatively fixed labor costs (you wouldn't lay off a cargo pilot, or a veterinarian, if you had a quiet week) 🔹Given the above it would seem that dynamic pricing might also make sense in vet med, but, as was seen at Wendy's, considerations of fairness can make such pricing strategies look distasteful in the eyes of many customers 🔹These concerns can be mitigated by only using dynamic prices to lower prices during periods of low demand but not to increase them during periods of high demand So, do you think there's a place for dynamic pricing in #veterinarymedicine? https://lnkd.in/eJW2FUmj