Understanding and Serving the Three Types of Orthodontic Buyers
According to the AAO website, “It is estimated that between 50 and 75% of the population could benefit from orthodontic treatment.” Now for the reality — traditionally the profession has treated about 2% of the population in any given year. During a period of time when the US population of teenagers has dropped by 10% from just three years ago and is projected to continue to be below previous years’ numbers for at least five more years, many orthodontists are asking – how do we get the other 48% of the population to start treatment?
I assume there are two population sets that make up those that ‘could benefit from orthodontic treatment’ but don’t get treated: 1) those who don’t understand how orthodontics could help them, and 2) those who don’t think they can afford treatment.
In some way, the “evolution” of orthodontists’ financial policies is to blame for the many patients and/or parents who believe they can’t afford treatment. Let me explain.
In the 1980s, orthodontics began to move from a “pay per visit” economic model to a “pay in full/no interest” model. Early on, most doctors remembered the earlier model and were perfectly happy to receive payments over time. As new doctors entered the profession, historical financial practices faded from the professional memory and more and more doctors began to feel like they were entitled to full payment, or at least to a generous down payment.
Before I continue, let me make clear that I am of the opinion that doctors should ALWAYS take payment as soon as their patients are willing to pay (the ramifications of this and arguments for and against will be saved for another paper).
Now many practices feel that their doctor is ‘generous’ in offering a no-interest payment option. This is a departure from the early professional opinion that was expressed something like: “I can’t believe these patients are willing to pay me before I do the work – this is great!”
When doctors treat just 2% of the population each year, most of the parents/patients they see are in the highest tax brackets in the country. In other words, those who elect to have orthodontic treatment are those who can afford it – due to plenty of discretionary income or to great insurance/flex spending programs from their employer. As the profession pushes further and further into the population base, doctors will need to consider how the middle class makes high-ticket purchases.
To understand the general population, doctors – especially orthodontists (who have always been high achievers)- need to remember one fact: you are NOT normal.
I remember how shocked I was to learn (in the early 90s) that more than 60% of the new cars that left the show room floor in our small town in Idaho Falls, ID, were leased. I’ve since learned that only 18% to 40% of cars are purchased on a lease (in 2009, CNW Marketing Research reported that 70.5% of new cars were financed, 11% purchased with cash and 18.5% were purchased on lease). I had always learned that owning was better than renting – an auto lease didn’t even cross my mind as an option at that point in my life.
I’ve since come to realize that many of America doesn’t buy based on the total price or even the price compared to their total income. Many Americans have decided that they have a certain amount to spend every month (some are learning the hard way that employment affects that monthly income). When making a purchase decision, they add up all of the money they make, subtract all the commitments they have to pay for other stuff and if they have enough left over – they can afford whatever it is they want to buy. We live in a rent or buy it on credit world – and buyers are getting harder and harder to find.
So how does this affect orthodontics? I believe there are three types of buyers, and orthodontists are ignoring the third type of buyer. Because a majority of patients have come from the top income levels of the population, orthodontists have been successful catering to those with money – those in the first two buyer groups: “Cash Only” and “Payments Only Without Interest.”
“Cash Only” buyers are seen less and less in today’s economy – even among the wealthy. Cash only buyers are those who only buy things they can pay cash for now. They save for new cars; they save more in general than other buyer groups. They value the peace of mind of being debt free more than the gratification of having something. They want their children to be free from payments – and won’t indulge their children for fear that their children will some day allow wantonness to consume them. They appreciate the fact that most orthodontists offer a pay in full discount and view that as further evidence of their financial wisdom.
“Payments Only Without Interest” buyers will pay cash, but recognize that ‘no interest’ is a deal (or perhaps was a deal before the interest rates dropped to almost nothing). They want to be financially smart, and have learned about the time value of money. They believe it is always better to pay later than to pay now – especially if there is no interest (though many don’t realize that losing out on the pay in full discount is effectively the same as paying interest). With the exception of a very few practices in extremely well-to-do areas, this is the majority of buyers most orthodontists treat. Their staff – especially their treatment coordinators – are used to this group are often members of this group and are great at using ‘no interest’ to win a new start.
The third buyer group has no financial option for them in most practices and in fact, most offices have an unwarranted and perhaps unrecognized bias against the third type of buyer. The third buyer group is the “Monthly Budget Buyers.”
“Monthly Budget Buyers” are those buyers whose incomes require them to keep a budget and balance their checkbook. They know how much they spend for utilities, gas, insurance, auto lease, rent, etc., etc. They know how much they can spend for something not currently in their budget and $5-$10 a month can make the difference between a ‘yes’ and a ‘no.’ While many of these buyers have been considered a ‘bad credit risk,’ most of these buyers are actually much better credit risks than others because they are so attentive to buying within their monthly budget.
Monthly Budget Buyers don’t mind paying interest – in fact they are almost blind to the interest – their primary and overwhelmingly most important issue is – can I afford the down payment and do I have enough money at the end of my month to make the proposed payment. Even though these buyers make up the largest segment of the US population, they make up a relatively small segment of the orthodontic client base today (less than 10% in most practices as high as 35% in others). In the past, it’s been easy to ignore this group, but as the competition gets more intense, the country’s most successful practices are learning how to present payment options that win case starts from Monthly Budget Buyers.
Here are a few suggestions to help you win more Monthly Budget Buyers:
• Offer options with low or no down payments.
o Many offices consider insurance as part of the down payment.
o Other offices consider the family’s history of paying for prior children.
o Smart offices check consumer credit to know in advance if the patient/parent has shown integrity in paying previous commitments.
• Offer lower monthly payment options – even if it requires you to extend payment beyond treatment.
o Charge interest for these options as away of creating an incentive for the patient/parent to pay more than they have committed to pay. {We have one practice that has agreed to terms of 5 years often and at least once to a 30-year term. Their goal is to make sure the patient/parent commits to a monthly payment they know they can pay. They’ve learned that the interest rate motivates early payment – and their friendly payment options have increased case acceptance more than enough to account for the risks and lower monthly revenue.}
o Again, smart practices pay $5 to find out if the patient/parent has a habit of paying their bills. They know that there is LESS CORRELATION between payment and still being in treatment and MORE CORRELATION between their credit history and payment. In other words, those with a history of paying their bills tend to pay whether or not they are in treatment.
• Don’t allow your TC to sell against your monthly budget buyer option. Many TCs would never pay interest and so they think others won’t either. They actually make monthly budget buyers feel stupid for choosing the option that will allow them to say “yes,” with comments like, “let’s see how we can put together a plan that will help you avoid paying interest.” Just present the options with NO bias and with clarity around the fact that you want to make treatment affordable and any option they choose is perfectly acceptable by the doctor.
More and more practices are spending more time and money focused on marketing initiatives that help get more new patient consultations. However, many practices are ignoring the much easier and less expensive option of focusing on starting more of the new patient consultations they already have. Practices who learn to improve their payment options and to do it in away that they communicate flexibility and accommodation see big returns both in an increase in case acceptance, but also in an increase in new patient consultations as more and more of their patients talk about how great the doctor was at making a financial plan that worked for their budget.
If you’d like to see more starts in your practice, stop ignoring the Monthly Budget Buyers.
