Growing Your Laboratory Business is Like Gardening

Farmers can’t harvest crops in the early fall if they have not planted seeds, tended the fields and kept the weeds away. The same can be said for marketing efforts in the dental laboratory. You have to establish relationships, nurture them and keep the chaff from compromising the time you should be spending with your best clients. Let’s look at these in reverse order so you will have the time to spend on the first two.

In his 2002 article in the Wall Street Journal, The Unprofitable Customers, Will Morton admonishes us to be able to identify them and either make them more profitable or show them the door. We have all heard and maybe even use the 80/20 principle. Well does it ever apply here? Sort your customers by revenue first, and then look at a breakdown of the individual costs of serving them. If your largest monthly account sends everything back at least once for an uncharged adjustment, they may not be you best client at after all. Delivery charges and postage, discounts to compete with others and a host of other hidden expenses can make the bottom line of some accounts less attractive. Once you have them identified, see if there are some things available to make them profitable again. If they have a high remake rate, charge for them. The downside risk is losing an unprofitable customer, which is an oxymoron.

Eliminate special pricing or discounts, evaluate delivery costs, and track how many times you handle a case. If these activities are too frequent and compromise your margins (financial not measured in microns) charge extra for those individuals activities.  As my good friend Bob Ingrassio, CDT, of CQC Dental Lab in Rochester N.Y. says, “Price them for profit, don’t fire them, if they don’t want to pay they will fire themselves.” The only thing you have to risk is the loss of a loss! That sounds like a double negative, which is actually a positive.

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If you think of your five favorite accounts, your best customers, you are likely to find a few things that they have in common. They likely invest a significant dollar amount with you every month. They are likely easy to work with and communicate well even accepting your suggestions as part of the professional health care team. And most importantly, you both likely have become friends. You care about each other and have the patient’s best interests at heart when you make decision. This level of engagement goes beyond simple customer satisfaction, or even loyalty, it is the development of a raving fan! There are several surveys that can track the level of customer engagement for businesses and help you make strategic changes to improve the scores. In the end though, there is one question, one engagement query that is far more important than all others in determining where you are at with your clients. “How likely are you to refer a friend to use our laboratory?” Rate that from 1-10 and you can get a quick pulse on their level of engagement.  Here is how it works.

Tally the scores by adding all of the 9 and 10s together calculate as a percentage of responses and we’ll call them your promoters. Then add all of the 1-6s together, take another percentage calculation, they make up your detractors. Now simply subtract your detractors from your promoters and you have you net promoter benchmark. Don’t be surprised if your number is lower than you suspect. The median score for over 400 companies across 28 industries (based on 130,000 customer surveys) was just 16 percent.  Companies with some of the highest scores (eBay, Amazon and USAA) receive net promoter scores above 75 percent!

The survey should include this question and touch base on other pieces of information you want to know. Any good book on customer service or customer relationship management will have some form of a survey you can use as a guide.  This net promoter score is taken from a Harvard Business Review December 2003 article. You should also log onto the Gallup Management Journal at http://gmj.gallup.com/ and search for more information. Magazines Inc. and Fast Company have excellent Web sites as well. Gallup has researched questions for surveys and developed and entire protocol that is successful for building a business. Strengths theory matches people’s skill sets to appropriate tasks.  Employee engagement drives customer engagement and that drives sustainable growth and profits!

These things do not and cannot happen in the blink of an eye. It takes time. Time to develop the internal systems that support your goals. Time to develop the external systems to put you in place with the right customers and clients. Time to let those develop into meaningful and engaging relationships. It is not the quick fix, drive through mentality that seems to pervade society today. Building a good business takes time and a focus on doing what is right for the right reasons. That way, when the harvest comes, there is plenty to eat, and sell and even store away for a raining day or slow season. The fluctuations of our economy will have a less deleterious impact on this type of a business plan.

Do you have a question for Mark Murphy? E-mail jdt@nadl.org.