Veterinary practices offer discounts (even if they say they don’t). And that’s not necessarily a bad thing. Few management actions are all or nothing — “Never do this” or “Always do that.” With discounts and other decisions, it’s a matter of carefully thinking through why your practice is doing it and then tracking the benefits.
Discounting is the deliberate reduction of the charges listed in the fee schedule. It might involve a partial markdown or a 100% discount. Either way, the practice owner, veterinarian or staff member consciously decides to reduce the price of a service rendered or a product sold.
Veterinary practices generally have three kinds of structured discount programs: employee benefits, marketing and charitable contributions.
In addition, a fourth kind is the random, unplanned discount that doctors or staff members approve because they are uncomfortable with the fee structure or are just generous people. This last category most often gets a veterinary practice into trouble.
Employee Discounts
The Veterinary Hospital Managers Association’s October 2023 “Insider’s Insights” survey found that nearly all practice employees receive discounts. Less than 1% of the responding practices did not offer any. Such a benefit is valuable in attracting and keeping quality team members.
I recommend that practice leaders ask these questions:
- Is the benefit attractive and useful to my team members?
- Is it competitive with other practices?
- Is it critical to attracting and retaining employees?
According to the survey, clinics are more likely to discount products and services for employees rather than provide the items for free or at cost. (The size of the discount varies, but most practices offer 16% to 20% off or over 45% off.)
Weigh price cuts for team members similarly to any other employee benefit. However, a practice that doesn’t offer employee discounts or is stingy about them will likely have challenges finding and keeping team members.
Charitable Discounts
Many veterinary practices give charitable discounts to animal welfare organizations and individuals who care for stray animals. The amount is at the hospital owner’s discretion because that person or company has the right to determine when a discount is excessive.
While hospital owners must understand the financial impact of providing discounts, other considerations come into play.
One, for example, is that small businesses often contribute to their community because they think it’s the proper thing to do. While that is true of larger companies, too, most bigger entities recognize that social responsibility is a good business strategy. Indeed, multiple studies have demonstrated that customers prefer to frequent companies that give back and behave well socially. Customers tend to have a more positive image of those companies and are likelier to trust and be loyal to them. In other words, consumers have long memories of companies that behave badly. That is especially true for millennial customers and the generations after them.
Marketing Discounts
Cutting fees to attract new clients or encourage current clients to do more for their pets is a marketing move. Discounting products and services for pet owners who would have come in anyway or paid the full amount doesn’t make sense as a marketing strategy. However, fee reductions can increase revenue and profits if they bring in first-time clients, fill slow times in the appointment schedule or entice people to buy services they wouldn’t have purchased otherwise.
According to the VHMA survey, the most common marketing discounts are those for multiple pets, referrals, senior citizens, and product or service bundles.
About 20% of the respondents don’t discount services for clients, and 51% don’t reduce product prices. The majority of practices reported discounts in the range of 6% to 20% on services and 10% or less on products.
Review your practice’s marketing discounts to ensure they achieve your goals. Start by listing the programs and then look at each one. For example, if your practice gives a complimentary exam to a puppy purchased at a local pet store, does the owner return to your clinic, building your client base? You should track clients who respond to a marketing discount to see whether they remain with your practice. Do they bring in enough revenue to warrant the discount?
In addition, examine all formal discounts periodically and track them to see whether they lure new clients or entice long-standing clients to return more frequently or buy more services. If, after a trial period, the discount isn’t accomplishing your goals, phase it out.
Random Discounts
The last kind of discounts are random ones given for no particular reason. They harm your bottom line.
To identify them, audit medical records and flag discounts that aren’t part of a specific program. Once you highlight random discounts, search for patterns. Is the same doctor involved? The same receptionist? Do the discounts occur on the same day of the week or at the same time of day? During the same type of appointment? Are certain fees regularly discounted?
Patterns will help you identify the specific issue. Once you find the root cause, take corrective steps.
While some discounts can help increase a practice’s profitability, inappropriate ones can drain the hospital’s finances. Many practices have systems and rules in place to deter improper discounts. However, few do enough about it.
Discounts often increase during busy times due to sloppiness or because employees use them to pacify unhappy clients. Fixing service issues is a much better solution, as is identifying and correcting the fundamental reasons behind bad discounts.
