Marketing Monday: It's the economy. Or is it?

Friday’s jobs report produced another reminder of the state of our economy: sluggish, uneven growth with a large portion of our country’s job creation taking place among part-time jobs.  Predictions for future look similarly uninspiring.  Less than a stellar picture, indeed.  Regardless of whether you lean red, blue or neither in figuring the cause of this malaise, as a practice owner, you have to deal with the situation.

In well over half of the cases in our recent history, when we talk with a doctor about the reasons for a decline in revenue or new production, the answer is along the lines of: “it’s the economy, stupid.”  Well, it’s not always so obvious.

Certainly, no one has any doubt that the overall economy affects orthodontic and dental practices.  If a person’s income goes down, he or she begins to look for costs to eliminate or push back until better times return.  Orthodontic treatment certainly fits that category.  Delaying treatment typically does not cause pain, spreading infection or related health issues.  For dental treatment, while some procedures can and will be delayed, some severe cases have to be handled immediately.  

On the other hand, the economy-as-total-problem answer may obscure other issues in the practice that will need fixing regardless of GDP.  Here are some of the key considerations:

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Know your numbers

We just finished analyzing a case in which the doctor’s business advisor insisted that the slowdown in local economic growth was the sole cause of the decline in new patient production and contracts.  When we examined results, we found that new patient consultations had actually increased 21% when compared to the same period of the prior year.  In the weaker economic environment, the practice had actually been presented the opportunity for greater growth.  But because the practice had problems in getting new patients signed during the consultation process, production fell.  Because production fell in a weak economy, the practice immediately assigned the reason for the decline to economic conditions.

The moral of the story is that by knowing the numbers in your practice, you will know which declining indicators are the result of the economy and which represent problems in the practice that have nothing to do with the unemployment rate.

Know which areas of your practice are affected by the economy

Along the lines of knowing your numbers, know how your practice is affected by the economy.  One stream of new patients may be completely impacted by a downturn while some segments might actually improve.  In one state, when economic conditions deteriorated in 2008, the state reaffirmed its commitment to leaving Medicaid unchanged in order to lessen pain to the people who had lost jobs and required a social safety net.  In that case, despite the collapse, that part of the economy was left unaffected.  In fact, a practice that focused on Medicaid patients at that time probably experienced a growth in patient volume as patients were added to Medicaid rolls and utilized that benefit to get treatment. 

If you charge a large down payment and a substantial monthly fee, a fall off in patient financial fortunes will substantially impact results.  That will need to be an area that is addressed.

And on and on.  The point here is that opportunities lay in areas that don’t garner any of your attention during good times.  By the same token, your entire practice may not be devastated by an uptick in the unemployment percentage.  If you have a handle on your target market and sources of income, a down economy can actually be a blessing.

Respond properly to a downturn

At the beginning of the downturn, a client of our decided to refurbish his waiting area and add an espresso bar.  The thinking was that in a bad economy, people want a place to go to relax and get away and his office was that place.  And, yes, folks will always want comfort in bad times, but money is a much more substantial consideration.  Comfort comes largely from being able to fit expenses within your monthly budget and care for your family.  After that, a nice cup of espresso helps too.  Needless to say, the practice did not experience any improvement in results as a result of the refurbishment.  They were left with flat results and additional cost.

In the downturn, practically every major retailer and large scale business relied heavily on price promotions and competitive pricing to maintain their market share during a downturn.  Consider Hyundai’s offer to simply let a person give his or her car back in the case of a job loss.  Price promotion.  Hormel focused its marketing and efforts on the lower-end Dinty Moore line of products as a way to compete on price.  Price usually matters and becomes that much more important when people’s incomes are threatened.  A good understanding of that fact enables you to attract new patients even in a poor environment.

Not in the mood to reduce your fee?  Spread payments over a longer period of time to reduce the monthly payment amount without changing the fee.  Rearrange payment terms for existing patients and have them notify their friends about it.  A lot can be done in this area.

Whatever your conclusion, keep in mind, that in good times, patient x is going to come to you without a second thought.  In tough times, multiple doctors will compete for patient x.  Don’t lose that patient because others are more conscious of and responsive to the environment that you.