Pricing Your Refractive Product Line
Pricing Your Refractive Product Line
The key is giving patients a mid-priced option
BY MICHAEL W. MALLEY
Somewhere along the refractive road, practices took a very shortsighted approach to fees. Suddenly, affordability was in the eye of the practice — not the consumer — and tiered pricing was considered too much like retailing for refractive surgeons. Too bad it took an economic tsunami to help us better understand today's consumer mindset.
In the current refractive surgery marketplace, there's one primary thing you need to know about consumer spending to be successful: People buy in the middle.
How Consumers Think
Okay, so now what? How do these five words of wisdom help your IOL counselor make a $10,000 bilateral premium IOL procedure seem affordable to an aging Boomer on fixed income? Better yet, how does this information convince a 25-year-old millennial (Gen Y) that bilateral LASIK is a bargain at $4,000? Well, it won�t if you don�t understand the consumer mindset in the high stakes “business” of refractive surgery. If you don't know how to properly price your premium product lines, you�re either already experiencing serious “patient pushback” or you will very soon.
For anyone who still thinks price doesn't matter, you're either still in denial or inherited your father's medical practice in Beverly Hills. Now more than ever, price matters in everything. But it doesn't mean you have to lower your refractive fees. You just need to understand how to “position” them!
To help you better understand the “buying in the middle” theory, let's look first at the typical refractive surgery recipient. For cataracts and premium IOLs, it's fairly simple. The vast majority of patients undergoing cataract surgery are working-class men and women above age 60. They�re typically on some kind of fixed (retirement) income by this stage in their life and demand value when spending their hard-earned dollars.
Like most of us, they normally do not buy the most expensive cars made or largest houses ever built, nor do they dine in the finest restaurants and always travel first class. Nope. They're just average folks who do most of their purchasing — including food, clothing, essentials and non-essentials — somewhere near the middle. Typically it's wherever they can find the most value.
The Perception of “Value”
It doesn't mean they aren't buying. They're just not buying at the top. Seniors still buy nice cars, purchase expensive homes and dine at first-rate restaurants. Somewhere in their purchases, these cataract-age patients find value and convince themselves they can afford it. And usually it's because they're comparing their purchases to a more expensive car, house or menu item they chose not to buy. They're simply more comfortable buying the middle.
The same is true for the average LASIK patient. Yes, there is the rare white-collar doctor, lawyer or banker who strolls in and pays full-price for LASIK. But glance into any one of a hundred LASIK centers on a given Friday and you'll see that the average LASIK patient today is between 38 and 44 years of age, split pretty much evenly between men and women. Most are in the middle-class demographic where a non-essential $4,000 purchase is going to be a major hit on their finances.
Providing value with this target demographic is huge. If patients don't think your LASIK procedure is a value at $4,000, they simply are not going to convert to surgery. They know they can't afford the most expensive things in life, but they like them just the same. The same is true with LASIK. They want the most advanced technology, the most surgical experience, the best possible result, in the finest spalike setting — but their perceived value of your LASIK procedure has to meet or surpass your asking price.
Just like the senior target audience, the LASIK age-group still makes major purchases. However, unlike a senior who eventually has to have cataract surgery, LASIK is an option for this target demo and your competition is their discretionary income… not the practice down the street. The same money that could be used for LASIK can also be used for a new jet ski, two-week Alaskan cruise, hi-def entertainment system or surfing lessons on Maui. The winner is usually the product giving someone the most value.
Value for this group does not necessarily mean the most expensive. If they take the Alaskan cruise, there's usually a larger suite available they deemed too expensive. The same is true with entertainment centers and surfing lessons. Yes, they're buying, but usually not at the top.
Claiming the Middle
How this all relates to refractive surgery pricing is quite simple. Knowing that the vast majority of people buy in the middle means that your fees for your most popular refractive services must appear to be in the middle. If this sounds confusing, it obviously is for the thousands of refractive practices out there who still believe in the “take it or leave it” refractive pricing system. An example of this would be: “Our fee for bilateral premium IOLs is $10,000.” There's nothing below this fee and there's nothing above this fee. It's just the fee.
And for some practices, that system works perfectly fine. But for the average patient to feel comfortable committing to a specific refractive procedure, it helps to have both a higher-priced version of the same procedure and something similar on the lower end. Just like very few people buy at the absolute highest price, the same is true about bottom prices. Most people prefer to buy something a little higher than the absolute cheapest version of anything. But, playing with fees can be a very challenging, frustrating and dangerous undertaking for refractive practices.
