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Filling the Gap: How Clever Pricing Can Elevate Your Dental Practice

Marketing
August 05, 2024•6 min read

In the competitive world of dentistry, standing out isn't just about offering superior care—it's also about implementing smart pricing strategies. With potential changes in UK government policies and the possibility of more NHS contracts becoming available, the landscape could become even more competitive.

So, how can your practice become known not only for its excellent service but also for its innovative pricing that attracts and retains patients?

It's crucial to understand that pricing isn't about undercutting your competition. It's about understanding your customers and your market. Who are your patients? What is their price sensitivity? By grasping these elements, you can develop a pricing strategy that aligns with the market you want to attract, ensuring your practice thrives.

Before we dive into specific pricing strategies, let's explore a fundamental concept: Price Elasticity.

Understanding Price Elasticity

Price elasticity of demand measures how sensitive the quantity demanded of a good or service is to changes in its price. If a small change in price leads to a significant change in demand, the product is considered elastic. Conversely, if demand hardly changes with a price shift, the product is inelastic.

Understanding price elasticity helps dental practices make informed decisions about pricing strategies. For instance, if dental services are found to be elastic, raising prices might lead to a significant drop in patient visits. Conversely, if services are inelastic, the practice can increase prices with minimal impact on patient numbers.

Why does this matter? Just because customers are price sensitive, it doesn't make them bad customers. You may simply have an unappealing offer! This is where strategic pricing comes into play.

Understanding Pricing Strategies

Pricing strategies are essential for any business, including dental practices. They help in setting prices that reflect the value of services, attract patients, and ensure profitability. Let's explore some common pricing strategies and their applications in dentistry:

1. Penetration Pricing

How It Works: Penetration pricing involves setting a low initial price to enter a competitive market and attract a large number of patients quickly. Once the practice gains a substantial patient base, prices can be gradually increased.

Application in Dentistry: A new dental practice could use penetration pricing to attract patients by offering discounted rates on initial consultations or routine cleanings. A great anchor is to initially match prices to the cost of NHS services. For example, offering a "new patient consultation for £40". This strategy helps build a patient base quickly, and as the practice becomes established, prices can be adjusted to reflect the quality of care provided.

2. Skimming

How It Works: Skimming involves setting high prices initially and then gradually lowering them over time. This strategy targets patients willing to pay a premium for early access to new or exclusive services.

Application in Dentistry: This strategy is particularly effective if you have technology that outpaces your competitors or if you're in a unique position, such as opening a new practice in an area with unmet high demand for dental care. For instance, a practice offering the latest in cosmetic dentistry could initially set higher prices, targeting patients who value being among the first to benefit from these advancements. Over time, as the technology becomes more common, prices can be reduced to attract a broader patient base.

3. Competition Pricing

How It Works: Competition pricing involves setting prices based on what competitors charge. This strategy ensures that the practice remains competitive within the market.

Application in Dentistry: A dental practice can analyse local competitors' pricing for similar services and set their prices accordingly. This approach is often a great starting point for new practices in high-demand areas, ensuring that they're neither overcharging nor undercutting profits.

4. Bundled Pricing

How It Works: Bundled pricing offers multiple services together at a lower rate than if purchased separately. This strategy encourages patients to opt for comprehensive care plans.

Application in Dentistry: Dental practices can offer bundled pricing for services like routine cleanings, X-rays, and fluoride treatments. For example, a "New Patient Special" could include an exam, cleaning, and X-rays at a discounted package rate, encouraging patients to commit to a comprehensive care plan. Or alternatively - have you thought about creating your own Dental Subscription? And take it one step further - how about a Dental Subscription for the whole family - striking the balance between value & what a family of four may be willing to pay. There is so much scope to stand out!

5. Psychological Pricing

How It Works: Psychological pricing leverages the emotional response of patients to certain price points. For example, setting prices just below a round number (e.g., £99 instead of £100) can make services appear more affordable.

Application in Dentistry: A dental practice might price a teeth whitening service at £199 instead of £200. This slight difference can make the service seem more affordable and appealing to patients, even though the actual difference is minimal. It may sound silly - but it has worked for year. John Lewis does it, Amazon does it - and all other kind of retailers. Why not try it yourself?

6. Cost-Plus Pricing

How It Works: Cost-plus pricing involves calculating the cost of providing a service and adding a markup to ensure profitability.

Application in Dentistry: A dental practice can use cost-plus pricing for routine services like cleanings or fillings. By calculating the total cost (including materials, labor, and overhead) and adding a reasonable markup, the practice ensures that each service is profitable while remaining transparent with patients about pricing.

Implementing Pricing Strategies in Dental Practices

To effectively implement these pricing strategies, dental practices should:

1. Conduct Market Research: Understand the local market, including competitors' pricing and patient demographics. Studies have shown that price elasticity of demand for dental services can vary significantly among different procedures and demographic groups.

2. Evaluate Costs: Accurately calculate the costs of providing services to ensure that pricing strategies are sustainable. 

3. Communicate Value: Clearly communicate the value of services to patients, emphasising quality, convenience, and outcomes.

4. Monitor and Adjust: Regularly review pricing strategies and adjust them based on patient feedback, market changes, and financial performance.

5. Consider Segmentation: Different patient groups may have varying price sensitivities. Consider offering tiered pricing or different service packages to cater to various segments of your patient base.

6. Leverage Technology: Use dental practice management software to track the performance of different pricing strategies and gather data on patient preferences and behaviors.

Conclusion

By thoughtfully applying these pricing strategies, dental practices can differentiate themselves, attract and retain patients, and ultimately achieve long-term success. Remember, pricing isn't just about numbers—it's a powerful tool for building a thriving dental practice that stands out in a competitive market.

As you implement these strategies, always keep your patients' needs and perceptions at the forefront. A well-executed pricing strategy not only boosts your bottom line but also enhances patient satisfaction and loyalty, creating a win-win situation for both your practice and the community you serve.

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