The secret to increasing your practice value
Keep the good dental patients your practice already has. One way to do that is through membership plans. This keeps patients engaged and loyal to your practice, and the income coming in.
A fundamental truth of all business is that it’s cheaper and more profitable to market to existing customers than to find new ones. In dentistry that message has somehow been forgotten. Too many practice owners believe increased revenue and profits rest solely with the next new patient.
In reality, most practices have an undervalued or untapped reserve of uninsured existing patients who, if reengaged, represent the most efficient, low-cost opportunity to build the practice. This is because these patients already know the practice, brand, and staff. The practice has already paid to acquire them and has spent time building relationships. As existing patients, they require none of the marketing or acquisition costs associated with targeting and convincing new patients to try the practice.
So, the key to growing your practice is not acquiring new patients but getting more value from your existing patients, especially those who are uninsured. However, this is not as easy as it sounds.
The challenge to activating your uninsured patients is to overcome their resistance to seeking care. Ironically, this has much less to do with the fear of treatment and much more to do with the fear of costs. Patients often have little or no way of knowing the cost of a procedure before an appointment. In fact, a recent American Dental Association survey of people who hadn’t visited a dentist in the past 12 months found that 56% said their main deterrent to seeking care was fear of cost. Only 29% reported that fear of treatment prevented them from seeing a dentist.1
That’s where membership plans come into play. According to the 2016 Finch Brands Consumer Research Report, uninsured patients want more care and are interested in a simple, affordable, transparent dental care plan.2 Membership plans create a sticky, ongoing relationship and enable patients to attain good oral health. The “club effect” of membership plans increases patient visits and treatment compliance, and the transparency of the plans takes the guesswork out of the cost of dental care and builds trust and loyalty among member patients.
Membership plans create a sticky, ongoing relationship and enable patients to attain good oral health.
Here’s where it gets really interesting. This loyalty unlocks previously hidden revenue, the kind that comes with no additional acquisition costs. Our research, based on real dental practice data and the May 2016American Dental Association Health Policy Institute report: An Analysis of Dental Spending Among Adults with Private Dental Benefits, shows membership plan patients accept 55% more treatment than uninsured patients and generate 54% more annual revenue due to the guaranteed subscription and higher treatment acceptance.3
There’s also an equally important story to membership plans. They can increase the value of a practice significantly. It’s doubtful whether patients in the past would have been open to subscription-based dentistry. Now, people’s behavior has been conditioned by a range of products and services provided to them according to predetermined monthly fees. Blue Apron has done it with meals, Netflix with movies, and Peloton, the online spinning and fitness company, is doing it with working out. In fact, Peloton’s plan is to charge every consumer in America a monthly fee to receive fitness equipment they can use to take online fitness classes. This premise has spiked Peloton’s value to more than $1 billion. The analogy here is clear. Just as consumers will pay monthly fees to stay in shape, so too will they pay monthly fees for good oral health.
There is real long-term value in that equation. Recurring revenue is the holy grail of modern business. It provides predictability, eliminates risk, and evens out cash flow. According toThe Automatic Customer by John Warrillow, investors and buyers pay anywhere from 200% to 400% more for subscription-based businesses than for transactional businesses.4
This translates into real value for dentists when it comes time to retire or tap into the equity they’ve created over a lifetime of building their practices. It goes without saying that a practice with recurring, dependable revenue is more valuable than one based on one-off procedures or acquiring new patients.
All of this spells good news for dentists, particularly in the current environment, as operational expenses increase and revenue per practice stagnates.5 It’s a two-way squeeze. The only exit is membership plans and the value they bring to the uninsured and the practices that understand how to use them and transform them into a growth engine for their practices.
1. American Dental Association Health Policy Institute. Oral Health and Well-Being in the United States.https://www.ada.org/en/science-research/health-policy-institute/oral-health-and-well-being. Published 2017. Accessed February 26, 2018.
2. Finch Brands 2016 Consumer Research Report [internal research]. Published 2016. Accessed February 28, 2018.
3. Yarbrough C, Vujicic M, Aravamudhan K, Blatz A. American Dental Association Health Policy Institute. An Analysis of Dental Spending Among Adults with Private Dental Benefits.http://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIBrief_0516_1.pdf. Accessed February 28, 2018.
4. Warrillow J. The Automatic Customer: Creating a Subscription Business in Any Industry. New York, NY: Penguin Publishing Group; 2015.
5. American Dental Association Health Policy Institute. Dental Earnings and Busyness in the U.S.https://www.ada.org/~/media/ADA/Science%20and%20Research/HPI/Files/HPIgraphic_1117_1.pdf?la=en2014-2015. Published 2016. Accessed February 26, 2018.
Dave Monahan is the CEO of Kleer, an advanced cloud-based platform that enables dentists to easily design and manage their own membership plans and offer them directly to their patients. Kleer is turnkey and free to implement. To learn more about Kleer’s innovative platform, call (844) YO-KLEER.