Wall Stree Journal Article on Medical Spa Franchises: Medspa boom is a bust for some

The following article on problems with medical spa franchises ran in the Wall Stree Journal. It's a telling article that points the finger at the current crop of medical spa franchises. I signed up and read it after Ron posted his comments on being an unhappy Sona owner.

Medspa Boom Has Become a Bust for Some

a.medspalogos2.gifBy RHONDA L. RUNDLE: November 21, 2006

Jeff Nebot thought he had struck gold. Two years after opening a laser hair-removal franchise in St. Louis, annual revenue hit $3 million. And over time, the lavish salon added other cosmetic services as Mr. Nebot joined the rush of entrepreneurs into the emerging business of medical spas. Medspas (also called medispas) offer such medical treatments as Botox injections and laser hair removal in a luxurious environment rather than a doctor's office. The field has been rapidly expanding in recent years as entrepreneurs and doctors alike have sought to profit from the dual quests of many affluent consumers: prettification and pampering. For an increasing number of those who entered the business, the boom is proving a bust.

"Several Sona franchisees, though not Mr. Nebot, are in private arbitration over problems that include misrepresenting a complicated business as a turnkey operation and failing to provide needed support. Sona officials declined to comment.

Several franchisees of Radiance MedSpa Franchise Group PLLC, a franchiser in Scottsdale, Ariz., say the company's financial projections overestimated revenue and underestimated initial start-up costs, including working capital.

The president of Radiance, Charles L. Engelmann, recently said: "There are currently 32 open stores and we will have 47 or 49 open by the end of the year. None of the stores have closed." He also acknowledged that some franchisees are attempting to get their money back.

"I can't be my own medical director any more, which is an added expense I can't afford," says one Florida physician who is not a dermatologist. He says he is "facing personal bankruptcy and trying my best to get out while there is something left for my family" after miscalculating what it would take to market, advertise and build his business. Indeed, many medspa owners are doctors who hope to make easy cash at a time when income is shrinking from their traditional medical practices.

You can read the entire article on the Wall Street Journal site here. It does require a subscription. 

Sona MedSpas: An unhappy franchise owner.

Ron Berglund, a Sona medspa owner, left this comment on one of the most widely read articles on this site: What's wrong with medical spa franchises? The article Ron refers to is referenced here: Medspa boom is a bust for some.

"You may want to check out the November 21 issue of the Wall Street Journal. There is a very informative article about mdeical spas (primarily the Sona MedSpa and Radiance franchises).

Having been a franchisee (St. Paul, MN) for almost three years and now facing personal bankruptcy and financial ruin, I can vouch for the accuracy of the article. I have personal knowledge that perhaps 33% (and maybe over 50%) of the Sona franchisees have either already failed or are struggling. The Sona business model-- and I am guessing most of the franchised medspa models-- are replete with flaws, problems and booby traps.

For starters, any business that tells you to spend 25% of gross revenues on marketing and advertising is giving you a recipe for financial disaster down the road. Relying almost entirely on inflated revenues from prepaid multi-treatment packages (allowing you to take in - and spend-- thousands of dollars today without making any provision for the steadily growing future service liabilities) are also a trap for the undercapitalized and unsophisticated. Finally, Sona encouraged us to commit the mortal sin of cosmetic practice-- they coached us to overpromise results to the point of commiting fraud with thousands of clients. When the Sona-required lasers failed enable us to deliver these impossible results we were literally murdered with demands for additional treatments.

I predict a huge "shakeout" in 2007 as other medspa franchisees hit the courthouses with litigation and financial nightmares. The profitable delivery of esthetic medical services is a tricky and demanding challenge for anyone. I believe it takes a unique combination of business and marketing acumen together with great medical skill and emotional intelligence to navigate these tumultuous waters without drowning."

Ron Berglund 

The article Ron refers to is referenced here: Medspa boom is a bust for some.

From the same thread.

JustCurious asks: How does a medspa franchisee handle closing its doors? Aren't there agreements (in years) that must be signed with the franchisor and wouldn't there be penalties for closing shop? I've notice several medspa franchises closing or selling their business within 2 years of opening their doors and I'm wondering (a) what motivates them to close or sell so quickly and (b) what the penalties of closing/selling could be. Also, if a franchisee sells their medspa in this "billion dollar industry" so quickly, is that usually an indication of a failing business?

