I recently played golf with two doctors, following which we discussed customer satisfaction and customer ratings. One of the physicians, let’s call him Dr. Feelgood, expressed surprise that anyone would select a doctor based on ratings, and he lamented that negative ratings often reflected intangibles like staff friendliness and wait times, rather than quality of care. In my opinion those factors and more are part of the overall determination of quality and customer value. Differentiating any business based on superior intangible aspects can increase customer demand and improve pricing power.
In our post-golf conversation, Dr. Feelgood said “I guess Millennials do everything electronically now.” The downside of that, he said, is that online ratings do not tell the entire story. He had received a few negative reviews, but the reasons for the low ratings included:
- Waiting more than 30 minutes to see the doctor
- The physician using a very direct communication style that some found as unfriendly
- Not spending enough time with the patient once they got to see him
- Not prescribing the medicine the patient requested
The doctor realized that it is always possible for #4 to occur when his professional judgement does not match the patient’s opinion. However, he believed the other three reasons were unjustified. Unexpected things occur daily, causing the schedule to get squeezed. In those instances, patients will have to wait, and the best way to minimize the wait for all patients is to be efficient in working with them. That may seem too direct to some patients.
The second physician, let’s call him Dr. Blue, agreed that unexpected events occurred daily, and the schedules suffered. Both doctors expressed the opinion that patients should understand this, and they should be more “patient”. I asked the doctors if they liked it when a contractor does not come to their home when promised, or when the cable repair team shows up late, or when their auto mechanic takes longer than scheduled to repair their cars. Of course, they are not happy when those situations occur.
In discussing these types of personal-service scenarios, we all agreed that the providers have enough data to estimate the average length of time for repairs, and the variability in repair times, as well as the time they must spend on documentation. By analyzing their data in more depth, repair providers should be able to adjust their scheduling to have fewer, shorter-duration late performances. I encouraged the physicians to apply the same approach to their medical practices.
The doctors agreed that if their customers (patients) were as happy with the intangible aspects of their visits as they are with the overall quality of care, they would earn fewer low ratings. Although health insurance impacts choices of doctors, they reluctantly agreed that higher ratings could increase the demand for their services. On the other hand, neither physician believed happier customers would give them any additional pricing power, since so much of medical pricing is driven by insurance.
In my experience, the prices charged by dentists, doctors, hospitals, etc. can vary substantially even for the same service. When practices are full and demand for the medical service is high, the providers have more pricing power.
In my view, these medical situations are analogous to customer interactions in almost any business. All the customer experience elements have an effect on the value perceived by the customers. Even things that seem commodity-like, such as water, dirt, and gasoline, have service components. Although some customers buy strictly based on prices, most customers place some amount of value on intangibles. In fact, once consumers find products and providers they are happy with, they often will not switch unless something upsets them. When customers are happy, and demand is high, you have some pricing power.
The bottom line from all this is you need to focus on all aspects of serving your customers, in addition to the underlying product or service. Make sure you understand all the service aspects that customers care about, because those are elements that add value to your product or service. These can include:
- Continuity of the sales person
- Timeliness of responding to requests and issues
- Ease of ordering or getting price quotes
- Range of products or services available
- Timeliness of deliveries
- Your process for dealing with returns
- Your process for dealing with unexpected events
- Ease of contacting someone to speak to
No matter what you are selling, if your customers like doing business with you, they will be inclined to continue buying from you. That does not mean you can charge them whatever you like, but it does mean you will have some pricing power.
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