Do Low-Cost Veterinary Clinics Negatively Impact Private Practice Veterinarians?
For years, low-cost veterinary clinics have struggled with the perception that their work cuts into the revenue of local private veterinary practices, giving the low-cost clinics, which are often subsidized by grants, an unfair advantage over full-service private clinics. This stigma has persisted although no research has documented the impact of low-cost providers on the overall veterinary services market.
The ASPCA and an external consultant conducted computer simulations using financial modeling techniques to understand the market dynamics of a low-cost clinic with lower prices and potentially long wait times and higher-priced full-service private practice veterinary clinics with potentially shorter wait times.
The model simulated a market with two clinics: one low-cost and one full-cost, and two populations of individuals representing two different market segments: one with high ability/willingness to pay for veterinary services and one with low ability/willingness to pay.
The basic theory of this model is that the low-cost clinic and the full-cost clinic target different market segments. Market segmentation is a fundamental concept, widely applied in many industries, accounting for subgroups of consumers with different demographics and preferences. Air travel is a classic example of market segmentation. Some individuals are willing to pay more to ride in first-class, while others choose to ride in economy seats. Both types of passengers are on the same flight and reach the same destination—and both are needed to make the airline industry profitable.
Here are some of the top-level findings:
The price of a low-cost clinic appeals to clients with both low and high ability/willingness to pay. That means many clients will demand services at the low-cost clinic, increasing wait time and inconvenience to access veterinary services at the low-cost clinic. Segmentation occurs because those with high ability/willingness to pay will pay the higher prices at the full-cost clinic to have their pet seen quicker. This increases the overall market value for veterinary services in the community and means more pets overall are receiving veterinary care.
The full-cost clinic attracted the market segment with high ability/willingness to pay, and the low-cost clinic targeted the market segment with low ability/willingness to pay. Thus, the low-cost provider does not take clients away from the full-service provider.
Because the low-cost clinic targets and serves a different market segment (those with low ability/willingness to pay), more pets receive care.
Discouraging low-cost veterinary clinics from entering the market decreases efficiency by leaving a population of pets unserved, decreases revenue for the full-cost clinic, and reduces the overall availability/market for veterinary services.