Dear Just Curious: Thanks for the response to my recent comment. You are asking two additional questions which are very important with regard to the subject at hand. First, you are asking how does a medspa legally close its doors. Closing shop would be no problem if all transactions were handled on a "pay as you go" basis. Unfortunately, most med spas sell primarily multi-treatment "packages". The Sona model encouraged us to do that almost exclusively. We typically sold five-treatment packages for laser hair removal, and often offered BOGO promotions wherein the client would purchase -- and pay cash up front for --five treatments at the "regular" price (full bikini @ $975 for example) and then would receive five FREE treatments for the underarms area. I had an excellent first year of operations since I was taking in thousands of dollars each month for treatments to be performed in the future. After signing up an average of 100 clients per month and pushing the future service obligation forward, you end up "painting yourself into a corner" and facing an insurmountable liability for performing treatments already paid for. Jeff Nebot had the same problem in St. Louis, except that his numbers were typically about triple my numbers. As this isn't enough of a problem, just imaging what happens when you try to sell or close the business!! You have several thousand clients who have prepaid and are legally entitled to the treatments they have already paid you for-- but you cannot afford to keep the Pnonzi scheme going! Believe me-- this makes any medspa almost impossible to sell because any prospective purchaser is scared to death to walk into this huge liability. That is the primary reason Jeff Nebot and I ended giving away our centers for free. Our buildout, furniture and equipment in St. Paul had cost us almost a million dollars and Jeff Nebot's investment was probably twice as much. I know first hand of several former Sona franchisees losing more than a million dollars on the whole mess-- in addition to a million headaches. There was a story posted on the Internet about the former Salt Lake City Sona franchisee closing her doors and failing to provide hundreds of clients with their pre-paid treatments. The article stated that Utah authorities chased the owners down in Texas and instituted some type of legal proceedings against them. I never heard how the matter was resolved, but I heard that the state was trying to impose some stiff penalties against the (Sona) owners.

Your second question asked how can it be that all these problems are occuring when this "med spa boom" is supposed to be happening all around us. The answer-- in my opinion-- is that the so-called med spa "boom" is to a large extent hype. I predict that the majority of the marginal operations will fall by the wayside during the next twelve month and the survivors will be the operatoins that are well funded and operated on sound business principles. Sona and many of the other franchised systems were attempting to offer a "get rich quick" scheme and also a model which-- for the most part-- utilized the physician as essentialy a mere figurehead. My personal belief is that the only truly successful med spa model requires three key components: 1. The physician is the key to the business-- similar to the dentist in the traditional dental office model; 2. The physician needs to be "on site" for a number of reasons-- business, professional and regulatory; and 3. The model requires superb marketing including a ton of cross-promotion and "guerrilla" marketing. Due to competition. typical profit margins and a number of other factors, med spas simply cnnot afford to allow advertising and marketing expenses to exceed over 10% of gross revenues. Whereas most physicians already have from 5000 to 15,000 patients in their data base who can serve as a "warm" client base for a med spa, all of the franchised med spa models start with zero and need to "buy" each client they recruit. Believe me--these outrageous advertising expenses eventually catch up with you! There is a reason the typical fast food franchises absolutely require that advertising expenses remain in the neighborhood of 7% of gross revenues. In order to survive in the low margin marketplace, there is no other way.

Ron Berglund 

When Young Doctors Strut Too Much of Their Stuff

corsets_sexy.jpgWhite lab coat and tie seems to be what patients expect from someone their trusting their body parts to. It's common among many physicians in cosmetic medicine to forego the lab coat in many situations. Hmmmmm....

Via NY Times: When Young Doctors Strut Too Much of Their Stuff.

There was just one problem. As she delivered her thoughtful patient presentations to me and the other attending doctors, it was hard not to notice her low-cut dress.

...One colleague commented that a particularly statuesque student “must have thought all her male patients were having strokes” when she walked in their exam room wearing a low-cut top and a miniskirt.

In a study published last year in The American Journal of Medicine, patients surveyed in one outpatient clinic overwhelmingly preferred doctors photographed in formal attire with a white coat to photos of doctors in scrubs, business suits and informal clothes — jeans and a T-shirt for men, an above-the-knee skirt for women. The patients also said they were more likely to divulge their social, sexual and psychological worries to the clinicians in the white coats than to the other doctors.

The Angry Physician Syndrome: Hostile MDs entering cosmetic medicine.

Hostile doctors and the clinics they run.

angryheart.jpg
Having consulted with many physicians about incorporating some form of cosmetic practice into their clinic, I've noticed that one of the biggest problems that these physicians have is changing the way they 'think' of medicine. (Noticed is something of a simplification since 'beaten over the heat' is a more accurate description.)

Cosmetic medicine is a new world for doctors who are used to third party reimbursement, nasty collections letters, physician referrals and seeing 30 or more patients a day. Docs today are angry; Irritated by long hours, pissed at malpractice premiums, feeling unappreciated and defensive.

Dr. Charles is Hostile:

blockquote.gifThere's no justice in Germany either. A German court ordered an OB/GYN doctor to pay $769 a month in CHILD SUPPORT to one of his former patients - a woman who got pregnant despite the IUD (contraceptive device) he inserted. This is horrendous. Sue your doctor if you get pregnant? An unintended yet healthy baby is evidence of bodily harm? No contraceptive is 100% accurate! The article says that "the implant could no longer be found in the woman's body." This does not mean it was the doctor's fault. IUD's fall out in up to 7% of women in the first year of use. That's part of the reason they have a string that dangles out of the cervix into the vagina, meant to be checked on a regular basis by the woman to ensure proper placement. This is totally outrageous, uncivilized, and another reason why it takes serious courage to try to help anyone in this world of blame.
[update - thanks to the correction of a German commenter, it was not an IUD that failed but another device, probably like Implanon but I don't know what's available in Germany. The underlying principle is still unbelievable. Overlawyered has some more links to this, and a decent discussion starting in the commentary.]

