How much do I charge?
The price you charge for your service is one of the most important business decisions you will make. Setting a price that is too high or too low will - at best - limit your business growth. At worst, it could cause serious problems for your sales and cash flow.
If you're starting your physiotherapy practice, carefully consider your pricing strategy before you start. Established practices can improve their profitability through regular pricing reviews.
When setting your prices you must make sure that the price you set will allow your business to be profitable. You must also take note of where your product or service stands when compared with your competition.
The difference between cost and value
Knowing the difference between cost and value can increase profitability:
- the cost of your product or service is the amount you spend to produce it
- the price is your financial reward for providing the product or service
- the value is what your customer believes the product or service is worth to them
For example, the cost for a therapist to give someone an assessment and a personal exercise programme at a patient's home may be $2 for travel, resistive band costing $2 and an hour's work at $10. However, the value of the service to the patient - who now has been given the knowledge as to what is required to improve their health - is far greater than the $14 cost, so the therapist may decide to charge a total of $50.
How to build a pricing strategy
It's important to find out what your competitors offer and what they charge. If you phone the physiotherapists in your local area and ask them for a quote, you can use this information as a framework.
It's probably unwise to set your prices too much higher or lower without a good reason. If you price too low, you will just be throwing away profit. If you price too high, you will lose customers, unless you can offer them something they can't get elsewhere.
The perception of your product or service is also important. In many markets, a high price contributes to the perception of your product as being of premium value. This might encourage patients to use you - or it might deter price-conscious patients.
It can be useful to charge different prices to different customers, eg to patients who require regular treatment, as opposed to patients you are just seeing the once for some advice. This is because it is often the first assessment that will require the most work (arranging the appointment, filling in a patient card, producing an invoice, establishing an exercise programme).
Raising or lowering prices
There will be times when you need to change your prices. But before you do, you should analyse the impact on your profitability of any proposed price change.
There are two key questions you will need to answer:
- What effect will the price change have on the volume of sales?
- What will the effect be on the profit per sale?
Increasing prices can improve your profitability even though your sales volume may drop.
If you are increasing your prices, always explain to your customers why you are doing it. You can use the price change as an opportunity to re-emphasise the benefits you offer. A good explanation can also strengthen your relationship with a customer.
You should never take the decision to lower prices lightly. Low prices often go hand-in-hand with poor-quality service - is this the image you want to create for your practice?
Concentrate on building profits rather than cutting prices to build up sales. In most circumstances, your customers decide to buy from you because of the benefits you offer, along with your price. It is rare for the decision to be made on price alone.
Sell the benefits not the features
Patients don't buy on price alone they want to know what you can do for them, not just how much it costs. They want value for money and they may be prepared to pay more for your services if they gain significant benefits or advantages.
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