Inflation And What To Do About It

Andy Clark 8.3.22

A report this morning from the Resolution Foundation is predicting that inflation will rise to 8.3% by April 2022 - the highest that it’s been for over 40 years and you need to be ready for it.

 

To quote from the report. “A deep living standards downturn is just getting underway.”

 

We are going to be experiencing increased energy costs, fuel costs, food costs, higher National Insurance and increased prices in general created by supply chain disruption.

 

All in all, it suggests that a typical household’s income will fall effectively by about 4% or £1,000 per annum and that people on low or middle incomes will feel the effects the most.

 

Putting the tribulations that this creates for business owners aside for a paragraph or so, we need to consider the effect that high inflation will have on two groups, your patients, and your staff.

 

Your Patients

 

When inflation rates are high, all but the wealthiest patients will be tempted to delay visits, purchase less frequently, spend less when they do and even consider going to a less expensive practice.

 

This could be particularly true for patients who came to you for the first time during the lockdowns. Back then their comfortable budget had increased because they had less opportunity to spend money on other things and they wanted the relative safety of a small local business over the crowds of a multiple on a busy high street. When the same people’s monthly budgets are under pressure and COVID appears to be far less of a risk they may well just compare how much their last pair from that delightful independent cost them compared to the multiple that they had been happily visiting previously.

 

You can watch out for signs that this is happening in your KPIs but the indicators vary depending upon your price positioning.

 

Lower to mid-priced practices should look for falling conversion rates and average dispensing values. The book may stay busy, at least at first, as patients migrate to them from the more expensive alternatives.

 

Higher priced practices are often lulled into a sense of false security because they focus on ATV rather than volume. We often hear the following:

"Downturns don't affect me, my ATV is really good, I just don't seem to be seeing enough of them right now."

For premium practices, an early indicator of trouble ahead is a drop in demand.

 

Your Staff

 

Most of your staff are probably in the lower or middle income pay brackets and they will be feeling the pinch themselves. The buying power of their wage slip will be reduced, and they will have to make sacrifices and / or take on more personal debt.

 

You can expect to hear more requests for pay rises, particularly if you haven’t given one for a while.

 

Those of you who personally aren’t worried because your patients are wealthy will have to think carefully about how you approach this. If you and maybe your optoms are still “comfortable” enough to cope with an extra £1000 on the household bills but the rest of your team are finding it hard to make ends meet, you could have a problem brewing.

 

The government talks a lot about “levelling up” the divide between the well off and the poor over the country. You need to consider if this is relevant in your practice. There is no one size fits all solution to this and if you need some help thinking it through, just book a call with one of us. It’s a conversation we’ve had many times.

 

When times are tight some staff can also become increasingly uncomfortable about asking a patient to pay an amount for a pair of specs that equates to more than a week of their own wages. The answer to this lies in your communication and management skills.

 

 

The High Inflation Action Plan

 

Keep Your Staff Informed

 

When times are difficult, people feel better when they understand what they can do to make sure the worst doesn’t happen.

 

Demonstrating strong leadership is essential. They need to feel confident that their future is safe in your hands.

 

Don’t share your fears and nightmares (if you ever have them). It’s a great way to convince your staff that you don’t know what you are doing. Instead, let them know what is going on, and how they can play an active part in keeping the business and their jobs secure.

 

Unless you have used it very recently, now is a really good time to run the “Where the Money Goes” workshop just to remind them about the realities of keeping the practice afloat. There is good version of this in the first module of the online  I Can Help You With That training. If you have no idea what I’m talking about, book a call with Matt and he’ll explain everything.

 

Listen to them carefully and often.

 

Bracket the day with short “huddles”; in the morning to plan the day ahead and in the evening to review the day, say well done and thank you.

 

Have a team meeting every week or two (but not longer) to involve everyone in planning and review.

 

Have a regular one-to-one meeting with each of them to explore their needs, say “well done” and “here’s what I’d like you to focus on next….”

 

Ask any of the Big M groups about the power of these meetings and they will tell you how they are worth every minute spent.

 

The HALE here is the old chestnut that your team is too small / too big and you can’t get everyone in on the same day. There is an easy answer to this, and if you are struggling to find it book a call and we’ll give you a hand.

 

Pay Rises

 

It’s a sad fact that when your team need a pay raise the most, the risk of doing so is greatest. Pay rises across the board will increase your fixed costs and therefore your break even at a time when sales might drift downwards.

 

Instead of pay rises offer a bonus system that shares a percentage of sales over a pre-determined target amongst the team. If you aren’t already running it ask us about the Bonus for Growth system, which is perfect for situations such as this.

 

Attract More Business

 

If transaction values are falling, volume must go up.

 

Marketing

 

Consider changing your tactical marketing plan to reflect value for money at price points that are easy to afford. This may or may not be with discounts and there are several strategies for this in the PB Studio; we would recommend that you let one of us help you with your plan by booking a call.

 

Once you have decided on your most appropriate marketing messages, make sure that everyone knows about them by giving them pride of place in point of sale, website, and external promotions.

 

If you don’t actively demonstrate value for money in a time of high inflation, people who would otherwise be very happy customers might not take the risk of walking through your door.

 

Stay in touch with your database

 

It is far easier to generate an additional sale from an existing customer than it is to recruit a new customer. Now is the time to stay in touch with your database, inspiring them about what they might buy next, inviting them to special events and sending them unique special offers. See the database marketing section in the Studio and, of course, VIPx.

 

Recommend more products and services

 

If you are still mainly focussing on Rx change as the driving reason for recommending a new pair, you are missing a lot of opportunities to sell more to very happy customers and take care of your bottom line at the same time. You can train your entire team to recommend more with our new online version of I Can Help You with That.

 

Get feedback

 

Feedback that is specifically designed to investigate the acceptability of your price points is essential when a market is changing, and I’m not talking about some amateur adaption of NPS over email, you need proper scientific feedback. It’s easy to do when you know how. Book a call with us if you don’t.

 

Look After the Numbers

 

The numbers that define how well your business is working.

 

Know your planned profit and break even target and revisit them monthly.

Know your daily, weekly and monthly sales targets and revisit them daily.

Use the Break Even and Profit Plan for the above and you can download a new version in the Club if you need one. When business is changing, you need to work with the most relevant and up-to-date numbers.

 

Take care of your KPIs, measure them daily, weekly and monthly, and fix them as soon as they move away from plan.

 

KPIs to focus on every day / week:

 

• Number of tests
• Recall response rate
• New patient percentage
• Test capacity utilised
• Conversion rate
• Average dispensing value
• Returning dispenings
• Total sales

 

If you need a new scorecard to manage this and more, you can download one in the Club.

 

Many of you who have been clients of ours for a while will recognise this as a familiar list of business best practice that works regardless of the state of the economy. You are quite right that’s exactly what it is.

 

My question for you is, what aren’t you doing? Now is the time to get it sorted out. There are no prizes for being caught out by a downturn and reacting too late.

 

Remember the Scout motto – Be Prepared!

 

If this seems overwhelming, don’t stick your head in the sand, book a call with us instead; we'll be happy to help.

 

www.callpb.uk