The Trial Lawyers Association is changing its name to the American Association for Justice. George Orwell is smiling somewhere, the skies are getting clearer every day, and no child is being left behind.

A doctor acquaintance of mine just got destroyed with a $20,000,000 jury award in a bogus malpractice case. I typed it into google and found this page, which is unrelated. I felt nauseous reading the top guy's credentials. The best thing he's done is apparently winning "the largest medical malpractice verdict ever won in the District of Columbia ($24 Million), (which was) reported by USA Today, Dateline NBC, Jet Magazine, the Washington Post, the Baltimore Sun and affiliates of ABC, CBS and NBC." Way to go! I bet his pockets were full after that one! Those doctors on the other end deserved utter destruction, all those years they spent working 120 hours a week for $30,000 a year, all those hopes they had of helping people, of making a difference. All those efforts pale in comparison to the $24,000,000 he got the jury to cough up.

Dr. Charles is right.

But... cosmetic medicine is a different animal and angry docs fare poorly when the anger they have towards the system spills over into their interaction with patients and staff. (Yes, I know angry docs fare poorly everywhere.)

Whenever I'm interviewing a physician I ask myself if they're an angry doc. If I think they are, it's a non-starter. I can work with a lot but can't change the way that someone fundamentally views the world and their situation. I can't change the way that an angry physician deals with patients, staff, and me. It just doesn't work. It's true that there are lots of angry docs out there and you might know some that you think are successful and that the fact that they're angry doesn't hurt them as a business. I don't.

If you're thinking about entering cosmetic medicine because you're angry and think that someone owes you, get ready for more of the same. In cosmetics as in regular medicine, it's still all about them.

You might be a Medical Spa Entrepreneur if...

check.jpgA lot of physicians think that they have entrepreneurial experience. After all, they started or ran a medical practice, and isn't that what a physician entrepreneur does? Maybe, depending on your own definition. Well, here's mine. These are not all necessarily descriptive of the current situation, and they are not all things I'm proud of or would recommend. Most of them certainly were not intentional, but they are all taken from my personal experiences. Some are humorous, some are not.

These days I'm happy to say that the vast majority of these things are behind me. Much of what is detailed below was brought about by the speed with which we are/were growing. Nowdays I'm usually home at night,Surface clinics have excellent staffs that I adore and count as friends, and I'm starting to have some free time again to devote to other persuits. Life is good.

And now, without further ado...

You might own a Medical Spa if...

 
You've 80k in credit card debt from cards you never knew you had.

You've averaged 60-80 hours per week of work for the past seven years.

You can personally have the most advanced medical treatments available but receive the poorest quality care.

You've found yourself at 2am painting treatment rooms in your underwear.

You spend two days without sleep because you know you're going to have to fire someone even though you're firing them for stealing from you.

You're accountant calls while you're leaving for vacation to tell you that your newest location is 25k in the hole so far this month and checks are bouncing.

You have employees that make five times what you do.

You eat all of your meals off of paper plates using plastic utensils. 

Without trying you've succeeded in convincing all your employees to never try to start their own business.

When someone asks you what you're doing this weekend you say "Working, of course, just like any other day."

You go to the gym once every six months and kid yourself that it makes a difference. 

Every six months you see the same guy at the gym who's obviously in shape and think "How in the world does anyone have time for that?"

6pm feels like 1pm.

Your staff clocks out while you're having lunch.

You drive home in the dark every night of the year.

You drive 60k miles between clinic each year.

You're ear aches at the end of the day from having a cell phone pressed against it for hours.

When people ask what you do you answer," I answer questions all day".

You have a bet with yourself on how long after meeting a woman and telling her what you do she asks, "What do you think I should have done?"

You learn never to answer the above question.

You have the most overwhelming sense of Deja Vu every time a physician with any type of rinky-dink cosmetic practice tells you that he's thinking about franchising his business.

Your wife is reduced to tears at a fourth of July parade when a patient accosts her demanding to know why your physician, Dr.Y, has ruined her life.

The physicians complain that the front desk is booking too much time for something and changes the default in the schedule. The front desk complains that the physicians take that much time and change it back.

You've closed, locked the doors and gone home leaving a patient still sitting in a treatment room.

You walk into the clinic kitchen while the staff is discussing horror stories of performing Brazilian hair removal in graphic detail.

You wonder if the computers ever actually work when you're not there.

You have to chase down a woman who's attending a free seminar and trying to make off with $600 in product samples. 

You feel almost euphoric just thinking about what it would be like to not owe anyone any money.

You develop a deep and abiding hate of yellow page salesmen.

You wonder why, when every salesperson on earth is deeply committed to helping you 'grow your business', they're never around when you're signing payroll checks. 

You've told someone not to start a new medical spa on their own because you sincerely can't bear the thought of someone going through what you've been through.

Just closing the doors and moving to South America seems like a perfectly viable option.

You've worked multiple Christmas days.

A physician you've trusted and put in a position of power starts having patients pay him directly inside the treatment room and sets up a secret merchant account so that he can swipe a card and have the money deposited directly into his personal account.

