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Inside Dental Technology

March 2014, Volume 5, Issue 3
Published by AEGIS Communications


Increasing Market Penetration

Cross-selling and account growth build client retention and profits

By Mark T. Murphy, DDS

For several years now I have averaged over 125,000 miles annually on Delta Airlines, qualifying me for Diamond Medallion Status. This entails free upgrades, club access, flight changes, and a host of other amenities designed to keep me from flying any other carrier. I am a well-retained client. All of the great things Delta does for me make it difficult to justify flying with another airline. In addition, even if Delta cancels a flight, loses my luggage, or something else untoward goes wrong, I am much more likely to forgive them because of all the added value they provide. Shopping around for savings and spreading my business across three different airlines might save me a few dollars, but I would also lose some or all of the perks I’ve come to enjoy.

Delta also sells other “products”—credit cards, all-inclusive vacations, hotel reservations, rental cars, and other travel related solutions. The more I buy from them, the greater the rewards. Using my American Express Delta Card gives me even more bonus miles and free upgrades. When I book a room or rental car through the Delta website, I can add to my mileage credits while still participating in my Marriott and National loyalty programs. Delta realizes that it is easier to sell an existing customer more than it is find a new customer. For existing customers, like me, it becomes highly attractive to achieve a higher priority status by bundling purchases through a narrower channel of providers.

In a May 2008 Harvard Business Review article, “Marketing When Customer Equity Matters,” the authors discussed how much more effective it was to improve growth and profitability by driving the value of a customer, focusing first on retention then on cross-selling.1 We have to understand that the cost of acquiring a new client is far more expensive than the cost of keeping an existing one. That is also true about growing your current client base and cross-selling them into your other product lines. When you increase the average monthly spend of your current accounts just a little, it yields a huge impact. The average dentist earns just over $700,000 in revenue per year. Allocating 7% for their dental laboratory bill results in a $49,000 annual or a $4,083 monthly average spend. Most laboratories have client averages of $1,200-$1,4000 per month. So where is the balance? According to a 2009 ADA survey, the average dentist uses three dental laboratories and an incredible 28% of dentists use four or more. That is a cross-selling gold mine!

Do the Math

If you have 60 active clients averaging $1,400 per month for the year, you would have just over a one million dollar annual revenue business ($1,400 x 60 x 12 months= $1,008,000). If you could increase their monthly spending with you by just one more case, or one crown ($150) you would grow to a $1,160,000 business and grow by 10.7% (assumes 100% retention) with no new clients. That is a huge impact without spending time and money on acquisition or conversion of prospects to new customers.

There are two categories of behaviors you can embrace that drive the average laboratory bill higher. First, if you can help your clients grow and improve their practice, you grow too. Second, most accounts are using multiple laboratories and they are using them for different products or services. Getting these clients to buy more products from you grows their monthly laboratory bill.

Improving Practice Growth

Most continuing education offered by laboratories promotes clinical training and is often supported by manufacturers. Surveys repeatedly have shown that dentists’ greatest concerns are not which bur to use or which porcelain has the greatest strength; it is “The Business of Dentistry” that keeps them up at night. The included survey from the January 2012 issue of Inside Dentistry demonstrates that clinical issues are of much lower concern than matters regarding running a business (to see this survey in full, visit dentalaegis.com/go/idt684).

If laboratories structured more of their continuing education sponsorship and hosting toward solving the dentist’s most pressing problems, their clients’ businesses would grow and, in turn, so would the laboratory. By partnering with practice management-styled programming, laboratories would deepen the engagement of clients and prospects, strengthen relationships, and help them solve important issues like dental insurance, staffing, and case acceptance. Find a way to partner and help provide the type of education that will help you both grow.

Increasing Product Penetration

Your product and service offerings can be categorized several ways. For now, consider the following product categories—anteriors, posteriors, implants, and removables. By analyzing your customer buying habits, you are likely to find that most are only buying from one or two of the categories. If so, create and offer incentives and rewards such as those described above to encourage stronger engagement from existing clients. To introduce posterior restorations to an anterior user, you could offer a short-term price match while they try your other fixed solutions and experience the value. When they comment on how much easier and faster the restorations seat, you can emphasize the monetary value of their chairside time. At $400-$600 per hour, saving a client 10-15 minutes is huge and may help them to overcome any resistance to switching from a “cheaper” laboratory. Discuss advantages of working on combination cases and treatment planning together in advance of starting the case. That way you have an “in” when getting all of the component restorations and helping them feel more successful.

The Takeaway

If retention is the most important metric for a dental laboratory, cross-selling, client growth, and the resultant average laboratory bill improvement is not far behind. By focusing on retention and penetration, you will need fewer new accounts. Next month we will discuss some of the best strategies for acquiring and converting new clients.

References

1. Hanssens D, Thorpe D, Finkbeiner C. Marketing When Customer Equity Matters. Harvard Business Review. May 2008. Accessed December 15, 2013. http://hbr.org/2008/05/marketing-when-customer-equity-matters/ar/1.

About the author

Mark T. Murphy, DDS is the Lead Faculty for Clinical Education at MicroDental/DTI Dental Technologies Inc. in Dublin, CA.


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