Pricing of veterinary products and services – fair pricing for profit?
Abstract
The pricing strategy which a veterinary practice develops must reflect the true cost of delivering products and services to clients. An essential starting point for any pricing strategy is, therefore, to establish what these costs are. This article addresses the issues and challenges involved in costing and price setting of veterinary drugs and medicines, pet health products and veterinary services within a small animal practice. First, the various pricing strategies available to practice managers and owners are explored. Then a basic costing and pricing formula is put forward that can effectively be applied both to products and services and this is utilised to illustrate the actual price-setting process in two selected examples. Finally, some general guidelines are given for keeping clients informed about prices in order to ensure transparency and clarity and thus maintain and even enhance the practice–client relationship.
Since the start of the recession just over 5 years ago, many veterinary practices have been facing increasing challenges — rising costs, reducing client numbers and increased competition (Wright, 2011). In the past, the automatic response might have been to simply increase prices. However, today's clients demand fairness, transparency and clarity of pricing and if they experience a lack of these, are more likely to seek them elsewhere.
The prices a practice sets for the services it provides and for the products it sells lie at the very heart of everything it is able to do and everything it will achieve in the future. Shilcock and Stutchfield (2008) argue that there must be a rational basis for pricing, which must not undersell the service or the products, but which, at the same time, must not open the practice up to accusations of profiteering or taking advantage. Irrespective of the various factors that influence a practice's pricing strategy, such as geographical location, positioning or practice type, a rational pricing strategy must achieve four key aims. It must:
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