Are All Hospitals Really Price Buyers?

May 18, 2015

I see that you’re driving a Chevy Spark, getting 119 combined city/highway miles per gallon-equivalent. And, at around $25,000, it’s got to be the most efficient car currently being sold in the U.S.

What? You’re not?

Oh, then you’re driving a Nissan Versa 1.6 S, right? At $11,990, it’s the least expensive car sold in the country.

What? You’re not?

You mean that you’re not a price buyer; you’re a value buyer?

Certainly, there are price buyers out there. In the car market, they are buying those Versas and their close competitors.

But most people don’t buy on price alone; rather, they buy on value.

Value is what a buyer receives for the price paid. If value is more than the price, it’s a good deal. The devil though, is in the details: what’s value to you isn’t value to everyone. And, value is determined by the buyer.

I once represented a guy who could, and did, move $50 million into an account to show good faith within a day of being asked to do so. Yet he drove a ten year old Buick station wagon. He apparently saw no value in a Mercedes. Another client, similarly well off, took a weekend trip to Palm Springs and came back with not one, but two, Rolls Royces.

So, then, why do so many simply assume that all hospitals are price buyers? That they only want they cheapest price?

You can compete on price. Go ahead, try. But then your competition might simply cut their price, forcing you to cut yours even more. Your competitor doesn’t care if you are profitable.

Instead, compete on value, the value that you provide to your customer. Yes, creating value in the eyes of your customer is harder than simply saying “we’re the lowest cost provider,” but you’re selling professional services, not mass produced pickup trucks.

Sure, some or even many hospitals may be price buyers. If they are, consider that they may be the wrong customer for you. Either that, or you need to develop a more sophisticated business model in which you provide different value options to different customers.

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