Discussing price with clients

March 21, 2012

In today’s economy businesses of all types in many industries are being squeezed by increased costs and their inability or reluctance to pass the costs along via increased prices. No one likes higher prices. Customers resist and higher prices make selling more volume that much more difficult. The situation really heats up when not only can the business not pass along price increases, but the business is pressured for price reductions.

In today’s economy businesses of all types in many industries are being squeezed by increased costs and their inability or reluctance to pass the costs along via increased prices. No one likes higher prices. Customers resist and higher prices make selling more volume that much more difficult. The situation really heats up when not only can the business not pass along price increases, but the business is pressured for price reductions.

Many lab owners and managers are getting calls from dentists who want to discuss prices. Unfortunately, not many are calling to say the prices are too low. Sometimes subtly and sometimes bluntly, they are looking for a better price than they have been paying. Sometimes implied and sometimes directly-there is the threat of taking their business elsewhere. It’s usually a stressful conversation and how you handle it can make a big difference in the outcome.

Keep your Cool and Listen

This is a very good time to keep calm and keep your emotions in check. Let the client talk and explain what is going on. He or she is probably experiencing the same pressures on their business as you are, so that gives you some common ground.

Ask questions that convey your concern for their problem, and demonstrate a willingness to understand the situation.
You also can point out the similar problems you both have. Sometimes, what the client really wants to do is vent.

Finally, ask for some time to study the situation and develop some possible solutions.

Evaluate

This is where your business skills come in. You need to evaluate several things:

The Client: How much are they worth to you? What volume do they do? What products do they buy? How is their payment history and remake level? What is their potential?

The goal here is to establish an idea of their real value because that will help you determine how much time, effort and money you should spend to respond.

Your Products: You need to have a handle on the cost to produce the various products the particular client currently buys (or could buy) from your lab. The productivity of your lab can play a big part in the prices you can charge. You need to know how to calculate your costs before you can make a rational judgment about what to charge.

At this point you can formulate some alternative courses of action. Maybe this particular client is just not worth pursuing and your response is a phone call or visit to tell him or her that while you value their business, you just don’t have anything you can do to help them.

Negotiate

Other options might include a price concession if the client warrants it and your cost structure allows it. The key here, however, is to negotiate. Don’t make a concession without getting something in return.

For example, you could offer a lower price in return for more volume:

“Doctor, I can offer you a lower price on PFMs if you can send more crowns or send your denture work to us.”

They get a better price, you gain volume and a possible reduction in delivery costs because there probably will be more cases per pick up. Or consider this…

“Doctor, I can offer a lower price on our dentures if we can have an extra three days of lab time or if you can pay for the case on delivery.”

These types of concessions from the doctor can help reduce your costs, thus maintaining your profitability in spite of a lower selling price.

Use your technical knowledge to offer alternative products that will lower the costs without lowering your margin. All Ceramic in place of a PFM for example. Dentures with less expensive teeth may be a possibility. Understanding production costs and pricing appropriately will allow you to offer a product that costs you less to make at a lower cost to the dentist, thus creating a win-win situation.

The Bottom Line – Communication is Key

Throughout this process you need to point out to your clients the benefits they enjoy in doing business with you.

Are you always on time with delivering cases? Do your cases fit without adjustments, saving chair time for the doctor? Do you help him as a resource on materials and techniques or handle rush cases? Those things add extra value to your product and service, so make sure to promote them.

Lastly, if it’s an account you want to keep and grow, stay in touch even if they leave you. It’s a common occurrence for clients to return when the lower priced lab does not meet all their expectations. Make it easy and comfortable for them to return.