June 21, 2011
There was a craze a few years ago for Business books with random nouns in the title: “The Lexus & the Olive Tree”, “Guns, Germs and Steel”, “The Cathedral and the Bazaar”.
So I give you “The Dentist and the Petrol Station”. I just got back from the dentist today, and like most Brits I endured a costly hour of pain and humiliation (“You’re not flossing enough, Mr. Marland”).
While handing over my credit card for the second time that day, I considered the pricing model of the dentist compared with my first port of call today, the petrol (gas) station.
At the Dentist
- There is very little price discussion
- My Dentist chooses treatment plan
- High customer loyalty
- Price is used to indicate quality: no-one advertises “cheap dentistry”
- Little feel for “market price”
At the Petrol Pump
- Prices prominently displayed
- Station chosen on basis of price
- Difference of 0.05 = gouging!
- Low customer loyalty
- Everyone knows what a gallon of petrol “should cost”
Of course if you have dental insurance, you may not be so price aware, but there are other professionals with similar pricing power: lawyers, tax accountants and of course, funeral homes. Pricing power gets us all in the end.
You have both “Dental Patients” and “Petrol Buyers” in your business, but who is who? In order to maximize your margin you need to know who is just cruising for the best deal, and who has real pain.
– James Marland