Article Date: 8/1/2002

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When Loyalty Is a Scary Thing

Recent research and this tale suggest that patient retention isn't always beneficial.
FROM THE EXECUTIVE EDITOR, Jim Thomas

The tradition of listening to scary stories around the campfire is centuries old, although the tales have changed in recent years:

Stephen began, "Once a wicked witch cast a spell on an optometrist where the O.D. could only treat loyal, long-term patients."

The argument for loyalty

"That's not scary," said Anne. "Aren't loyal patients more profitable?"

"Yeah, they require less of a marketing effort than new patients, don't they?" said Igor.

"Right, and they continually shy away from lower-cost providers," said Anne.

"Not to mention that they're your best marketing staff," said Igor. "Their referrals to family and friends don't cost you a penny, do they?"

The cost of loyalty

"Listen!" commanded Stephen. "The O.D. began to market services to his long-term patients. So he spent more on promotions to patients who were already under his care.

"Then, to keep them, he offered a number of coupons and discounts for patients to use on return visits," said Stephen. "More and more patients returned, but the discounts cut into his net income."

"Now that's creepy," said Igor.

"Often, he wouldn't charge for follow-up visits for fear it might cost him a patient," Stephen said. "And he didn't suggest certain services. He thought his patients might misinterpret the suggestion as a sales pitch, which would offend them."

"I have goosebumps," said Anne. "But what about the referrals?"

"These new patients expected the same treatment -- discounted fees, free follow-up visits -- in exchange for loyalty. The O.D. fell into a spiral. As his net fell, he marketed more to less profitable, loyal patients."

"What an ugly way to go," said Igor. "Did it ever end?"

The spell is broken

Stephen said, "One day, a princess came into his office. She had traveled far and had lost her glasses. She paid him his customary fee for the exam and purchased thin, high-index lenses with a premium frame. This one-time-only stranger was more profitable than any of his loyal patients. She broke the spell with these words, 'Loyalty is a desirable and wondrous quality, but never confuse it with quality patient care or profitability.' "

"That's some tale," said Anne. "Now it's my turn. Once upon a time, 95% of my retirement savings were invested in WorldCom, Tyco and Enron . . . ."

 


Optometric Management, Issue: August 2002