The Cost of a Pair of Contacts—Priceless
contact lens business
The Cost of a Pair of Contacts—Priceless
Don't give up on CL sales. Here's how you can revive your contact lens business.
Justin Bazan, O.D.
Tom Baugh, OD, of Denison, Texas remembers that in 1966, when he was a 13-year-old Kentucky teen, his parents bought one pair of PMMA contact lenses plus eye exam from a local optometrist. The cost was $660.00—$60.00 was for the exam. (If you don't believe me, ask his mom. She still has the receipt!) At the time, a new Volkswagen Beetle was $1295. If we fitted these lenses today, at half the cost of a new VW, they would run about $9,000.
During the 1980s, it was common for a pair of daily-wear soft lenses (vials) bundled with the exam and fitting to cost about $350—and that was the low end. With inflation, it could be around $700 today.
So, how the did we get to the point where deals like “a free exam with the purchase of $200 worth of contact lenses” exist? How times have changed.
The value of contact lenses
In the early days of contact lenses, a limited number of practitioners invested in fitting contacts. Nobody will argue that today, the ease of fitting a typical contact lens patient has greatly increased and the skill set required is nothing close to what it used to be. Nearly every optometrist does, or can, fit a patient. It's unfortunate, but the fact is that patients and doctors don't place as high a value on the exam, due in part to the ease with which it's performed. Luckily, unlike contact lenses, there are no online purveyors of contact lens fittings—yet.
With improvements in manufacturing technology, companies are able to bang out contacts at an astounding rate. The disposable modality has become a reality and the consumer mindset has shifted to thinking that contact lenses are less of a special device because of their abundance. How careful were patients when they had a single pair that cost lots of money?
As quantity and availability increased, so did the number of distribution channels. More offices could carry more types of lenses. This availability helped develop a consumer mindset that most contact lenses are the same, and consumers began to become more price conscious. The pedestal that contacts lenses were placed on was chopped down with the advent of businesses selling via phone or Internet. It became convenient, quick and easy to shop around for lenses based solely on price. Take a look around you—ads and opportunity are everywhere. People know they can get the same contacts you prescribe for less, and they can get them delivered to their door.
The heart of the matter
Will there ever be a second golden age of contacts? Let's consider some things the typical private practitioner can do to reestablish worth and build profitability back into his contact lens practice. We'll take a look at what some of our peers are doing to remain competitive, profitable and to prevent further decline. First, let's get to the crux of the deal.
Businessdictionary.com defines commoditization as an almost total lack of meaningful differentiation in manufactured goods. Commoditized products have thin margins and are sold on the basis of price and not brand. This situation is characterized by standardized, evercheaper and common technology that invites additional suppliers, who in turn lower prices even further. Contact lenses have thin profit margins. Many patients buy them on the basis of price, not brand.
What will facilitate the commoditization of our products and further decline profitability? I feel that devaluing the supply by deeming lenses free or supplying them at a heavy discount is a sure way to do this. What's more alarming to me is a growing trend toward decreasing fees for our services.
Your time is worth money
Should we also be concerned with the commoditization of our services? Who's at fault? It would be easy to blame external market forces, but are we at fault? How much do you educate your patients on what you're doing and why during the fitting and evaluation process? To the patient, it seems like you aren't doing much more than flicking a light on and off and asking them if the image looks better “here or here.” We have to be the ones to put the worth back in service.
Check out Figure 1: does this ad help or hurt the profession of optometry? Does it facilitate or prevent commoditization? As a typical consumer, when something is given to me for free, I don't seem to have the same level of reverence for it. Do you?
If it were flipped, and the supply was free but the exam still carried a fee, would that make a difference? After all, the patient is still getting the care and the annual supply; something we all strive for—although the means and ways often vary. Some would argue that this is acceptable. However, my personal philosophy and experiences lead me to believe that giving away anything devalues it.
I feel there's also a detrimental effect on the mind of a consumer when commoditization occurs. Contact lenses are medical devices prescribed by a doctor. Contacts interact with living tissue, which provides us with our sense of sight. When people sell and buy without regard for this, they're in danger. As a doctor and business owner, I feel strongly that I need to safeguard against the further erosion of value for the product, profession and procedure.
For example, the passive verification process is greatly flawed. If a company doesn't hear from the doctor's office, they simply fill the order—without any evaluation of safety or appropriateness for the patient. Maybe the lens is the wrong type, size or power. Maybe the consumer has a contact lens-related condition developing. Maybe he is overdue for an exam. Maybe the patient purposefully—or accidentally—selected the wrong doctor information, rendering the verification useless. The system is easily played and imperfect. People who want contacts can get them online with ease. This is dangerous to our patients, our profession and our profitability. We can help safeguard against this danger by better educating our patients and by taking a new approach to handling the verification process.