Let's take your fee(s) for LASIK. Most practices have what is known as their LASIK average selling price (ASP). Look at last year's surgical volume, confirm your gross revenue for all LASIK procedures performed, divide your gross revenue by the number of eyes for the year and you'll have your LASIK ASP
For example, let's say your LASIK ASP is $2,000 per eye. Let's also say your LASIK volume has dropped 35% in 2009 after a 20% drop in 2008. Suddenly, potential LASIK patients are telling your counselors that they just can't afford a $4,000 procedure. They either can't make up their minds, want to go home and talk to their spouse, call you back or their perceived value of LASIK at your practice is simply not quite as high as your asking price.
If you want prospective patients to perceive your $4,000 is affordable and has value, show them a $4,600 version of LASIK that comes with a Lifetime Commitment, complimentary annual eye exams and two pairs of Maui Jim sunglasses. Then show them a very low price for surface ablation for patients with a similar prescription but just thin corneas. Next, drop in a corporate/business benefit price at $1,925 per eye that most working people qualify for. And finally, list a $5,400 fee for ICLs and/or clear lens extractions.
Put all five prices on a professionally designed pricing sheet (like the one on above) that lists the prices vertically. List all services that come with each procedure, the typical patient who qualifies for it and leave room for notes. Design the sheet so the eyes fall naturally on the middle section. Just below that is where your new, targeted ASP falls.
How Patients Respond
The patient sees a $4,600 LASIK price that comes with a few more bells and whistles. They also see lens procedures at a much higher fee and a $4,000 standard price for LASIK. Right below that they will see the LASIK business benefit price of $1,925 per eye. And below that, a fee in the price range of $1,500 per eye for surface ablation, for which 93% of patients will not qualify.
Even with the least qualified LASIK counselor, potential patients can physically see the value of a lower-priced LASIK procedure. Add in a well-trained LASIK counselor who can also verbally point this out to patients and you'll witness patients suddenly finding value in LASIK priced at $1,925 per eye. Why $1,925 and not $2,000? Even though it's only a $75 difference, the perceived value under the thousand-dollar barrier seems much more affordable.
The next step is among the most important. This is where your counselor does not ask potential patients if they want to have LASIK. If you do, you've just lowered your conversion to at least 50%. Instead, the counselor points out how fortunate the patient is not to need an ICL or a lens implant, which are both priced thousands of dollars higher than LASIK.
You then ask them which one of the options seems to have the most value. This allows the patient to “self direct” in terms of the final close. It's easiest for patients to find value in the middle, so that's typically where they will indicate their interest. Your counselor should then follow-up with an option-style closing technique that gives the patients two options at this point: get back into their old glasses or contacts, or find them an affordable way to have LASIK. Ask them which one sounds better. Then wait for the answer. More than 90% of all patients will tell your counselor that finding an affordable way to have LASIK obviously sounds better. Once they say that, the rest is up to you. But it all started by letting the patient physically see some pricing value.
Pricing IOL Procedures
The same pricing also works for your IOL procedures. Most practices do not have an IOL pricing sheet, so it's hard for patients to see or feel value in some of the higher-priced lenses. In the past, pricing sheets — and pricing systems — were not needed because patients only had one choice. Today, with more choices, more options are required.
Therefore, to make your premium IOLs appear more affordable, you need to carefully design your cataract pricing sheet. The chart found above is an example that can work well for many. At the top of your pricing sheet, put the costs for basic cataract surgery as covered by most insurances and Medicare. Then, start working your way down the sheet. Add your fee for LRIs. Go down a little further and add your price for toric IOLs. From there, add your fee for multifocal or accommodating IOLs, but be sure you only list the out-of-pocket amount not covered by insurance.
Now, keep working your way down the list. Next, add the total out-of-pocket expenses someone would incur if they were under age 65 and wanted a clear lens extraction not partially covered by insurance. This fee should obviously be higher than your out-of-pocket fees for premium IOLs. Now list the same for premium IOLs.
All of a sudden, your $2,200 out-of-pocket amount for PC-IOLs not covered by Medicare or insurance seems much more affordable than the higher-priced options. Once your surgery counselor points out how much money they're saving by having their procedure partially covered by Medicare or insurance, patients will feel a little more comfortable with the middle range of fees.
When done properly, there is nothing misleading or unethical about properly listing the price of your services. Even in today's challenging economic times, there is no need to lower your fees for refractive surgery services, as long as you have them properly positioned in front of patients. OM
Michael W. Malley is President and Founder of CRM Group (Centre for Refractive Marketing), an ophthalmic marketing and consulting firm specializing in cataract and refractive growth and development. He can be reached via e-mail at: email@example.com or in Houston at 713-839-0202.
Ophthamology Management, Issue: September 2009