Simulation of the effect of low-cost companion animal clinics on the market for veterinary services

Abstract

OBJECTIVE To understand the market dynamics of companion animal veterinary services through the simulation of willingness to pay and willingness to wait as consumer behavior attributes. SAMPLE Numerical distributions for the willingness to pay and willingness to wait of simulated potential clients of companion animal clinics. PROCEDURES Simulations were run by use of numerical distributions to create demand curves and analyze market dynamics across 2 market segments (price sensi-tive and price insensitive) and different price dispersion between clinics. RESULTS The simulations suggested that the profit-maximizing price of a full-service clinic created a natural segmentation of the companion animal veterinary market, with a majority of clients coming from the price-insensitive seg-ment. The simulation of 2 clinics (full-service and low-cost) with 2 market segments showed an increase in the overall market for veterinary services when a low-cost clinic was present. In addition, the lower the price charged at the low-cost clinic, the greater the profits for the full-service clinic. CONCLUSIONS AND CLINICAL RELEVANCE The presence of multiple prices for the same services, or price dispersion, in a market increases the overall market value and services more clients. Discouraging low-cost companion animal practices from entering the market decreases efficiency by leaving a population of pet owners unserved and ultimately reduces the overall market for veterinary services and the economic viability of veterinary practices.