Figure 1. Business boost or business bust?
When something becomes a commodity, the only point of comparison becomes price, and the consumer will seek out the lowest one. How do they look for the lowest price on contact lenses? They go online and search—it's easy and convenient. In fact, you can see the majority of the options and even arrange them by price. This further promotes the idea that contact lenses are a commodity and that offline stores are ripping consumers off. The wave of “get them online—they're cheaper” has serious repercussions for independent optometrists.
People trust online retailers, buying everything from baby formula to cars online. They especially trust the larger, namebrand lines, such as 1-800. You can't just tell your patients, “don't buy contacts online because you're taking a risk and might cause yourself harm.” Patients realized the integrity of the online wholesaler years ago—you need to realize this.
As doctors, we seek out the best cost of goods, especially now that the majority of lenses are perceived as healthy and comfortable for our patients. If your suppliers had easy-to-access online price lists, wouldn't you shop around? I sometimes think we are the middlemen, and one day, the contact lens companies are going to sell directly to the consumers.
So, we have consumers and doctors viewing contact lenses and exams as commodities, in a fragile economy, in an environment hostile with competition. What can an independent practitioner do? Here is a list of what your peers are doing to keep contacts profitable. Adopt the methods/approaches that will work for you and your practice.
1 Put the value back in contact lens fittings. Begin talking through the process and telling patients why you're performing an exam and why it's important. For example, “I'm looking at your cornea to make sure I don't see any signs of contact lens damage. Sometimes the cornea is not as healthy as we think and I can see those signs. One of the things I'm looking for are blood vessels growing into your cornea. You can't see or feel them, but I can see them with my special microscope. Yours look great, and we'll check again every year to make sure we don't see any signs of trouble.”
Educate them about care (ie, the importance of rubbing and rinsing and following lens replacement schedules). Let the patient know what you see on a day-to-day basis (ie, patients with eye infections, poor vision and so on). They'll value your services and be more willing to tolerate an increased fee if you demonstrate your worth.
2 Improve your handoff. Instead of saying, “You're all set today. Thanks for coming in, Jenny. I'll see you next time,” try “Jenny, I'm authorizing you for your annual supply. Things went so well today, I won't need to see you back until you're running low next year around this time. Alison will help coordinate your insurance benefits and assist you with your annual supply.” If you forget, make sure your staff asks, “Doctor, is Jenny cleared for her annual supply?”
3 Assume your patients are going to order lenses from you. If they say “Will you be giving me a prescription for my lenses?” Counter with “Yes and I'll have your order at your door in 2 to 3 days.”
4 Let trained salespeople sell the annual supply. It's the best way to ensure that patients keep buying from you. If patients wear contacts every day, they need the annual supply. Don't give them a chance to re-up at 2 a.m. from an online vendor who's advertising on the Facebook page they're viewing.
Train staff to understand the importance of getting the annual sale. Let them demonstrate the benefits to the patient. This is a script that helps us improve contact lens profitability. “Great news, the doctor cleared you for an annual supply and they're on sale! The total for the year supply is $150 after a $60 mail-in rebate. That includes a 10% discount and we'll ship them wherever you would like for free. Where would you like them delivered?”
► To encourage your optical staff, offer a small incentive for every year supply sold. Offer $5 to staff members for every year's supply sold.
► Use your reps—they have training materials to share with your sales team.
► Rebates also work well when they're part of the deal. Always quote the “after rebate” price. A trained salesperson delivers a script. “After rebate, the whole year is right around $150. That's a great deal.” You can even take it a step further and fill out the rebate for them, and give it to them in an envelope with a stamp. Now they have no excuse not to mail it in for their money. Use rebates that require the patient to buy the contacts where they had their eye exam. By letting them know that if they want to get that rebate check, which is the best deal and the biggest savings, they need to buy the annual supply from you.
► Encourage the purchase of a year supply by offering a discount. “The annual supply is on sale today! We'll take 10% off for you.”
► Do your brands pass the Google test? Some brands are dirt cheap online while others maintain their profitability. Google your favorite brands. Are you able to find them online for just above your cost? Maybe you need to consider an alternative. The bottom line is that you have to be competitive on price. If you're not close, good luck getting the sale. Know your competition and their prices.
► Try a milder sales approach. When you ask for the sale and the person declines, ask them why in a gentle way. A typical script might be, “Dr. D said you wear you contacts all the time. Why aren't you buying them here?” Let them respond. Typically it's because they want to see how much they are online first. Consider proving that you're competitive. Pull up 1-800 and let them see how close—or better—your prices are.
