The entire dental field is experiencing a major upheaval and the economic climate has clearly had an impact on many laboratories and their customers. So how is a laboratory to thrive in these times? Here's what we know doesn't work: discounting your prices!
Discounting your price impacts your brand. Your brand is your identity, distinguishing you from all the other options available. More than just a logo, a brand characterizes your business, encompassing what you do and how you do it. Your brand is multi-dimensional, highlighting the value you can provide your dentist/clients. Focusing only on price is a single-dimension approach; it focuses on a feature, which is not a true benefit highlighting your uniqueness. Everything you do must reinforce your brand.
"The problem with discounts is that customers don't see the price drop the same way you do. As a business person, you clearly understand you are temporarily cutting into your own profit to give a little more to the customer and keep his business," writes Paul Williams in his blog, Discounting Prices Discounts Your Brand (www.mpdailyfix.com).
"As customers, we see it differently. The moment you discount, it re-calibrates the perceived value of your products/services. Selling something for $200 today and discounting for $150 tells the customer you are making more money on the $200 version...and you're still making money on the $150 version...so the $200 version was overpriced. The new perceived value is $150. As a consumer buying something, we get this; as a marketer selling something, we tend to ignore this fact."
Another downside to discounting: it's just as easy for other laboratories to lower their price points and, for most labs, you'll never be the lowest priced. This short-term tactic is not the answer.
Differentiation vs. Discounting: Most Fortune 500 companies realize that to differentiate themselves in the marketplace, they have to stay true to their core business and, at the same time, enhance their offerings to create more value for their customers.
The pursuit of technical excellence is the main focus of most laboratories and the laboratory industry should take great pride in the quality and consistency of the products it produces. Unfortunately, the other side of that coin is that most dentists can't tell the difference between one high quality lab's restoration and another high quality lab's restoration. For instance if, after the first day of exhibits at a dental convention, you took all the various laboratory samples and redistributed them to the other labs' exhibits, there would be little chance any dentist would know the difference the next day. For related coverage, see LMT's Crown Experiment 2008: Perception is the ONLY Reality:.
One way to differentiate your laboratory is the perceived quality approach. It's based on the opinions and experiences of your customers such as how your telephone is answered, the packaging of your restorations, the skills of your customer service representatives and, most importantly in this economy, the resources your laboratory offers to help your customers' practices grow.
Can Fortune 500 strategies work for your laboratory? Yes, if tuned into your core business. Your customer's perception of quality relative to price determines value. The higher the value, the more likely you are to retain and attract customers. This important concept dramatically influences a dentist's decision to purchase and repurchase from your laboratory.
To be successful in today's competitive environment, a laboratory must offer state-of-the-art services consistent with the technical excellence of its restorations. Together, the entire package creates a higher value to current and potential dentist-clients. "Move away from focusing on the competencies required to manufacture and sell product; [instead, move toward] a focus on the much broader set of competencies related to the design and functioning of a value-creating system," writes Henry Mintzberg, co-author of Reframing Business: When The Map Changes The Landscape.
Increasing Your Value: Like laboratories, dentists are striving to keep their current customers active and attract new customers. Laboratories need to have a bigger vision than just a finely crafted restoration; they need to find ways to help their dentist-clients expand their practices. By becoming a resource for the dentist's success, the laboratory lessens the focus on price and raises its value to the success of its clients' overall business.
Here are five ways to maximize your perceived value and become an indispensable business partner:
Co-Sponsor Continuing Education Consider both refresher programs on well-established technical procedures as well as cutting-edge topics such as oral systemic approaches to hygiene, nutrition and in-office diabetes testing. The "wellness" trend is gaining great momentum, and your customers need to be at the forefront. Your laboratory may not have a product or service to "sell" in these programs but the goal is to increase your dentist-clients' business by helping them retain their current patients and attract new patients thus growing your business.
However, don't limit your programs to just clinical ones; marketing and management topics such as communications/treatment acceptance, how to use patient financing as a marketing tool and web page design will also help dentists grow their practices.
Study Clubs Start your own ongoing study club offering a curriculum of clinical and business topics. Consider working with one of the well-respected specialists in town to act as a director. This creates a win-win-win situation: the education provided by the study club can help grow the GP's practice; the GP can generate referrals to your laboratory; and the specialist can benefit from referrals from the GP.
Cooperative Consumer Marketing Programs This is called strategic alliance marketing and many of the major manufacturers are already doing this; they market directly to the public and refer interested patients to their clients using their products and services. It can be as simple as placing an ad about dental implants with an 800 number to collect names and refer your dentists or a more sophisticated approach such as co-sponsoring evening events to educate the public about implants, sleep apnea, wellness or cosmetic dentistry.
Value and Rewards Programs There are a variety of ways to offer these programs, such as offering reduced tuition to educational programs (but no discounts on restoration fees) or additional products or services based on customer loyalty and spending. These programs can all be self administered and easy to run.
On the other hand, there are commercially available programs like Loyal Lab Rewards (www.loyallabrewards.com) and Travelflo (www.travelflo.com) that can cost effectively offer more attributes than an in-house program. (Here's a great marketing tip to pass onto your customers: the Loyal Patient Rewards program, www.loyalpatientrewards.com, can help them re-activate patients and create incentives to get the patient to move ahead with additional care.)
Electronic Newsletters with an Emphasis on Marketing Systems like Constant Contact® are easy to use and, in this economy, finding a freelance copy writer is not difficult. Keep your newsletters short and to the point; sending one e-newsletter per month is ideal. Here are several well-known websites that offer marketing advice you can use as a resource: www.goldenproportions.com, www.curtisgroup.com and www.practicebuilders.com. (Another marketing tip for your dentist-clients: MD Referrals--www.MDReferrals.net--is a complete system to help GPs gain referrals from physicians.)
The Z Factor
When growing any business and looking for ways to differentiate the laboratory, start with the strategy that has the highest potential for success and lowest risk. The Z factor graphic at top right illustrates the progression of increasingly risky approaches to expanding your business:
- The easiest and most cost-effective way is to start with your established customers and offer your current services/products. Your confidence in your existing services and products is naturally communicated to your customers and they know you and trust you, so they're most likely to continue to do business with you.
- It's slightly riskier to offer new services/products to established customers. While you have an established relationship, you might not be as confident in your newly acquired skills, which may impact your presentation and their acceptance. However, this is still a relatively safe approach to growth.
- The next level is offering current services/products to new customers. You're confident in your skills but lack a relationship, so there may be a question of trust, which plays heavily into the perception of quality. But it's a more difficult approach and, in many cases, you have to overcome the already established relationship the dentist has with his current lab—not always an easy task.
Offering new services and products to new customers is the highest risk approach because it can be very challenging to establish rapport with these new customers and communicate your new expertise. Unfortunately, this is where most small businesses mistakenly begin. Many labs attempt this approach with an emphasis and substantial investment in technology; keep in mind that technology alone seldom represents a long-term competitive advantage.