After you fire the above physician, he breaks into the clinic and steals equipment. While you're on the phone the next morning with the police, his wife calls and leaves a hysterical message asking 'How you could do this to us?" and threatening to sue you.

A patient asks "Why is ________ at the front desk insisting that she deliver deliver products and take payment at my house?" 

You've paid the federal government more in business taxes than you've paid yourself.

A physician calls you and asks for your help since American Laser Clinics has an armed guard in his waiting room to prevent him from seeing his own patients while at the same time their performing treatments using him as their medical director.

The same physician tells you that he's been doing this for thirty years and know how to run a clinic better than anyone while dismissing reports showing his declining performance as a 'computer problem' and asking you for money so that his kids can continue to go to private school and he doesn't have to sell his airplane.

The same physician thinks that all his new patients are coming through excellent word of mouth and his superior charisma while dismissing the $16,000 you spent last month advertising his services.

You have to deal with this physicians office manager who's decided to get even with you for not hiring her so she takes every opportunity to sabotage you.

You find yourself expanding to a physician why you can't advertise in a fashion magazine using before & after images of extremely unattractive sagging bellies and thighs from 80 year old morbidly obese patients even though 'the results are good'.

You don't worry about filing taxes late because you know you're not in a situation where you could possibly owe the government any more money.

You've felt a sense of relief when an employee has quit because now you don't have to lay them off.

You're an expert on what does and doesn't count as a business expense.

You've slept on the floor of your office or on the couch in a waiting area more than once.

You've seriously considered buying a cot for your office.

You wonder where the last five years went.

You realize your wife must be a very special person because what other woman would put up with all this and still like you?

You have 6 horses you never ride, a gym membership you never use, children you hardly see, and family vacations you don't go on. 

You look at every medical spa you drive by in your car thinking, "I bet the guy running that medspa is making a lot more money than I am."

You have a surge of bile when you're at a medical convention and a consultant says to a packed room of physicians, "Of course you can make $250,000 per treatment room right now," and then proceed to tell everyone that the key is to 'not let any patient leave until they've bought product and booked another appointment.

You wonder how the above consultant got anyone to listen to her, ever. 

You're able to write a list like this in a half hour right off the top of your head.

This just a partial list of course. I may add to it. And of course these are all in the past.

Cosmetic Medicine: The Unhappy Patient

How to ask the patient to stop seeing you.

I shouldn't have even said "unhappy patient." I should have said the forever unsatisfied patient. Thankfully this is a very infrequent situation in our practice, but it happens every once in a while. And it leaves such a mark, that I thought I'd ask how other physicians handle these scenarios in their own practice.

Last year I saw a patient (56 year old woman) and treated her with a little Botox between her brows and some Restylane in her nasolabial folds and the lines above her lip. She came back to see me 2 weeks later and fell into tears in my office. In fact, I was moved to tears since it truly seemed like I had ruined her life (there's where I should have seen the first red flag, but I missed it). She felt like she had all sorts of new wrinkles, her brows had fallen, etc. Unfortunately (and let this be a lesson that some of you might learn from my mistake) I hadn't taken "before" photos of her. And that was unusual since I really do take pictures of almost everything I do. Especially the first time I treat a patient. And now I absolutely do! Anyway, I couldn't see any "lowering of her lids" from the Botox. In fact, the Botox did exactly what I had expected and had informed her beforehand that it would do. I assumed she just didn't like the effect. But in terms of the Restylane, she saw all sorts of new lumps, new horizontal wrinkles and changes to her original appearance.  In her defense, I did seem some minor areas I could fix and so I did so at no charge to her. And this time I took photos. I also added some Botox to her lateral brows hoping we would see a little lift there to alleviate what she saw as "drooping."  But there was no ptosis or any of the potential complications that could occur from Botox.

She returned to see me again in another two weeks and again was still unhappy. I had ruined her "girl's weekend" in Vegas because she couldn't leave her hotel room looking so "horrible." Again more tears. But I managed to take some more photos and compare them to the ones we had taken on the last visit. Her brows were elevated a bit and her lip lines and nasolabial folds looked great. We even zoomed in to take the closest look possible. But she was not swayed.  She was convinced she still looked horrendous and that I was to blame. So now I'm starting to notice a little bit of the flag. But it's still in my peripheral vision  I really listen and try my best to understand where she's coming from, but honestly I think she looks pretty good. Course it doesn't matter what I think, I still have a dissatisfied patient sitting in front of me. But I didn't think adding any more filler or Botox was going to improve the situation. So I ask her what she thinks can be done. And she comes right back, in a very matter of fact tone, and says that she feels the most appropriate next step would be for me to perform a thread lift on her at no charge. So right about now the red flag is waving frantically in front of my face....hopefully hiding the look of shock.  My mind is filling with all sorts of questions...like why would she want something more invasive, more long term? And if I'm the one who has ruined her life, why does she want me to do another procedure on her? 