► Make ordering convenient. If they decide not to order the annual supply, ingrain in them that it's easy, convenient and greatly appreciated if they use your online contact lens store (if you have one). Give them this info with their supply. Maybe a flyer in the bag or a follow-up email will do the trick or maybe an old school laminated walletsized card. Whatever you do, you have to get it into their heads that they need to re-order from you.
Barry Farkas, OD, of Vision Source NYC, wants doctors to know “most importantly, no matter what ODs do, they will likely lose the national average of 20% to mail order. Hey, 80% isn't bad, and if you can make friends with your patients and offer convenience, service and accuracy, you'll meet that goal.” Also note, some doctors are using contacts from revenue boxes for the fitting. They require the patient to supply the lens for the fitting, which often guarantees at least one box sale. Controversial? I would say yes, but it is occurring.
5 A newfound loyalty. When an order isn't placed and there's a notion the sale may be lost, one doctor says: “Our contact pricing is equal to, or better than, 1-800 and we'd really appreciate your business. We're a local business and depend on people like you to keep their dollars locally. It's important that you know this as we're looking to build relationships. We just want to make sure we're all on the same page. If not, we know there are plenty of other great practices who might be a better fit.” There's a doctor that really says that?
6 When appropriate, prescribe proprietary products first. Hans Kell, OD, vice president for practice development for Vision Source, says, “The clinically equivalent, proprietary products available to Vision Source members provide the lowest cost of goods and therefore maximize profitability.” He also notes that patient loyalty increases when a practitioner prescribes proprietary ophthalmic lenses, ophthalmic lens treatments and contact lenses that offer performance equal or superior to global brands.”
7 Fit lenses that don't have much, if any, competition. Hybrid and specialty lenses come to mind. How about orthokeratology? Nathan Bonilla-Warford, OD, of Bright Eyes Family Vision Care in Tampa, Fla., enjoys substantial profits from his optical center. Total charges are bundled to include both the procedure and the lenses. His patients place a premium on his skills and maintain a high regard for his services and the contact lenses he provides.
8 What's new? In addition to private-label products, consider working with cutting edge materials and contact lens designs. They're often not yet big enough to be included in the online retailers product lines.
9 Increase your contact lens fees. While others are reducing their exam fees or providing exams for free, you can combat commoditization by “charging what your worth.” What is worth? It's the value associated with your fee. Make your exam valuable. (See point #1) Communication is the key. Give the kind of care patients will tell their friends about—in person, on the phone, through a blog or a post on Facebook.
10 Add value. Ship free to home, work, wherever. Patient-direct shipping is often free or a few dollars. Use this to your advantage. Peter Rozanec, OD, of Port Credit Optometry Clinic in Ontario, lets patients know that he's there to take care of them with complimentary lenses to hold them over in case of emergency. Similarly, using your starter kits can be beneficial. Giving someone something often causes a feeling that they owe you something in return.
11 Improve your recall. If a patient buys at 3 months, at 2 and a half months reach out to him. 1-800 does this.
12 Create opportunities. Richard Chute, O.D., Vision Source C & R Vision Center in Victor, NY, says online verification is an opportunity. “We're calling because we received a call from 1-800 contacts,” he says. “Our price is very competitive and we're a local business that would really appreciate your business. If we're better, or within a few dollars of your purchase, will you consider giving us your business?” Often the prescription is expired. Don't ignore the verification, as the patient will be sold the contacts. You must respond and prevent the order from being put through, then contact the patient to schedule an exam.
13 Keep your cost of goods as low as possible. Hone your negotiation skills. Join a buying group. Buy bulk, banks, inventories. Buy the specials. Merchandise better, move the stuff that's not moving with a sale.
14 No room for mistakes. Missed order? Delayed order? Missing order? Wrong order? Guess what? Lost patient order. You must double check. People put a high value on accuracy and timeliness.
15 Become friends with your patients. Loyalty counts for a lot. People do business with the people they like. They want to see you succeed and they'll be more tolerant of fees, prices and errors if they like you.
16 Get social. Getting patients on your social media page will build loyalty. Through this online engagement, you stay on their minds.
Stay in the game
Ultimately, we have a lot of moves to make and the game is far from over. I hope several of the above tactics can increase your profitability and keep contact lens sales offline. OM
Dr. Bazan is in private practice at Vision Source Park Slope Eye. He is a co-founder of Peripheral Vision, a social media group for optometrists. To join, visit www.facebook.com/peripheralvision. Please send comments and questions to Dr.Bazan@VisionSource.com, or send comments to firstname.lastname@example.org.
Optometric Management, Issue: October 2011