The Middle Market Orthodontic Practice Observation

Chris Bentson has been speaking to the orthodontic residents a great deal recently regarding market positioning. Within any market there is a luxury brand, a middle market brand, and a value brand – yes, this is even true in orthodontics. In car manufacturing think Rolls Royce, Camry, and Yugo. In the world of mass-market clothing retailers consider Nordstrom, Gap, and Wal-Mart. If in the market to buy a watch, Rolex, Seiko, and Timex define these three market positions.

In orthodontics there are subsets of practices in the country that are “high-end” (or luxury practices). These practices are often characterized by high fees, exquisite facilities, the latest technology, and are heavy with a personal touch. On the other end of the spectrum there is a growing number of “value branded” orthodontic options. Ranging from “doc-in-the-box” corporate stores to “insurance- or Medicaid-” based practices that do not rely heavily on general practitioner referrals and offer no-money down, no frills. Orthodontic practices at both ends of the spectrum, luxury and value, seem to be performing well in today’s economy. Where does that leave the mid-market orthodontic practice? Perhaps, in a pinch.

The middle market orthodontic practice is characterized by mid-level fees (approximately $5,200), a modest-to-high integration of technology, contests and/or drawings for patients are common, patient flow is largely from general practitioner referrals, and a hot cup of coffee may be offered in the reception area. The mid-market practice is fighting hard to attract consumers. The question arises; why is there such a struggle for this market segment of orthodontic practices?

An excerpt from an article featured in the January 3, 2012 Wall Street Journal may help answer this question. The article, “Year of the Oops: Firms Spent 2011 in Reverse,” states:

“Retailers and consumer-goods companies alike grappled with a disappearing middle class in 2011. After years of caution following the stock market’s financial-crisis swoon, the wealthy returned to luxury brands, benefitting retailers such as Saks, Inc., and Nordstrom, Inc.

At the lower end, dollar stores and discount chains profited as prolonged unemployment and economic uncertainty spurred the middle class to trade down.

That created a barbell effect, as companies that traditionally cater to middle-class consumers suffered. Gap Inc.’s profit declined 27% for the first nine months of the year. Department store chain J.C. Penny Co. recorded a $65 million loss.”

For practices feeling the pinch in the middle market, orthodontic owners should understand where their practice is positioned, manage overhead costs to meet consumer expectations for that particular market segment, and develop strategies to extend their position up or down in the market to attract more patients. Business as usual will likely put you in an uncomfortable position. An orthodontic consultant can be a great benefit to help you make the right moves. A thorough demographic analysis of your drawing area is also suggested (see “Is It Cold or Pneumonia: 5 Demographic Facts About Your Practice Area,” Bentson Clark reSource, 4th Quarter 2011). With time and effort, your practice can be successful regardless of its market segment in today’s economic environment.