Right about then I realized that she wanted more procedures done, but she just didn't want to have to pay for them. So in the nicest way I knew how, I simply said that I didn't think that I was going to be able to satisfy her needs.  I was concerned that there was little, including a thread lift, that I thought I could do to meet her expectations. And I wasn't sure whether she had unrealistic expectations or if I had promised the sun, stars, and the moon. But somewhere between what she wanted and what I could deliver, there was a great divide. But knowing that all our office offers are minimally invasive or noninvasive procedures, I routinely spend a great deal of time in the initial consultation. If a patient comes in to see me and has complaints that cannot be adequately treated with the procedures I offer, then I usually refer them to one of the plastic surgeons in the area. I try hard to communicate the strengths and weaknesses of what I can do in my office verses what a surgeon can do in the OR.  So I doubt I had given her the impression that a little Botox and filler were going to make her look like she was 22 again.

And I certainly didn't think it was going to be a good idea for me to be performing any more procedures on her given she already didn't like what I had done. Did I mention she had already spoken to her attorney? I think I forgot to tell you that part of the visit. At the end of my previous visit with her, she told me that her attorney had advised her to stop payment on the check that she had originally written for her initial services. I wasn't sure if that was even legal or not, but needless to say, that put a damper on our relationship. And then when I said I didn't feel it was in either of our best interests to do the thread lift, her tearful eyes quickly changed to scowling ones and she let me have it. I asked my office manager to step into the office with me since I wanted somebody else to witness the exchange. But now she turned from a weepy patient to an angry woman who was yelling and screaming at me.  Since it quickly became apparent that we could no longer communicate in a constructive manner, I let my office manager (who is extremely proficient in all situations) try to diffuse the tension. 

Cosmetic medicine is still medicine and needs to adhere to the regulations governing any practice. But are the terms somewhat different when it comes to patient "abandonment" and how to notify a patient that you no longer wish to be their provider? What happens when a patient wants you to do something that you don't feel comfortable doing? What if it gets ugly? Please share your stories or thoughts on these situations.

To learn more about how to end the Doctor-Patient relationship and the legal aspects or ethics involved, click here

Medspa Doc: Do you know what your patients are reading about you?

gotplasticsurgery.jpgCosmetic patients are smart & educated consumers.


Many of the patients who walk through your doors have expectations that are set by previous patients. Often those patients setting expectations are not yours. Some are benign, some are positive, a few are downright nasty.

As an example, here are some posts from Well Past 50, a site for women.

Patients have access to more of this information and there will be a time in the not to distant future where your practice will be listed with patient feedback and ratings from your patients posted on the site. (If you've purchased on Ebay you'll know how possessive buyers and sellers are of their feedback rating.)

These types of systems produce negative reviews out of proportion since it's motivated consumers that go to the effort of praising or trashing your practice. But you'll still have to deal with it.

Patients have more information now than they've every had and it's changing the way they are able to research and evaluate you. How will you fare when all of your patients can intereact with each other without you?

Top 10 reasons why loyalty programs don't work.

Medspas consultants will often promote loyalty programs as a way to reward your best clients and build their loyalty to the practice. But loyalty programs are often not all they're cracked up to be.

10 reasons whyloyalty programs won't work in your medical practice?

  1. Loyalty programs are based on discounts, which ‘train’ existing patients to expect 'sales' and wait out your normal prices.
  2. They attract your most loyal patients who would happily pay a premium.
  3. They confuse patients and staff and create customer service problems.
  4. they discourage new patients by making them feel punished or excluded.
  5. they encourage competitors to retaliate with me-too programs.
  6. they damage your perceived image by making you a 'discount' store.
  7. they reduce profit margins from your best patients.
  8. they reduce your ability to serve patients at the highest levels.

Ok, there were only eight. But the point is, patient loyalty can’t be programmed. As soon as patients begin to feel ‘stalked,’ they choose ‘fight’ or ‘flight.’ They either figure out how to game the system, or else they seek care elsewhere.

Chaos causes medical mistakes, not incompetence.

How to "survive" an ER visit.

(and as bonus: Complexity causes 50% of all returns.)

97912882_54b9f5cd7e_m.jpg"The main culprit isn’t incompetence but chaos: The nation’s emergency rooms are overburdened and underfunded, treating ever more patients with ever fewer resources. "You don’t want to scare the public, because hundreds of thousands of patients get cared for very well in emergency rooms every day," says Gail Warden, president emeritus of Michigan’s Henry Ford Health System, who chaired a trio of studies of emergency care released in June by the National Academies’ Institute of Medicine. "But the system is stretched, and it could be at a breaking point in three to five years."

Federal law requires that ER doctors and nurses treat everyone who shows up, regardless of ability to pay, but there has never been enough federal money to cover those costs—and that money is dwindling."

And from Complexity causes 50% of product returns.

Half of all malfunctioning products returned to stores by consumers are in full working order, but customers can't figure out how to operate the devices. Product complaints and returns are often caused by poor design, but companies frequently dismiss them as "nuisance calls.

The average consumer in the United States will struggle for 20 minutes to get a device working, before giving up.

Most of the flaws found their origin in the first phase of the design process.

This last one might be viewed as the most important. During the design of a system program or product, most of the problems with interface or use that are going to crop up are built into the system. .

