The importance of your clinic’s pricing structure

Alan S. Adamsexplains how to price your clinic’s services to convert more customers 

As a clinic owner, there are many differentials which are going to impact the profit made by your business. Whether it’s your sales process, regular outgoings, or staff salaries, regularly reviewing your revenue and costs is a standard part of running any company.

But how often do you consider your pricing structure? When was the last time your prices were adjusted, and have you thought about how they are displayed on your website or within the clinic itself? As a business coach, I understand that getting your pricing structure right is integral to your ongoing success.

If you take things back to basics and look at the core element of running any clinic, it’s supplying a range of treatments in return for payment. By attracting more clients, you’ll increase the number of bookings and revenue will rise. Your job as a business owner is to assign a value to each of the services you offer — and this can be a delicate balancing act.

Too low a price and you risk looking unprofessional, your profit margin narrows, and you undervalue yourself as a company and as a respected professional. Too high and potential clients may turn away in favour of a more affordable competitor. You’ll have considered your outgoings (rent and utilities, staff salaries, tax etc.), the standard industry price for that treatment, the time each appointment will take, and various other factors when setting that price.

But have you considered customer psychology? Purchasing behaviour is influenced not only by the value attached to a product or service but also by the way this value is presented to us as the consumer. And so, the process of setting a pricing structure is much more nuanced than simply attaching a price to a treatment and then focusing on how many treatments you can carry out, and how many new and returning customers are coming through the door.

All of the processes you use to encourage clients to patronise your clinic rather than a competitors are a vital part of running your company. But reviewing your pricing structure regularly, and employing gentle and ethical persuasion techniques which have been researched and proven to work by a raft of esteemed experts is equally as important.

There are many different strategies that can prove beneficial to your profits and bolster your clinic to the next level, but to begin with here are three considerations to focus on: the number of choices your potential clients have, the order in which those choices are presented, and approaching interactions with clients hesitant to commit to a higher-value treatment.

How many choices?

Deciding how many choices to give customers within each specialised sub-category of treatments you offer can be tricky. You don’t want to overwhelm them with a list as long as their arm, but equally too few options could lead potential customers to look elsewhere for a better variety. 

We know the brain responds to the number three — for example, a study showed students performed better and took less time to complete a multiple-choice test when given three potential answers rather than four or five¹. We also know too many choices can demotivate a person — shoppers were ten times less likely to buy jam when they were given 24 different options to try compared to six². In their review of the study, Iyengar and Lepper concluded previous research had shown the choice between relatively limited alternatives was better than no choice at all, and humans were not wired to desire the greatest amount of choices possible.

They set out to discover whether having a ‘limited and more manageable set of choices may be more intrinsically motivating than having an overly extensive set of choices’, and through the Jam Experiment and two others concluded that extensive choice led to less satisfaction and motivation among participants.

So, in narrowing down your customers’ choices to a level comfortable for them and their decision-making processes, how low should you go? Again, there’s lots of research on the subject and there’s a good argument to avoid only presenting two options — because to the human minds two almost suggests there is a ‘right’ answer and a ‘wrong’ answer.

The argument for a three-tier pricing structure is perhaps most succinctly described by distinguished author and therapist Virginia Satir: ‘To have one choice is no choice, to have two choices is a dilemma, and to have three choices offers new possibilities.’3 Of course, if your clinic has various aesthetics specialisms, this doesn’t mean only offering three treatments overall, but narrowing down to three pricing levels within each specialism could tap into the psychology of your target customer.

A third option can also make the middle option seem even more attractive to a potential client. This happened in the case of Williams-Sonoma who were struggling to sell their most expensive bread maker, priced at $275; in response, they introduced an even more expensive option.

That might seem a little absurd — but their tactic worked. The slightly better model priced at $415 was essentially used as a decoy which made a cost of only $275 look really attractive to those searching for a new bread maker. Sales of the $275 model went through the roof. The model hadn’t changed, but customer perception had⁴.

Ordering the choices

If your prices are displayed on your website, within your clinic, on leaflets or anywhere else, you’ll have chosen how to order the treatments in that list. It could be you opted to go from A to Z, from lowest priced to highest, or even a totally random order. But did you know, you could actually gently influence clients to pick higher-value treatments simply by ordering that list differently? A minor change, but one that many esteemed researchers agree will make a difference.

Studies into the influence of ‘price presentation order’ reap results that consistently show customers will spend more when the price descends from highest to lowest, rather than the other way round⁵. One of the reasons is a bias which psychologists have studied known as ‘price anchoring’.

Price anchoring⁶ sees individuals rely heavily on the first piece of information they are given. If they read the first treatment on a list is £500 then see the second is £400, then the second doesn’t seem as expensive. But if the first was £200 and the second was £400, this changes the perception of the affordability of the second.

