I’ve been thinking about Price and Competitive Advantage in Home Care.
How does price affect the client’s decision to use your Home Care company?
I was doing an online presentation for a Mastermind Group of the largest franchisees in one of the Top 15 Home Care Franchise companies this morning. We were talking about creating distinction in the local marketplace, and I shared the Seven Sources of Competitive Advantage in Home Care.
One of the members asked about how to compete with new companies coming in to the local marketplace and offering service at five to six dollars an hour less then they charge. I mentioned that it is almost impossible to complete on low price in Home Care.
For any business to compete on low price, three things must be true:
- You must have the LOWEST PRICE by a significant margin
- You must ALWAYS be the lowest price.
- You must have the LOWEST COST in order to sustain your position.
Since the direct cost of care is your major expense, and you can’t hire caregivers for less than the competition is paying, you cannot gain and sustain the lowest cost in the marketplace, and therefore you cannot sustain the lowest price.
That led us to a conversation about a principle that I created a few years ago called “The 80th Percentile Principle.” This strategy says you want to study the prices and pay rates in your local marketplace, and position your agency at or above the 80th percentile. You want your price to consumers to be at or above the 80th percentile, and you want your pay to caregivers to be at that level also.
If you can find clients who value your services and are wiling to pay more to you than your competitors, then you can reinvest the added Gross Margin back into your caregivers, and into your sales and marketing process.
To do that, you need to really understand your local market, and you need to identify and attract Premium Clients.
Finding Your Premium Clients
To position your agency in the 80th percentile, you need to find your Premium Clients who appreciate the value you bring to their family member, and who are willing to pay a premium price for your services.
To understand the concept of Premium Prices and Premium Customers, look at the parking lot of your favorite fine dining restaurant. What do you see?
If your idea of fine dining is similar to mine, you will see a lot of Mercedes Benz, Lexus, Audi, and BMW automobiles. There are lots of high income and high net worth people out there who appreciate fine dining, nice homes, and luxury automobiles. They are also often the people who value and appreciate exceptional service and are willing to pay a premium price for Home Care.
As a Home Care company, how do you find those individuals who are able and willing to pay a premium price?
You do that by building relationships with high-potential Referral Partners who are Trusted Advisors to your Premium Clients.
If you would like to have a personal conversation about how you can find your Premium Clients and build relationships with High-Potential Referral Partners, hit reply and send me an email. We’ll set up a time to talk … no charge … no obligation.