 

The 5 Stages of Consumer Decision Making that all your patients use.

decision-making.jpgWhen patients buy your services, they all engage in a decision-making process. Research shows that one of the major problems with businesses is that they fail in supporting the customers in this process. By understanding your patients needs and concerns as they progress through the decision-making cycle, you can build better and more successful medical practice.

The consumer decision-making process

Imagine that you need a new cell phone. The first step is recognizing your need. (You can insert 'want' or 'desire' instead of need.) Though you may have an idea of which phone you would like to purchase, you research your options to narrow the possibilities.

If you're a male, you go online and investigate manufacturers, resellers, and independent consumer organisations. You ask friends and colleagues for advice, and you visit a few stores to "kick the tires." You compare you options and finally decide to purchase what seems to be the best alternative, based on criteria like design, features, price. For men, this is a linear process.

If you're female you go through a much different, non-linear, decision making process that takes into account different variables than males typically choose. Men perceive this process as introducing a lot of extraneous noise into what should be a straight forward decision about cost vs.. benefits. Women are actually much harder to please because they're also buying a cell phone based on: What color it is. How it fits in their purse. cute factor, etc. They're deciding how much 'faith or trust' to put in the business. One process is not 'better' than the other, they're just different.

Warning: This is where many men don't get it. Women are using criteria that men don't understand so men tend to disregard this process. While women are harder to please, they are much more loyal consumers if you can satisfy them initially. Men look for features, women look for faith. 

After your purchase, you assess whether it lives up to your expectations. You might find that the phone is able to do what the manufacture promised, but that the navigation is unmanageable. You decide that you will never buy this brand again.

Your decision-making process can be described as five different stages:

decision_process.gif 
The customer decision-making process and its five stages

The complexity of this process can range from careful analysis to pure impulse. While an impulse buy, such as adding additional services or products to an existing appointment, can take place instantaneously, complex purchase decisions stretch over a long period of time. This buying process is an iterative process, where patients may collect information from different sources and repeatedly return to re-evaluate and compare the information they have found. Women are particularly adept at this and consider any number of points that you may not be aware of in this decision making process. One of the most important of these could be described as 'feel'. (Men typically descry this type of methodology, often causing them to dismiss what women see as the most important part of their decision making.)

The customer funnel

The Web is a great tool for information research. Studies show that the Internet is now the primary means by which people get key information. This counts for commerce in particular. People expect to be able to find information about products they are considering buying, even if a company doesn't sell its products online.

Considering peoples' high expectations about the information and services available online, it's disturbing to see just how bad commerce web sites are at selling.

Lets look at a study on consumer buying patterns online as an illustration: From their tests of consumer commerce, researchers from the usability consultancy UIE have discovered that the buying process acts as a sieve, where customers are inadvertently filtered out at each stage of their decision-making process. UIE's studies show that out of 100% of purchase-ready customers completely intent on buying, only 34% will actually make the purchase.

 customer_sieve.gif

Studies show that  buying process acts as a sieve, where customers are inadvertently filter out at each stage of their decision-making process.
 
At the information search stage, 9% weren't able to find the products they were looking for because they couldn't identify the right product category or find product options. 8% of the shoppers who succeeded in finding products gave up because the product lists didn't provide enough information to identify purchase options, or because they were confused by going back and forth between product lists and product description pages in order to decide if the products would fit their needs.

UIE's researchers found that the major problems occur when customers want to evaluate alternatives. Only 25% of the shoppers who reached this stage proceeded to the next. Some stopped because they realized none of the products would fit their needs, but most because the product information was so inadequate that they couldn't tell if the products they were interested in satisfied their needs.

At the purchase stage, 13% dropped out because they didn't want to go through the required registration process or because they where disappointed by poor shipping charge policies.

UIE also found a surprisingly high amount of problems in the purchase evaluation stage. 11% percent of the shoppers where either so unhappy with a product that they returned it. Some of the shoppers told UIE that they returned a product because it wasn't what they expected, which suggest a failure in setting up the right expectations in the product evaluation stage.

Knowing the customers' decision-making process

The most interesting thing about the study is that while they observed critical usability problems because of inadequate or poor information:

  • Customers couldn't identify purchase options
  • Customers couldn't decide if the products would satisfy their needs
  • The product presentations and descriptions raised wrong expectations, which made customers unhappy with their purchases

Businesses simply fail in supporting the consumer decision-making process by not taking their customers' information needs into account.

1419520199.01._BO2,204,203,200_PIsitb-dp-500-arrow,TopRight,45,-64_AA240_SH20_SCLZZZZZZZ_V65571311_.jpgRecommended reading: Marketing to women.

As a Physician, you will have little chance of knowing exactly which information needs patients have when evaluating specific services or treatments. To support the ' decision-making process, you need to understand which needs and concerns they have when making a purchase decision. There will often be patients who unintentionally mislead you by discussing a number of issues that appear to be of equal weight when they really have an overriding concern. You need to recognize how to discern exactly what a patients hierarchy of wants is.

The most effective way of discerning what is motivating your patients is to ask a number of very specific questions during a consultation. Surface physicians are trained, sometimes through trial and error, to ascertain the specific motivations that brought a patient in so that they can support the patients decision-making process.

