One of the services we sell at Omedix is the Patient Education Package — the idea is that we give you a fairly comprehensive patient education section for your website that flows with the rest of your existing website, is customized to your specialty, and is customized to your practice.
The response from practices has been great because the truth is it’s hard to find quality patient education materials out there for your website. We feel like we provide a solid product at a very reasonable price that adds far more value than it costs, so everyone should be happy, right?
Well, sort of.
Our clients love the product, but when it comes time to talk price, they look at our quote and see two simple words that inspire intense anger and bitterness: “Per Doctor”. That’s “per doctor” as in the product costs $X Per Doctor.
The practice figures that it probably costs us the same thing to produce whether we’re doing this for one doctor or whether we’re doing this for 50 doctors so why on earth do we charge per doctor? It gets even worse when the practice is already accustomed to paying a certain fee and then they add another doctor at which point our contract says we’re supposed to increase the price. I’ll be honest: that’s a natural reaction. I mean, the product didn’t change but the cost just went up? What gives?
Well, I think the big disconnect occurs because these pernicious “per doctor” prices stem not from our marginal cost of offering the service, but from the upfront fixed cost of writing those 40,000+ pages of patient education. Actually, we didn’t write all those pages; our patient education vendor wrote them. The thing is, they’re a 100+ person company with a staff of over 30 people whose full-time job is to author this content.
They invested a ton of time upfront writing this content, they invest a bunch of time editing it, keeping it up to date, adding pictures, etc. They then license it to us, but of course they have to recoup their investment, so they look for ways to make money from their very high-quality content whenever it’s adding value to someone. Therefore part of our licensing deal is that we actually get it for a specific number of physicians and then pay an additional marginal cost for each physician beyond our set amount that we sign up.
We then add our proprietary management software, content organization, custom visual design, and support services around the raw content and, voila! our product is born! When it comes time to price it, we also must recoup our investment, so we charge our customers an extension of our cost model–mainly we charge them per physician. We feel like this is reasonable because each additional physician has associated new patients who will read the content, increase their satisfaction, save the physician time, experience better clinical outcomes, etc.
So, in short, we feel like with each additional physician that uses the content, we’re adding that much more value. Likewise, those 40,000+ pages were authored with the understanding that a ton of people would benefit from them, so that the immense cost associated with developing so much content in the first place was actually a reasonable allocation of resources since the cost of development would be less than the total value provided to society.
It sounds great in theory but it creates this classic problem which I’ve eventually come to realize is: People hate paying for work already done. I think when people see that you’re working long hours in exchange for the pay they’re giving you, they feel like they’re getting their money’s worth. But when they perceive little marginal effort on your part, they feel like, well, what exactly am I paying for? Why isn’t it cheaper?
In the end, it just comes down to the hard-to-swallow notion that if we offer a service that involves considerable time upfront creating it, we have to ultimately be compensated for all that time at some point, or else it’s simply not feasible to do it in the first place.
It’s an interesting quandary; I wish I could find a satisfying way of having everyone feel like they’re getting a solid value.
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