Wellness Plans: Why Banfield Succeeds and You Won’t

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Several years ago, the promised panacea for dwindling patient visits was wellness plans. “Look at how successful Banfield is!” the consultant community raved. Headfirst many practices dove, launching plans, signing up clients, and then the excitement faded. Reality set in. The truth of the matter is, wellness plans are painfully difficult to do well and the industry, outside of the friendly-confines of PetSmart, was ill-prepared to administer plans. Sure, there are some practices that are really proud of their results, but when asked the difficult, but integral questions like “what is your client retention for non-renewals?” or “what was your realized margin on plans?” few have the answers.

We don’t do wellness plans at VPP hospitals. The reason is twofold: one, we’re really good at driving visits. Most of our Partner practices see annual visit growth in excess of the industry’s overall revenue growth, so discounting seems counterproductive when we’re growing without giving money away; and two, we know when we can’t execute the right way on something and with wellness plans, we can’t easily get the data we need from practice management systems to properly assess performance.

So how is Banfield so good at them when the individual practice isn’t? The answer lies in their back office, specifically the intersection between analytics and marketing. Allow me to explain. The typical architecture of a wellness plan is a group of services offered at a monthly fee wherein having all of the services performed in a given year will be much cheaper than paying for each one individually, a la carte. If a pet owner has everything included in the plan performed, the practice loses money. If a pet owner only has some of the services included in the plan performed, the practice makes a lot of money. The mechanics are that simple. Now, since wellness plan financial success is predicated on the percentage of services that get utilized, Banfield wisely researched two important numbers that no individual practice really thinks about. The first is the breakeven point; in other words, what percentage of the services can be delivered before the twelve months of wellness plan fees becomes a losing proposition relative to the pet owner paying for things separately. Above that percentage we lose, below that percentage we gain.

I know a lot of you are thinking, “Banfield’s not that smart, I thought of that too and know my practice’s breakeven point.” That’s fine, but do you know the second measure, which is the percentage of services utilized wherein a pet owner feels like they got value out of the plan and will renew? It’s this second one that is even more important than the first and which Banfield knows intimately and no individual practice can even begin to ascertain. For one, no individual practice has enough patients on plans to even begin to assess the figure. Two, no wellness plan administration software that we’ve ever seen has reporting to help you get to this number.

The reason this number is critical is because of retention. A client who doesn’t renew a wellness plan does so because they don’t feel like they got value out of it. Any consumer who feels like they were taken advantage of when it comes to value, typically looks elsewhere for their services. While never publically reported, it is widely suspected that Banfield sees meaningful client attrition from non-renewals. In other words, deliver value or you not only lose the plan participant, but you lose the client too. For a marketing machine housed in a PetSmart, this isn’t the end of the world. New clients practically grow on trees for Banfield. For the individual practice that goes all-in on wellness plans though, non-renewals can cripple the business because few practices are stellar at attracting tons of new clients each year.

Let’s get back to this last measure though and how Banfield’s marketing prowess ensures success and the individual practice can’t control it in the same way. If, for example, Banfield knows that say 67% service utilization ensures renewal, and Mrs. Smith is only at 53% with a month to go before her pet’s renewal date, Banfield will aggressively market her to get her to come in for the remaining services that will take her utilization to the cusp of that 67%. They have built marketing programs that individually try to move clients to renewal, and at a more aggressive pace as renewal date approaches. Are you doing that in a methodical way? Even with the large team we have at VPP, I know we can’t without massive investment in marketing technology. I’m pretty sure there is no individual practice in this country that can do it themselves.

The last piece of strategy that helps Banfield is service pricing. Have you ever noticed that outside of a plan, Banfield’s prices are above market? That’s intentional. It provides a further cushion in case wellness plan utilization grows past the breakeven point for too many patients. An individual practice that for years has never had plans can’t just go and jack prices for 80% of its line items in tandem with launching wellness; they’d go out of business. That’s a change that can’t be enacted until a critical mass of clients are already on plan. Banfield starts from scratch with this varied pricing approach, the established practice has a horse before cart problem that can’t really ever be overcome.

Wellness plans, like fad diets, won’t ever go away. Practices that are on them will leave them in place for fear of client retaliation. New practices will launch them with the hope that they can drive visits. Everyone will continue to marvel with jealously and consternation that Banfield continues to succeed with such a different approach. Just know that they’re playing a different game than you or I and that isn’t going to change any time soon.

About The Author

,
VP of Marketing & Technology

Win Lippincott serves as VPP's in-house marketing and technology expert, tasked with working with partner hospitals to drive new revenue growth through improved customer retention programs and new patient development initiatives. He possesses a deep knowledge of online and traditional marketing strategies and pairs this expertise with an advanced understanding of the various practice management software programs to offer hospitals actionable advice for improving their overall performance.

Contact: wlippincott@vetpartners.com

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