Information search

The basic prerequisites for patients making their way through the information search stage is that they are able to find services that fit their perceived needs, and that they can easily identify their available options.

In order to support the decision-making process at this stage, you'll need to know:

  • How will potential patients be inquiring about purchase options?
  • What basic information do patients need in order to identify purchase options?
  • What information do patients need in order to decide which product criteria are important to them?

Evaluation of alternatives

The problem with the operations in most clinics is that there's systems in place to effectively solicit this information. We saw above how a large number of customers dropped out at this stage simply because the information provided was inadequate. They couldn't decide whether the products they were interested in would fit their needs. All of your staff (especially the physician) should be acting as a skilled educator, and have answers ready to any question or concern that the customer might have.

Some of the critical questions that you need answers to are:

  • What information does the patient need when evaluating treatment alternatives?
  • Which product evaluation criteria will customers be using and which are most important?
  • Which concerns will the customers have and how can we address them proactively?
  • How can we encourage patients to maintain contact with the clinic?

Purchase decision

At this stage emphasis should be on providing the easiest possible way for patients to carry their purchase through. In the UIE example, we saw how obstructive policies made the process difficult. Patients want an easy way to find out where and how to buy.

Purchase evaluation

The outcome of the post-purchase evaluation stage is a level of customer satisfaction or dissatisfaction, which is determined by the customer's overall feelings about the effectiveness of the treatment and the experience.

The number on effect on patient satisfaction is the management of patient expectations. Most patient dissatisfaction is a consequence of not encouraging accurate customer expectations at the product evaluation stage. In order to avoid this, we have to make sure that the entire system, from initial contact to treatment, sets up the right expectations.

Designing for customer decision-making

Once we feel confident about customers' needs and concerns, our next challenge is to decide how to present the information to the customers in a way that supports the decision-making process. This is as much science as art. It is common for physicians to inflate their abilities in this regard. It's been my experience that every physician can benefit from constructive criticism and  training in presentation. Patient feedback to physicians is clouded by the patient/physician relationship. The result is that physicians feel that they are perfect communicators when they are not.

Conclusion

The decision making process happens in every instance. When confronted with the poor state of customer service and retention in medical clinics, patient are left to choose between providers. At each step of the decision making process, these clinics lose patients because staff never perfectly addressed their perception of what would be a 'perfect solution'.

Your medical spa staff should  be supporting patients no matter where they are in the decision-making process. They should address their needs and concerns at every point. Understanding the decision-making process, and how specific customers engage with specific needs is a prerequisite for any clinic with an ambition to turn visitors into patients.

What's a patient worth to your practice?

Most businesses exist to make money.  We've all heard the phrase "maximize profits and keep costs low." Among many factors, one of the major ways to build a successful and profitable medical practice is to reduce patient acquisition costs through a variety of patient retention techniques.

With that said, keep the following in mind: for an average company, it costs five times as much to obtain a new customer than to retain a current one. It can reach up to sixteen times as much to turn a new customer into one as profitable as a lost customer.   And that can be directly applied to most medical practices, especially ones that focuses on cosmetic services or charge fee for service.  Gone are the days when physicians could expect people to patiently sit for over an hour in the dull, dark waiting room with old boring magazines to read and then expect them to be grateful to even be seen.  Most of our patients are frustrated if they can't be seen within a day or two and will not tolerate waiting beyond 10 minutes in the waiting room.  And I don't blame them.  They are paying a lot of money for their treatments and are busy themselves.  Plus if we can't accomidate them, then usually there are at least 5 other physicians in the area who can do their Botox that same week.

What's a practice to do?  Treat the patient more like a customer and understand your practice through their eyes.   According to Marc Mertz  with The Horizon Group, a national health care consulting company, most patients base their level of satisfaction on two things: the front office staff and the office itself.  Can that be true?  You mean they don't seek out the best physician through hell and high water?  Actually patients tend to judge your clinic by the things that you likely take for granted.  And no matter how skilled you are as the doctor or where you went to medical school, they key in on a rude receptionist or the paint chipping from an exam room wall.  In fact, according to a survey of family practice patients, the front-office staff, ambiance of the practice facility, clinical support staff, and then physicians were ranked in order of importance as factors influencing patient satisfaction.

This is very important information and if you were suprised by it, then it was even more important for you!  Physicians tend to focus on their clinical expertise and think that staying abreast in their field is enough to guarentee a happy patient population.  And while that may be true in some fields, that is not the case in the field of elective cosmetic procedures.  So how do we adapt to this information?  One sure way to fail is to ignore it.  But offices who succeed tend to take it in, learn from it, and actually implement the changes necessary to keep their patients happy and, in turn, keep them coming back to them over and over again.

To read more about steps that you can use to improve your office, click here

Customer Service Obsession: Love your patients the Amazon way.

 Is obsessive customer service part of your medical practice?

Amazon is taking a page from Nordstrom's 'heroic customer service' book. Why? Because it's good business. I posted on the oft-induldged stupidity of price wars. One of the differentiators that drives business is customer service. Notice I did not say 'patient care'. Customer service is outside of the medical care you're providing. Customer service is the touchy-feely warm and cozy perceptions that your patients have or don't have.

