Things to Consider in Concierge Membership Structures and Practice Modeling
Let’s be honest. Pricing structures aren’t often the fun and exciting topic of conversation everyone wants in on. Should you offer multiple membership tiers? If so, how many? What should they cost? Are they really justified? It can be a stressful and confusing subject, but it is also very worthy of the conversation.
There are a lot of questions around pricing and membership tiers. In this post, we’ll talk about what we’ve seen create success in a large number of ROAMD member practices and what to consider when structuring your membership model.
How Many Tiers?
A survey of ROAMD members at our 2021 Annual Meeting revealed that 80% offer more than one tier. We think this makes sense, both for consumers who are accustomed to having multiple options in life and for the revenue structure of practices.
But you can have too much of a good thing. The problems we see arise with multiple tiers often come when practices start offering eight, nine, or 10 tiers, sowing confusion and making it difficult for consumers to determine what they need.
By tiers, we don’t mean differing price points based on age, or individual versus family plans. We mean packages that include specific services, like advanced pharmacy. Lower tiers might be able to add these additional services a la carte, but higher tiers have everything included.
In this post, we’ll discuss the potential benefits and downsides to a tiered pricing model and how to determine the number of tiers that make sense for your practice.
The Potential Benefits of Multiple Tiers
Align With Buyer Psychology
Consumers like to have options. Rather than being forced to consider one offering as their sole, take-it-or-leave-it path, they want to decide for themselves among good, better, and best. (Books like Clayton Christenson’s The Innovator’s Prescription can offer some helpful insights into buyer psychology and the way consumers like to purchase.)
For example, some people really want to be in the top tier of everything. They purchase the nicest kitchen knives, the best car trim, and the most exclusive club membership. If any of these people are in your target demographic, why not give them a top-tier option to buy?
In principle, though, most people prefer to purchase a middle option. Wendy’s restaurant provided a great example of this when they added a triple cheeseburger to their menu — in order to sell more double cheeseburgers. They realized most people wouldn’t buy the triple, but more would buy the double if the triple was on the menu.
Similarly, if you have a top membership tier that costs $8,000, people might choose the next tier down fairly often. But if you add an over-the-top tier at $20,000, that $8,000 tier becomes more attractive to buyers. They may even feel like it’s a discount.
The price didn’t change a bit — just their perception of it.
Please don’t misinterpret; this isn’t tricking anyone. Consumers can afford what they can afford, and they’re not buying above that. But there’s a psychological principle at work here: People tend to buy in the middle, even when they can afford more. So if you want more people in a certain tier, simply adding a tier above it may move them up.
If no one buys your $20,000 tier, that’s just fine. You’ll still increase the number of patients who buy at $8,000.
Generate More Revenue
We may not always realize it, but our patients truly value us. When they see more value available with us, they’ll often be happy to spend more money with us. But a single tier doesn’t give them that option.
We’re not talking about trying to convince them to spend more. You don’t have to be a salesperson and, in fact, we would encourage you not to be a salesperson. Just don’t close the door on the option. Give them the opportunity to spend, and if they want to, they will.
Maybe you’ve offered a single tier for years, and you’re unsure whether your patient base would be willing to pay more. You might just need to experiment. Maybe start by adding one additional tier on top of what you have now. If you see that new and existing members are jumping at the opportunity, maybe you need to add a third or raise your prices across the board. A single tier simply doesn’t provide enough information about the buying habits of your panel.
Adding a higher tier option can be a great alternative for improving revenue if you’re gun-shy about raising prices.
Mitigate Patient Financial Hardship
As recession looms, financial hardship is coming for your patients. Tiers could be a way of helping patients retain a membership with you even when money gets tighter.
Tiers provide a lower cost option for those struggling financially. They’re a great alternative to offering scholarships or free services. They give members the opportunity to spend less money while staying engaged at a reduced service level. So instead of walking away when the only tier you offer becomes unsustainable, members can retain membership by dropping into a lower tier while they weather the storm.
This is a great way to recession-proof your practice. Just be sure to position the lower tier as a short-term option for patients with a defined timeline to move back up. Establishing the timeline up front (even letting them determine whether it’s six, 12, or 18 months) so you aren’t having a more difficult conversation with them down the road.
Justify Ancillary Services
If your practice is interested in offering services beyond primary care, you’ll have to find ways to justify any associated expense. A tiered structure that incorporates ancillary offerings at different levels creates an easy system to justify the additional cost.
Potential Downsides of Offering Tiers
Patient Confusion
One possible downside of offering membership tiers is confusing patients with mixed messages.
If a higher tier offers certain services, patients might question whether they really need those services since they’re not part of every tier. You’re their doctor, and they trust you. If you’re giving them the chance to forgo certain services, then maybe (they think) those services aren’t that important.
Practice Confusion
We’ve seen too many practices who offer eight or even nine tiers. After conversations with other ROAMD members, they realize the benefit of simplifying their pricing structure to two or three. Eight or nine is just too much confusion, and too much to maintain.
Many practices start out offering two or three tiers, but after a couple years they add one or two more. Then, a year after that, they add some new services and need to create additional tiers. And all the while, they keep their existing members where they were in the earlier tier structure.
In a short time, a practice can go from three to six to nine tiers. And with lots of additional services and members coming and going and switching tiers, it can become a challenge to keep track of who has access to the sauna but not the stem treatment room, and how to bill for à la carte services. Invest the time to tidy up legacy tier structures and simplify life for your patients, your staff, and you.
Align Tiers With Strategy
While we do think offering a moderate number of tiers works well for many practices, how many tiers you offer and how you price them should align with your practice’s particular strategy and goals. Making a decision in this area is core to what you’re trying to accomplish in your practice.
Are you trying to grow by getting as many people in the door as possible? Are you trying to keep your panel size tight and nimble, but offer them more services?
Your tier structure is one of the first things people will see when they inquire about your practice. It can say a lot about your practice and who you’re looking to serve. It can even dictate the types and caliber of people you bring in. For example, if you aim to attract families, having a family tier shows potential patients that you embrace families.
By keeping your tier structure simple, uncluttered, and straightforward, you make it easy for people to do business with you. Too many tiers might confuse them (and you); three makes the decision far simpler. Take the opportunity to show consumers how clearly you communicate, even in something as mundane as your pricing structure.
As I mentioned at the beginning, this isn’t the most alluring of topics. But setting and maintaining tier structures is an important element of every concierge medicine practice. Time spent regularly ensuring your tiers reflect what you want from your practice and evaluating the results they’re creating is time well spent.
Dr. Scott Pope serves as the Chief Growth Officer at In Scope Ventures, a growth consulting firm focused on early stage healthcare companies. Scott is passionate about healthcare entrepreneurship and has been involved in various advocacy efforts to promote innovation in the industry.
Scott earned his PharmD from Ohio Northern University, where he participated in Habitat for Humanity, Phi Mu Delta, Order of Omega, and NCAA basketball. After graduating from ONU, Scott completed a pharmacy residency at Cone Health, followed by a specialty residency in infectious diseases, internal medicine, and academics at Campbell University and Duke University Medical Center.
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