It's time for a different approach if your middle-income veterinary clients are dwindling.
We've all had to tighten our belts as a result of the recent recession. Frivolous spending has been replaced by fiscal responsibility, and items that were once considered necessities have taken a back seat to true must-haves. If your practice has felt the impact of this spending cease-all, you're not alone. But is the dip in your veterinay clinic's income due solely to the recession?
Not according to the findings from the second phase of the Bayer Veterinary Care Usage Study, which reported that 51 percent of veterinarians describe a net decrease in their client visits. The recession is certainly one of the reasons given, but demographics could also explain the drop in visits.
A new study from Stanford University (and released by the Russell Sage Foundation and Brown University) found that part of the country's middle class have slipped to the lower rungs of the income ladder, as manufacturing and other middle-class jobs have dwindled, while the wealthy receive a bigger proportion of the income pie. Put simply—there are fewer people in the middle.
The study identified this pattern in about 90 percent of large- and medium- sized metropolitan areas from 2000 to 2007. Philadelphia, Detroit, Oklahoma City, Toledo, and Greensboro, N.C. are among those areas with a growing number of families that fall into either the low-income or affluent spectrum. Due to this shift, several U.S. companies have become convinced that the consumer market is splitting into high and low ends and eroding in the middle, says Ellen Byron in a recent article in The Wall Street Journal.
Byron cites Proctor & Gamble, whose growth strategy has for generations been focused on creating essential products for the U.S. middle class. But now the maker of Crest toothpaste and other popular consumer products will be setting its sights on the economically fortunate and the economically pinched consumers—but not much in between. Citigroup calls this the "Consumer Hourglass Theory," according to the article, and has urged investors to zero in on companies best positioned to meet the needs of the highest- and lowest-income consumers.
"Firms catering to low-income consumers, such as Dollar General Corp., are posting gains boosted by formerly middle-class families facing shrinking budgets," Byron reports. At the opposite end of the spectrum, "Luxury retailer Saks Inc. is bolstering its high-end apparel and accessories because the wealthiest customers—not those drawn to low-budget items—are driving the chain's growth," the article states. Also, companies that favor the rich, such as Tiffany & Co., have reported continuously high sales.
"Companies have thought that if you're in the middle, you're safe," says Citigroup analyst Deborah Weinswig in the article. "But that's not where the consumer is anymore. The consumer hourglass is more pronounced than ever."
So what does this mean for the veterinary practice owner? If your practice has historically catered to middle-income clients—whom you are now seeing less often—you should consider shifting your focus toward the sectors that are driving growth: the low- and high-income consumers.
Veterinary Economics Editorial Advisory Board member Bob Levoy is the author of seven books, including 101 Secrets of a High Performance Veterinary Practice and 222 Secrets of Hiring, Managing, and Retaining Great Employees in Healthcare Practices.