Essentially, we use the first piece of information we are given as the basis for our value judgements on any subsequent information. Of course, with aesthetics it’s not as easy as placing a moderately-priced car next to a top-of-the-range model — but you can absolutely influence how motivated clients are to spend their hard-earned money by thinking carefully about the order in which you present pricing information to them.

Hesitant customers

One of the best ways to approach conversations with would-be customers who might be hesitant about booking a certain treatment is to think about value rather than price.

The price of a product or service resounds in the client’s mind as a loss — they will effectively be losing that amount of money. By turning the conversation round to the value or worth of the treatment you’re offering — and its associated aesthetic benefits, you’re instead focusing on what they stand to gain.

This is also where price anchoring comes into its own: if you have a series of treatment bundles, then your premium or most expensive option should be the one you talk about first. By contrast, when you talk about a less expensive choice, it will sound preferably simply because of its lower cost — even though naturally the second option would include fewer treatments.

Offering a gift before the sales process (or giving an exclusive discount to someone who has declined to purchase at full price) can enact the principle of reciprocity. Coined by Professor Robert Cialdini as part of his globally-renowned work on ethical persuasion tactics, this principle states by essentially ‘doing a favour’ for or giving a gift to a client, they will feel indebted to you and thus more likely to make a purchase⁷.

It doesn’t have to be a huge gift, giving a free sample of a product you sell within your clinic or offering a ‘try before you buy’ taster of a treatment where possible can trigger the customer’s desire to reciprocate and banish the hesitancy they were previously displaying.

Conclusion

When setting your pricing structure, tapping into customer psychology is extremely important, but it’s also worth considering your own psychology as a business owner and how this impacts the decisions you make around the value of your treatments and time.

If you’re the kind of person who is motivated to steer away from loss rather than towards gain, then pricing fear could be holding you back from adjusting the costs of the services you offer. And comparisons between yourself and competitors can also impact the value you place on the treatments you provide.

Being aware of your own and consumers’ preferences, personalities, motivations, and reservations gives you a distinct advantage when it comes to setting your pricing structure, and deciding how best to present the costs associated with your clinic’s treatments to consumers.

Rather than simply assigning a price to each offering, it’s about assigning a value and then presenting this to the client in a way that helps them understand that value, and what they stand to gain, rather than focusing on the ‘loss’ of payment. 

It’s a tricky balance but one that, implemented correctly, can reap huge rewards in terms of converting an individual’s interest in your clinic into you gaining a new client — and then, of course, the work begins to ensure their loyalty and continued custom.

References

1. Vegada B, Shukla A, Khilnani A, Charan J, Desai C. Comparison between three option, four option and five option multiple choice question tests for quality parameters: A randomized study. Indian J Pharmacol. 2016;48(5):571-575. doi:10.4103/0253-7613.190757. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5051253/ [Last accessed 22/10/2020]
2. Iyengar, Sheena & Lepper, Mark. (2001). When Choice is Demotivating: Can One Desire Too Much of a Good Thing?. Journal of personality and social psychology. 79. 995-1006. 10.1037/0022-3514.79.6.995. Available at: https://faculty.washington.edu/jdb/345/345%20Articles/Iyengar%20%26%20Lepper%20(2000).pdf [Last accessed 22/10/2020]
3. Satir, V. (1991). The Satir model: Family therapy and beyond. Palo Alto, Calif: Science and Behavior Books.
4. Wall Street Journal. Paul Lee: The Williams-Sonoma Bread Maker: A Case Study. Dow Jones & Company, Inc, 2020. Available at: https://blogs.wsj.com/accelerators/2013/04/10/paul-lee-the-williams-sonoma-bread-maker-a-case-study/ [Last accessed 22/10/2020]
5. Suk, Kwanho & Jiheon, Lee & LICHTENSTEIN, DONALD. (2012). The Influence of Price Presentation Order on Consumer Choice. Journal of Marketing Research. 49. 708-717. 10.2307/41714459. Available at: https://www.researchgate.net/publication/262087911_The_Influence_of_Price_Presentation_Order_on_Consumer_Choice [Last accessed 22/10/2020]
6. Shamvir Singh. Anchoring should be a mainstay of pricing research.  Research Live, 2018. Available at: https://www.research-live.com/article/opinion/anchoring-should-be-a-mainstay-of-pricing-research/id/5041603 [Last accessed 22/10/2020]
7. Influence at Work. Principles of Persuasion. Available at: https://www.influenceatwork.com/principles-of-persuasion/#reciprocity [Last accessed 22/10/2020]