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Management Tip of the Week > The Circular Logic of Service, Profit and Demand

Exclusive Date: January 22, 2014

The Circular Logic of Service, Profit and Demand


 Sponsor: Alcon® - DAILIES® AquaComfort Plus®

Here is an interesting observation about the interrelationship of three extremely important factors that contribute to practice success. I have found that these three factors depend on each other a great deal and if you start with excellent customer service, you can increase patient demand and create a strong profit margin. These three factors continue to work in a circular manner: as one factor increases, the others increase as well.

The cycle of success
Here is the three-prong cycle that will lead your practice to growth and profitability. I am going to use the word "customer" to refer to our patients because customer is the universal term in business and customer service is well understood by all. I will refer to "letting the customer win" as an action phrase meaning great customer service. Notice that the final step in this cycle leads back to the first step. Continuing to improve in all three factors creates business growth.

  • You can let the customer win if you have a strong profit margin.
  • You can create strong profit margins if you have enough customer demand.
  • You can have enough customer demand if you let the customer win.
Analyzing each step
In my experience, a business that has a weak profit margin can't continue to deliver great service for very long. With weak profits, the business owner must begin to cut corners and that causes customer service to suffer. The business must seek employees who will accept lower pay. Suppliers are selected based on lowest price, rather than best quality. Many optometrists intend to offer great customer service, but they price themselves so low in the market that they can't sustain it.

A big factor in creating strong profit in a company is related to customer demand. If there are enough customers wanting goods and services, the business can charge more. And even if it can't charge more, it can increase the volume of customers handled per day through technology and efficiency and that increases revenue and profit.

The best way to achieve high levels of customer demand and volume is by providing outstanding customer service. I'm talking about legendary service that gets people talking about the business. Customer service leads to word-of-mouth referrals and customer loyalty. In any business that is not a pure commodity, people want great service.

Putting this to practical use
Of customer service, strong profit and high customer demand, the factor you have the most control over when starting a practice is customer service. It is true (as I stated above) that you will need some profit eventually to keep the great service going, but that is the phase of a business where you inject working capital and wait for the profit to occur. As you continue to work hard to provide fantastic customer service, even when the customer seems unreasonable, you will see demand increasing. You will gain more customers as the public learns how great you are! As the numbers of customers increase, your profit will also increase and you can even begin to raise prices. You then take that extra profit and re-invest in equipment, staff, inventory and d├ęcor, which improves customer service.

Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week


Management Tip of the Week > The Circular Logic of Service, Profit and Demand

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