Strategy - Are you a low cost provider - It's OKAY as a strategy in healthcare

It would be very rare if I asked anyone in the health care industry if they were a high quality/high provider and they said, NO, I am a low cost provider in my industry.?Yet, when you compare the prices from a range of physiotherapy or other allied health service, the service offering AND pricing between practices is very similar.

How can every provider claim to be high quality (potentially premium) service providers, yet the pricing and services offered by different providers be so similar?

In reality, a lot are competing on price

It is perfectly okay to compete on price.?It is a very legitimate strategy and is adopted by many other competitors in different industries.?Amazon competes on its triad (Lower price, widest range and fast delivery).?Chemist warehouse, competes on price, with the aim of selling high volume.?Gym chains, such as Zap or Snap provide low frills gyms services at low prices.

If your customers have fixed amounts they are able to pay, such as Workcover or TAC or Medicare, your revenue ceiling may be forcing you to compete on price, so this may be the only viable strategy for your business.

What do you do?

Be super strict on what you will and will not provide for your customers.?You can’t be all things to all people, this will drive you out of business and you will serve no one.?Understand the structure of how you can provide the service you desire and the how you can do this profitably and stop doing everything else.

This does not mean doing a bad job, but it does mean that you have to be extremely specific on what you will and will not do for your customers.

If you have a revenue ceiling in your business, what service level can you provide and what can’t you provide profitably?

Be ruthless on costs

If you have a revenue ceiling, you have to be ruthless on costs (that do not directly result in serving the clients you have).?This does not mean doing a sloppy job with your clients, but it does mean not spending any additional time/resources/money on things that do not directly serve this market.

For example, chemist warehouse has shelving that are very close to each other and stacked quite high.?This way they are able to fit more items into a smaller space, having a larger sales per square metre and reducing their rental costs.

Or, you may have an automatic re-booking system for clients that need to attend a certain number of sessions for a certain amount of time.?This may give your clients a limited amount of choice of times, however, this will reduce your reception time required for re-bookings and make the process more efficient, reducing costs

Be ruthless about what elements of your service offering are “essential” and which can the reduced to reduce your costs?

Be ruthless on who you will NOT serve

You must know exactly who you are serving and who you are NOT serving.?Although they are not a low cost providers, Tesla only have 3 models of cars in production.

This means that to produce a model 3, there is very little change over of equipment required to produce more of these models for production.?They have one system of ordering cars, not a whole range of dealers with different systems for the ordering process.?These elements make their process very efficient and allows them to minimize their costs, serving their particular market.

What they don’t have is a huge variety of cars that met everyone’s needs.?That’s okay.?Telsa is very clear on their target market and who they will and who they will NOT serve.

Are you crystal clear about who you will and will NOT serve?