Most home care agency owners and managers have faced the difficult position of being told that a competitor has lower rates. This usually occurs during the assessment portion of the referral process while meeting with a prospective client and/or family. While the experience can be awkward, it will happen to most home care representatives more than once.
The question then arises whether or not home care agencies should “discount” rates. Some industry experts may have different opinions on the matter. However the general consensus is that selling on price rarely results in business success.
The consequences of discounting in the context of home health marketing are particularly concerning. Here are 5 great reasons to avoid the temptation:
1. Devalues Services and Company Brand
Discounting as a method of acquiring business usually devalues a company’s brand, whether it provides plumbing services or home care. While the easy-fix strategy is often used by car salespeople and other merchants, it appears very unprofessional in a healthcare setting. Even if the tactic manages to secure a new client, he or she will likely accept the offer with a bit of buyer’s remorse.
A prospective client may wonder why a reputable caregiver company would haggle over rates in the first place. Or, perhaps she’ll be concerned that the home care representative didn’t provide his best rate right from the start and view that as a sign of dishonesty. The prospect or her family may even worry that they’ll have lower priority than other clients, since they’re not paying as much for services.
From a bigger-picture perspective, the referral source (hospital case manager, social worker, etc.) may hear about the representative’s discounting. When that happens, she may question the value of the agency’s services or ask other similar questions. Worse yet, that referral source may start quoting the discounted rate to other potential clients as the new expectation!
2. Word Gets Out to Everyone
A home care agency’s community is much smaller than it sometimes seems. Hospital staff, healthcare professionals and families quickly spread word about caregiver services. While this grapevine home health marketing can result in new referrals, it can also set preemptive rate expectations from prospective clients.
If a family refers a home care agency to a neighbor—complete with the hourly rate—one can assume that the new prospect expects to pay the same price. It is incredibly difficult for a home care representative to tell a potential client that he’ll have to pay a higher rate than his neighbor for the exact same services.
3. Creates Margin “Death Spiral”
Perhaps the term “death spiral” is a bit hyperbolic. However, any home care agency owner or manager in charge of business financials knows that maintaining proper margins is like walking a tightrope. Just a handful of under-paying clients can throw the entire equation out of whack and create an unsustainable situation.
The problem of low margins impacts every aspect of a home care business. Suddenly, there’s less budget for home health marketing efforts or the hiring of new office staff. Problem begets problem, and operations struggle. Eventually, the agency has no choice but to discount rates due to sub-par service.
4. Hard to Raise Rates on Existing Clients
Here’s an insight unknown to most consumers… Many car insurance companies have an entire marketing strategy of poaching customers from competitors based on normal fluctuations in premiums. So, “ABC Insurance” will send out mailers asking people to get a new quote if they’ve noticed an increase in their premiums. The funny thing, however, is that all insurance premiums naturally fluctuate with all companies!
Basically, these marketing campaigns are capitalizing on the anger people feel when their normal monthly insurance payment suddenly increases out of the blue. The same holds true for home care agencies that try to raise rates on existing clients. Yes, it can be done. But, it also results in complaints and a loss of clients.
5. Low Caregiver Pay Rates Hurts Service
The margin death spiral was already explored in terms of negative affects on home health marketing budgets and general operations. However, the topic of low caregiver rates deserves its own discussion. Low margins hurt caregiver pay rates the most, and quality caregivers are the bread-and-butter for any home care agency.
Simply put, a successful agency never underpays its caregivers. Such a strategy may work in the short term, but it always fails over time. Low margins require that companies pay below-market rates, and this results in unhappy workers, poor service and high turnover.
Home health marketing is a unique challenge far different than other forms of sales. Home care agency representatives must work hard to secure new clients while still respecting the sensitive nature of their business. While discounting is generally frowned upon in most forms of sales, it’s particularly negative for the long-term success of a home care agency.
If you own a home care company and are seeking more referrals and business growth, be sure to talk to the industry’s leading home health marketing firm today!