In the world of dentistry, it’s not uncommon for practitioners to offer discounts to friends, family, or even patients who may be facing financial difficulties. While it might seem like a generous and logical step, especially when wanting to help those close to you, expanding discounting beyond a close circle can lead to unintended consequences for the practice’s bottom line.
The financial impact of discounting
One of the key issues with offering discounts is that many dentists do not fully grasp the effect this has on their profitability. A small discount may seem harmless, but when considering the practice’s overheads, the financial impact can be far more significant than expected.
For instance, if a dental practice has overheads that account for 75% of their production (leaving 25% Earnings Before Owner’s Compensation), a 10% discount can reduce income from a treatment by 40%. In practical terms, if a procedure originally costs $1,500 and a 10% discount is applied, the new charge becomes $1,350. What many forget is that the initial profit would have been $375, but after the discount, it drops to $225—a 40% loss on that service.
Training patients to expect discounts
Another concern is the long-term effect of discounting on patient behaviour. By offering discounts regularly, you may inadvertently train patients to expect them as a norm, diminishing the perceived value of your services. Over time, this can shift the focus away from the quality of care and place undue emphasis on price. This not only erodes profits but can also create a culture where patients expect lower fees, making it difficult to charge your standard rates in the future.
The importance of a discount policy
Without a clear and consistent discount policy, confusion can arise among both patients and staff. If discounts are applied inconsistently, patients may become upset if they do not receive the same reductions as others, or they may even leave your practice if their expectations aren’t met. Additionally, a lack of clear policy can lead to internal misunderstandings among your team, particularly when clinicians independently decide to offer discounts.
Having a structured discount policy in place ensures transparency for everyone involved and helps manage the financial impact of discounts on your practice.
Tips for creating a discount policy
When designing a discount policy, it’s crucial to outline:
Who qualifies for a discount (e.g., family members, staff).
The specific discount amounts (e.g., 5%, 10%, or lab fee only).
Any exceptions or special cases (e.g., charitable cases, friends of employee dentists).
For example, while it may be tempting to discount when performing multiple procedures during the same appointment, it’s important to recognise that you’re already providing value by offering convenience. Reducing your fees in this situation may not be necessary and could undervalue the care you’re delivering.
Implementing and communicating your policy
Ensure your entire team is aware of the discount policy and that it’s clearly communicated to patients when they receive a discount. It’s essential that patients understand they are receiving a benefit, and that the reduced fee is not your standard pricing. This not only reinforces the value of your services but also helps to avoid confusion down the road.
Additionally, it’s wise to track discounts regularly, so you can monitor how often they are being applied and assess the overall financial impact on your practice.
While discounting can be a generous gesture, it’s important to understand the true cost to your practice. Without a well-defined policy, you may find yourself eroding profits and creating unrealistic expectations among patients. By implementing a clear discount policy and communicating it effectively to both your team and your patients, you can provide discounts responsibly without undermining the value of your services.
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