Anytime I look at the internet I see people querying abt what to charge for hearing aids and services. Many people are worried, and I understand that with the increasing numbers of TPAs out there trying to dictate what we charge but fees should be based on the cost of doing business. I can’t tell you what to charge because I don’t know what it costs to run your business.
So what’s the most effective pricing structure? Many of you may have heard me talk about the Predictably Irrational Pricing Structure that is based on Dan Ariely’s book. We’ve used the pricing structure for several years but I will be honest and say that we have deviated and that change has negatively affected our ASP. So, in 2018, we are returning to what works – Predictably Irrational Pricing also known as Consumer Advantage Pricing.
Here’s how Consumer Advantage Pricing works. When you have two options, people are forced to make a decision between the two. Consumers want better products, but don’t want to spend more money. So what do the majority of people do? They generally spend less money.
Consumer Advantage Pricing involves adding a third option that is priced exactly the same as the more expensive option. Why do smart people make irrational decisions every day? It’s often because of the way information is presented. Research has shown that consumers change their preference between two options when also presented with a third option.
Decision making for humans is difficult so why not make it easier? Sometimes we give too many choices to our patients and they don’t know which one to pursue. By providing a method of comparison, we are more likely to increase the number of patients who will make a decision on the spot, rather than having to go home and think about it. IN ORDER FOR THIS PRICING STRATEGY TO WORK, YOU MUST OFFER THREE CHOICES – NO MORE, NO LESS!
I have always employed a Good Better Besttype of technology presentation with prices equally spaced apart.
While some patients chose the best technology, it was most typical for patients to choose the middle option. My ASP didn’t increase for twenty years until we started using the Consumer Advantage type of pricing.
I know some people reading this article are saying, “This will never work for my practice. My patients or my town won’t support such a concept”. I have heard it all before but I have yet to talk to someone who implemented this strategy that hasn’t found it beneficial, even people in other parts of the world.
The objection that I have found to be the most relevant is explaining to patients why the better and the best technologies have the same price. Believe it or not, this isn’t a comment that we hear often. Patients just seem to be satisfied that they can obtain “more” for “less”. When someone does inquire as to why the better and best products are the same price, we simply respond, “Since our results indicate that patients are more satisfied and perform the best with the Best Technology, I negotiated a better price with our manufacturers to make it possible for more patients to get what they need.”
What do you have to lose? Give the Consumer Advantage Pricing a chance. If you want to make this work Raise the price of your Better technology to be EXACTLY THE SAME AS THE BEST, and then add something Free to it like an additional year warranty. So, let me stress these aspects of this pricing structure if you want to make it work –
- Only offer Three prices for your Hearing Enhancement Plan
- Raise the price of your BETTER technology and Worry Free Service Plan so it is exactly the SAME as the BEST Technology and Worry Free Service Plan and then add something extra Free to the Best
- Don’t lower the price of the Best Plan. Increase the price for the Better plan
For instance, perhaps the Hearing Enhancement Plan for Good Technology and Worry Free Service is $4590 and then the Hearing Enhancement Plan for Better AND Best Technology and Worry Free Service is $5990 but the Best Plan included an additional year warranty FREE. (This is just an example and the actual prices are not based on anything concrete)
This type of pricing structure WILL raise your ASP if you Do It. Want to know more, read Dan Ariely’s book Predictably Irrational and if you have other questions, contact me at DrGyl.com. Don’t get stuck in a rut. Take a chance and Try Something New in 2018!!