Dr. Amy B. Jackson offers four strategies that can help you to devise a productive pricing psychology.
Dr. Amy B. Jackson discusses pricing psychology and how it relates to orthodontics
For many in the world of healthcare, pricing is low on the list of priorities. It simply isn’t an enjoyable element to grapple with, especially for those who entered the industry to pursue their passion for helping people. While others thrive in the numbers side of the business, pricing is a game of constant adjustment. It has to be evaluated and reevaluated consistently to stay competitive and relevant. You must be able to retain current patients and attract new ones. Balance must be achieved, and it is seldom easy to nail.
There are many strategies designed to facilitate the best, most effective ways to price your services. Entire subsets of psychology are dedicated to studying various aspects of pricing and how they affect consumer habits. In other words, you could dive very deep into the minute details of pricing psychology.
We selected three primary pricing strategies to highlight. Check them out below.
Charge before customers consume
Customers should pay before using your product. For starters, you are more likely to get paid, which is always nice. Prelec and Lowenstein, 1998, found that customers are generally happier prepaying as it gives them the opportunity to look forward to the benefit.1 If they already consumed those benefits, nothing will numb the pain of paying.
If you charge customers every month, charge them at the beginning of the month. If they have difficulty making the down payment, allow them to split it into two payments and only start active therapy once the second payment has processed.
Structuring your goods and services in such a way can be extremely advantageous in the orthodontics industry where patient acquisition is competitive and expensive.
Raise prices incrementally
Price adjustments are an inevitable part of doing business. Unfortunately, those price adjustments usually manifest as increases — that’s just the way of the world, especially in economies where inflation plays a major role in market value. You must adapt to the times, or you might undersell your value.
Raising your prices incrementally makes them far more tolerable to consumers. While your prices may increase by 6% over a year, for example, implementing that increase annually by 3% raises has a far less immediate impact on the consumer.
Opting for incremental price increases also gives you an opportunity to evaluate the economic landscape and competition regularly rather than relying on price hikes to catch up or guesswork to project the right price.
Many businesses are afraid to raise their price, so they wait until it is absolutely necessary and are then forced to raise fees by a large margin. Instead, use frequent, small price adjustments across the board to avoid waiting until the moment of desperation.
Package services together
Consumers will often be willing to pay more when they’ve provided with more valuable services. One way to easily provide more value is by packaging services together.
For example, by packaging active treatment with the passive retention phase of treatment, you can charge a larger fee to patients due to increasing the perceived value you are providing them. This can be either an in-house package or a package via a third-party partner. For example, in my practice, we offer patients the option to prepay for Retainers For Life, a program that provides my practice with income and provides the patient with excellent retention care.
By offering packaged treatment options to patients, you’re able to offer excellent levels of care while simultaneously differentiating yourself from competing practices.
Follow the rule of 100
Running promotions and offering discounts can provide valuable boosts to your business. In order for them to be successful, however, they need to attract patients. The theory is that a reduced price leads to a higher volume of sales. Unless this proves to be true, your promotion could flop.
The Rule of 100 states that if something is over $100, use an absolute discount ($40). If it is under $100, give a percentage discount (10%). The reasoning behind the rule is simple — the larger the figure, the more appealing the promotion: $40 off of $200 sounds more substantial than 20%.
Pricing psychology is just one part of a total plan to grow your practice. Check out Chris Bentson’s article, “Observations on growing an orthodontic practice: part 1” at https://orthopracticeus.com/observations-on-growing-an-orthodontic-practice/.
- Prelec D, Lowenstein G. The red and the black: Mental accounting of savings and debt. Marketing Science. 1998;17(1 ):4-28.