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Soapbox

Invest to create value (and profits)

04/10/2018
Corporate optometry businesses have changed the Australian market. I often speak to independent optometrists who want to know how to win in this market. 

How they can compete with the increased buying power, marketing dollars, backroom support and sheer volume of sales the major players generate.

The simple answer is that like for like, they can’t, but that doesn’t tell the whole story. There is also untapped opportunity.

Much of the current market is split between those that are chasing revenue and those that are chasing profit. But what’s more important?

For an independent it’s definitely the latter. It doesn’t matter how many patients you see or spectacles you dispense if your practice isn’t generating optimum income.

That’s why it frustrates me to see independent optometry practices trying to beat corporate optometry at their own game, by for example, reducing prices to attract more patients.

What does that mean if you break it down?

Let’s say your practice is operating on a 60% gross profit margin. If you decrease your price by 10% you have to cover that with 20% extra volume – just to break even. That means you have to improve your volume by more than 20% and in most instances that doesn’t happen.

"The best way to create value is through knowledge of the product and investing in technology"

You can change your fixed costs, your can reduce your variable costs, you can try to increase your volume, but the one change that will really drive your profit is deciding to give the patient better value.

The more value you create the higher you can justify your average selling price. The bigger the increase, then the better outcome you’re going to have and the more it drives your profit.

From my experience, the best way to create value is through knowledge of the product and investing in technology. Improving product mix is the fastest way to increase value for the patient and the practice. Luckily, this is where independent optometrists have the advantage.

Independents have the benefit of being nimble and agile when it comes to making decisions about their practice. Corporates on the other hand, are large and cumbersome – they have to simplify everything to be able to duplicate it across a large number of practices.

Because there is less of an emphasis on volume and price, independent optometrists have the opportunity to really invest in training and knowledge to become true experts. After all, that training, knowledge and skill is something that can be translated into value.

Think about it – when you have the patient in the chair in front of you for 30 minutes. That’s a minimum 30-minute one-on-one experience of your business. Most patients are in the practice for a minimum of one hour, which is something almost no other industry or profession has access to.

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This is when value is created. Independent practices are well placed to be effective trouble-shooters and create tailored solutions; often where others have failed or where scale and business model has lost its personal touch.

In this time you can demonstrate your knowledge and expertise to your patient. You’ll also reinforce that they’re getting the best value money can buy, and have a greater chance of creating a lasting bond and vocal advocate who will do your advertising for you.

The same applies to technology. Independent practices should always have the best technology first, because it has to be trade proven and simplified before the corporates can introduce it.

Technology can be used to engage the patient, not just once but multiple times.

If you use a piece of technology and you take measurements on a patient, that measurement can be used as a benchmark for all future visits. You’re tracking the patient’s medical history over time and that’s one of the benefits of being first with new equipment, new technology and new information.

Once you engage the patient with the best, it’s very unlikely that they will trade back for something of less value, it rarely happens.

The underlying message is the consumer is not making rational decisions about price, about competitors, about features of the product. The consumer is making a judgement about the value that you’re offering, about your complete service, and whether or not it’s worth it to them.

There’s room in every market for a ‘premium’ segment – so why not make your practice the Aston Martin of optometry turbocharge your profits.


Name: Tim McCann
Organisation: Rodenstock Australia
Position: General manager
Location: Sydney
Years in the profession: 13

 

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