VALUE-BASED Strategic Pricing Best Practice for Veterinary Practices
Low Incremental Costs to Offer New Veterinary Services

Cost-based pricing is the most popular method to price veterinary products and services. Although it rarely makes sense to price veterinary services offered by your practice solely using a cost-based pricing method, i.e., by estimating your total costs to deliver a service and marking them up by a certain factor, costs do provide an important input into pricing decisions.

In this best practice tool, we will discuss the concept of incremental costs, and how you can use incremental costs to make profitable pricing decisions.

In every veterinary practice, the costs set the floor or the lower limit on prices by establishing the lowest prices you can charge your customers on average. In the long-run, your veterinary practice will only be able to keep its doors open if it can cover all the fixed and variable costs of delivering the services. However, this does not mean that every single service you offer has to be priced above costs or earn a profit. As we will see in this tool, it is possible to charge prices far below total costs for some services for carefully considered reasons and still earn a healthy profit. For day-to-day pricing decisions, especially for specific decisions such as offering a targeted discount, introducing a new or additional service (or product) at a discount, a specific type of costs is much more important. This is known as incremental costs.

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