DOING NOTHING IS NOT AN OPTION

By Jim Misco
Our industry continues to evolve from a cottage industry to one with large multi-national companies integrating all channels of distribution. We are also facing multiple challenges on the managed care front with the Affordable Care Act driving up health care cost for some small businesses. Additionally, the change in the delivery models in the eye care portion is taking work from many independent labs across the country. Other pressures come from the proliferation of ECP alliances/buying groups, internet commerce and the overall commoditization of our products and services.

While there is little that can be done to eliminate the negative effects these may have on our business, there are some things we CAN control and our focus needs to be shifted in the direction of things we CAN change. Here are some ideas for changing the impossible to the possible.

ECP BUYING GROUPS DIRECTING LAB WORK TO   “CONTRACT” LABS

The benefits to an ECP of belonging to a buying group cannot be disputed. Obviously there are the benefits of more attractive prices on frames and contact lenses, as well as lab work in some cases. There are also less quantifiable benefits of belonging to a group, such as the feeling of security in knowing you are part of something bigger than your own practice. The problem for the independent wholesale lab is that if the doctor buying group has a lab contract with a large national entity, their lab work is directed to those contract labs. This drives a wedge between the local lab and their customers. The independent lab has little power to fight back because they only sell one of the four things the doctor wants to buy…lab work. Lab generally don’t offer frames, contact lenses and other ancillary products/services.

At Optical Synergies we have partnered with The Alliance Buying Group (BG), which is owned by the same parent company as Optical Synergies. The Alliance, which does not direct the lab work of its members, is a buying group made up of over 2,500 optometrists and ophthalmologists across the country. With the Lab Partner Program, the Optical Synergies member can use The Alliance BG to expose their ECP customers to those same cost saving benefits across ALL product lines, without having their lab work redirected.

LACK OF MARKETING DOLLARS

Most of the large integrated lab networks in the U.S. spend approximately 4 – 5 percent of their revenue on marketing initiatives. The small-to-medium independent optical lab typically spends between nothing and not-much-at-all. How are the independent labs in this country going to compete against these large national companies and their marketing messages that are constantly blasting the magazines and airwaves? Getting a lab to invest 4 to 5 percent of their revenue in marketing when they have done nothing is a steep hill to climb. However doing nothing is no longer an option. At Optical Synergies we have endorsed the Vision Made Local initiative. We have negotiated an inexpensive way for the small-to-medium-sized lab to market to the ECPs in their “local” area. The message is really quite simple and is resonating with the doctors and opticians.

Supporting local businesses and local manufacturing creates local jobs and supports local taxes, local schools and libraries; everywhere those tax dollars are spent. We encourage our members to define who they are and what they do best, and then communicate it to as many customers and potential customers as they can. One of the most important things to remember is that if you do not define who you are, your competition will. Who’s telling your story; you or your competitor? Vision Made Local is one conduit to achieve this communication in an efficient and economical manner.

CHANGES IN THE MANAGED CARE DELIVERY MODELS

The recent changes in managed care delivery models have had the largest negative impact on the independent labs in this country than any event in my memory. VSP is moving more of their contracts into plans that require their VSP-owned labs to produce the hardware. EyeMed’s model requires that all covered eyewear be sent to their contract labs, thus taking it away from the independent labs that had been providing that eyewear. From all accounts this could be the tipping point for many of the small independent labs in this country. The ECP is also being squeezed by lower reimbursements for exams and hardware.

The easy answer for labs is to get more jobs in the door to replace the work lost. Similarly, the ECP needs to get more people in the door and offset the loss of revenue with more volume. Well, that is no easy task in an industry with little organic growth and everyone in the industry trying to do the same thing.

If you cannot replace the units, then you need to find a way to replace the revenue. In a recent report from the Vision Council, it was reported that the independent optometrist still does 70 percent of the eye exams but only accounts for 40 percent of the eyewear sales. This indicates there is still room for improvement in the capture rate for many optometric offices. Most optometrists generate 60 percent of their revenue from product sales, yet pay little or no attention to the retail side of their business.

We have initiated a program with our Optical Synergies members to assist their ECP customers with better patient retention, second pair and premium lens sales. If we can help the ECP improve retention, sell higher margin units (premium lenses), and keep the work local, then both the lab and the ECP win with better realized margin revenue. We have developed a program with Mike Karlsrud from Karlsrud Company to help our members have this conversation with their customers, and those customers have that conversation with their patients. We recently completed one of these meeting in Sycamore, IL. Here is what one of the attendees had to say:

“I go through my day, every day, trying to get these concepts across to our doctors and staff and it seems like it never quite sinks in. The seminar offers up these concepts and data in a way that they may listen to and/or understand. Maybe now I can stop banging my head on a wall. Thank you for the opportunity. When is the next one”?

Here is what the lab owner had to say; “With this system the lab gets to be the knight in shining armor and present solutions to their customers’ concerns. So all in all I was very happy with the immediate results. I believe in this program and know that continued education is the key to our success”.

FINAL THOUGHT

All of these initiatives put the lab owner in a position of being more than just the guy that does the lab work. You will be looked upon as the business partner that brought the doctor solutions to the issues facing them in these difficult economic times.

Waiting for things to get better is just not an option any longer. If you join Optical Synergies to take advantage of these initiatives or you do it on your own, it doesn’t matter…just do something; the future success of your business depends on it.

Jim Misco, a 39 year industry veteran, is the group director for the Optical Synergies and Premier Vision buying groups. He has held senior level sales and marketing positions with American Optical, Pentax Vision, Vision-Ease and Signet Armorlite.


CURRENT ISSUE


August/September LabTalk 2017