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. SAMPLES: 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 sensitive 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 segment. 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.