Price vs value: Why should I care what the difference is?
So many of our choices are driven by price but rarely do we think about value.
For example, price is easy to compare. In business you are always taught to reduce costs which means getting everything at the cheapest price is best right?
The subtle difference is it’s about getting the greatest value at the cheapest price.
Four examples are very relevant to therapists:
1. Valuing your time
2. Cash vs card
3. How to get paid for no shows
4. Paying money to help meet your goals
Valuing Your Time
As therapists become successful it is often the case that the time they have available to treat patients is less than the number of patients that want to see them. Most therapists do not factor the value into their pricing. For example, with our own Mike James, trying to juggle Sports Injury Fix whilst also treating patients has proved challenging. He felt a duty to maintain prices at a reasonable level for existing patients, was not keen to take on any more as at that price it wasn’t worth his time yet needs to treat a certain number to retain his licence.
After a value-based pricing session he has put a limited number of slots available for new patients but priced at a level that is far higher than previously. That way if a patient really wants to see him and is happy to pay that amount they are happy that they are getting a session with Mike but it is also priced at a level that Mike does not resent the added workload of travelling to see that patient.
Newer therapists face the challenge of pricing at a level to win business based on price or to price at a higher level that could be associated with higher value. For example, there are multiple studies about wine being marked more favourably when told it is more expensive. Primarily though it’s about choosing a strategy that is authentic to you and you feel most comfortable with. People buy people.
Cash vs Card
Many therapists still only accept cash because they don’t have to pay any card fees thus that’s the cheapest and best option isn’t it?
We are moving to a cashless society. People carry less cash and getting it out is a hassle. These are two recent news reports that highlight this BBC Report 1 and BBC Report 2.
People want to be able to pay in the simplest way, i.e. when they book so they then don’t need to worry about payment.
Average card payments are 2.4% so on the face of it then if just one in every 41 people goes to see someone else they can prepay with or pay by card rather than seeing you then that’s any savings wiped out.
That’s based on the price of £50 but actually the typical lifetime value of a patient is actually over the £1,000 mark*. This would make it, if 1 in 833 patients didn’t use you because of a cash only policy you’re losing money. That also doesn’t take into account the average 0.5% charges to pay cash into the bank plus the physical time to do so.
How to get paid for no shows
The typical therapist misses out on 9% income through no shows and last-minute cancellations.
Many therapists think it’s ok because it gives them a break during the day and patients often rebook later in the week. In value terms that is a session that could have been sold elsewhere, plus the time organising, chasing and reorganising. Just one a week adds up to £2,600 a year.
If there’s a solution that’s £9.99 a month and one of the benefits is to get paid for no shows then focusing on price means you view that as £119.88 a year. Focusing on value means you look at it as for a spend of 0.04% of average income I can increase my income by 9%. All it takes is to stop, or get paid for 3 no shows over the course of the year and you’ve earned money from spending money.
Paying money to meet your goals
Continued Professional Development (CPD) is a classic case of this. In price terms, paying £200 for a day or two of CPD feels expensive. In value terms if it improves you as a therapist, makes you a better clinician, or stops you using out of date practices, then this will lead to better patient outcomes, satisfaction, higher patient retention and greater numbers of referrals i.e. it will lead to a greater pay off than the initial outlay.
Have you thought about what this means for your business?
Paying money doesn’t guarantee value: you get out what you put in.
Buying a diet cook book or a gym subscription doesn’t make you thin or fit. Creating a dating profile and just putting ‘29 year old man’ as the description is unlikely to produce results. So why is it for therapists that when you look at profiles of therapists the number that just say ‘massage therapist’, MSK Physio, Sports Therapist etc is incredibly high?
Indeed, on SIF Health we’ve had a large number of therapists who have created a poorly written basic profile. Amazingly they’re getting some traffic to their profile but it’s no surprise that none of that is converting. Asked what their opinion of SIF Health is and they say “I’ve not had any clients, I’ve not looked at how else it could help me and thus I don’t think it’s helpful to my business”.
There is a small amount of effort you need to put in to things in order to get value out.
Focus on value not price. Take the time to think about what you are doing and, when money is involved, think about the value of that purchase, taking the time to maximise the value.
*The lifetime value of a patient is to you is also referred to as the Lifetime Customer Value. For example if the average Patient books 5 sessions a year at £50 a time with you and remains a patient for 5 years that means their value to you is £1250. This does not include any referrals they generate from recommending you for being great and thus some argue the value is actually higher.