How To Set An Optometry Pricing Products And Services Strategy

The conventional way to pricing products and services consists of determining the costs of goods sold then adding up all fixed costs, variable costs, overheads, and the desired profit margin to obtain the final price. This method is called the cost-based pricing method. It is important to note that more than 60% of all pricing decisions in companies across all industries are cost-based. The advantages of cost-based pricing methods include the desired profit margin is guaranteed, with known costs and overheads it is easy to calculate the price, customers perceive it as fair and transparent, and eliminates differences in pricing between sales force as every price is set and controlled by the administration. However, there are many disadvantages to cost-based pricing among them are limited pricing capability to customized jobs, patients value perception and competition are disregarded in pricing policy, and the biggest disadvantage is that your practice will miss the opportunity of making money and profit on two occasions: when demand is high you cannot increase your prices and when demand is low you cannot reduce your margin.

The best way of pricing in Optometry is to be able to understand the value created to the patient and employ it as the unit of measure to add up profit margin rather than employing the cost as a unit of reference. This is called value-based pricing and mainly consists of trying to understand the value created to the patient with every option presented or offered to him. Basically, you should be able to provide patients and customers with options, be it bundled products or unique services and set a price for each option. You want to be able to answer the question what is the value of each option to the patient? Once the value is determined try to figure out the answer to How much the patient is willing to pay for this option? Once you estimate how much the patient is willing to pay for the value you are proposing you set the price accordingly without being largely dependent on the costs.

While cost-based pricing is easy to determine value-based pricing is a little bit more complex because it requires understanding the patient’s needs and perspective about the product and services, moreover it requires your practice to possess some capabilities that allow you to measure value in an accurate and profitable way. This will be the main topic of a coming post about value-based pricing and the organization’s pricing capabilities that identify what the patient value, what benefits he is seeking, what products will benefit him, and what segments of value will he pay for.