From my friend Shmula's blog on Amazon's customer obsession:
blockquote.gifpushing 300,000 - 600,000 units of product per day through a fulfillment center is no easy task. gratefully, Amazon’s home-grown software and efficient processes help to deal with the immense volume. sometimes, if there are inventory gliches or poor product flow, an activity known in warehousing as “product chasing” occurs. “chasing” is when a product is ordered, but it is nowhere to be found in the (1MMft^2) facility. in reality, it is somewhere, but according to the inventory software the product is supposed to be in its assigned bin, but it has been moved somehow, drifted to another bin, or stolen. this defect is called Inventory Record Defect Rate and is one of the most important metrics at Amazon, and is highly scrutinized and reviewed by Bezos and his senior team.

customer_lifecycle_experience.gifWhy is it important? because when the front-end Amazon store allows you to order something, the precondition is that the product and the quantity desired is currently in an Amazon facility: the software follows a very complicated algorithm based on network optimization, shortest path techniques, and traveling salesman routing; a check is made against the inventory database — in real time — how many are available, which facility, and how many have been committed already. when the order drops into the assigned facility, the picker goes to the bin where the product is supposed to be, but because IRDR is poor, the item is not there. this situation leads to two following options: (1) go to a local store and buy the item and ship it to the customer or (2) do a “network flip”, where the assigned facility “flips” the order to another facility that has that product. option (2) is ideal, but during the holiday season, it is very difficult to do. during the holidays, option (1) is common.

doing option (1) is heroic and is a true example of customer obsession at work: it’s not about serving all customers as an aggregate, but it’s about serving one really well, several million times. at Amazon, they really believe this and live this.

This kind of take-no-prisoners approach to customer service is absent in most clinics I see. You're asking your patients to spend their money inside of your business. Great customer service is your obligation.

Medspa Consultants writing business & marketing plans.

The infamous Medical Spa Business Consulting Plan: The emperor has no clothes.


chart.gifI've received a few emails lately castigating a number of medspa consultants by name. (Since I have no other information those names will not be mentioned.) You might first read my view of most medspa consulting and/or franchises here.

The physicians/owners feel that they were over-promised and under-delivered. One doc referred numerous times to the 'medspa business plan' that his medical spa consultant wrote for him. I thought I'd weigh in on this business and marketing plan issue.

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What's with the Medical Spa price wars? Cheap is no way to build a medical practice.

Medical Spa physicians always seem to want to offer the lowest price. Why?

I speak with a lot of physicians. One of the first few questions that I'm asked has to do with pricing. (read the MedSpa Business or Med Spa Advertising Q&A here.) Physician and medical spa owners seem to be highly agitated by not offering the lowest price in town. This shows directly a lack of competence and belief in their own abilities. If you can't imagine why anyone would come to you except that you have the lowest prices, you have big trouble.

Anyone who will choose you based on price, will leave you just as quickly. That's OK if you happen to be able to deliver services at substantialy reduced costs compaired to your competiton (think Wal-Mart) but it's certain death if your not the clear low-price leader (think K-Mart). Does your Botox, Restylane, Thermage tips, or staff cost significantly less that your competition? No.

The only sustainable business you can build is a reputation on something other than price. Make a decison about where you want to be and start moving in that direction. No woman ever recomended Surface to her best friend with 'they're the cheapest'.

From Seth Godins Blog:

blockquote.gifCheaper is the last refuge of the person who's not a very good marketer. Cheaper is easy and cheaper is fast and cheaper is linear and cheaper is easy to do properly, at least at first. But cheaper doesn't spread the word (unless you are much cheaper, but to be much cheaper, you need to be organized from the ground up, like Walmart or JetBlue, to be cheaper). They are, you're not.

Cheaper is a short term hit, not a long term advantage. Cheaper doesn't create loyalty, because the other guy can always figure out how to be cheaper still, at least in the short run.

Is medical advertising ethical?

nnm_ad.jpgThere is a new discussion area: Advertising + Marketing

 
The prevalence of advertising for cosmetic medicine brings out the charlatan element. Plastic surgeons and cosmetic dermatologists have been in this arena for many years but the addition to the market of doctors who have never advertised their services before brings the ethical conflict up more and more.

Here's what the American Medical Association says about advertising medicine:

2.2 Advertising
a. Confine advertising of professional services to the presentation of information reasonably needed by patients or colleagues to make an informed decision about the availability and appropriateness of your medical services.
b. Make sure that any announcement or advertisement directed towards patients or colleagues is demonstrably true in all respects. Advertising should not bring the profession into disrepute.
c. Do not publicly endorse therapeutic goods as defined under the Therapeutic Goods Act 1989 (C’th), contrary to the Therapeutic Goods Advertising Code.
d. Exercise caution in publicly endorsing any particular commercial product or service not covered by the Therapeutic Goods Advertising Code.
e. Ensure that any therapeutic or diagnostic advance is described and examined through professional channels, and, if proven beneficial, is made available to the profession at large.