Tiered-pricing frames.

[drk]

I need you all's take on just an idea.

In order to consider a "simplified pricing structure" (which would include lens tiered-pricing too...) how about a "frame tiered-pricing" structure?

Here's the thought:

"Designer frame" = $xx
"Luxury frame" = $xxx
"Basic frame" = $x

That's it. Three tiers. Jam the inventory into those.

Any drawbacks that you see, other than uneven margins?

[Kwill212]

I try to keep all the frames from each company priced the same. There may be 2 prices for 1 company if they do acetate and say titanium. Keeps it very simple. I can tell you the price of any frame in my store without even looking at it.

[KrystleClear]

We generally do a markup based on wholesale. Our Flexsys Software even does the math for us. Now, for the bargain basement frames (like Enhance, Jubilee, etc) we do a flat price for all of them. It certainly would make things more streamlined to do a flat price for all the designers, all the mid levels, and all the budget frames.

[Optical Roy]

Flexsys Software

I love our Flexsys, pricing, inventory, all very streamlined.

[juno]

Potential issues I see: Margins being funky, as you mentioned. Stocking, you need to pay closer attention to frame prices (and their fluctuations) in regards to the tiers, esp if you have lines that have weird ranges on their wholesale pricing that may cross tiers. Lastly, Pricing, what are you setting the tiers at? Because that's gonna have big knock-on effects for your insurance patients (and consequently your reimbursement). I personally don't love the idea, but that's coming at things from a subjective evaluation rather than an objective one

[drk]

Juno, that's a very good (and probably definitive) point.

In a "retail" or "cash" optical, there is probably enough margin/wiggle room to allow for simplified pricing/marketing/product positioning. If a practice is a victim of (cough) contracting with VCPs, the margins are slim, and even a minor decrease can be magnified.

It's hard to "sell up" from a VCP benefit baseline. Packaging seems like a good way to start from a reasonable point, so ergo my interest in the question. (Plus the inheirent beauty of minimalism.)

Ultimately, as always, the best way to approach business in the optical is to resist any temptation to judge what a person's pocketbook looks like, and design the eyewear the way you'd like to do it for yourself without undue regard to price.

[DanLiv]

I did it 9 months ago, and it's great. We have 4 tiers, and no prices on frames. It has obviously simplified price quoting and invoicing, but it has also pleasantly eliminated price from most customers' considerations. Some will ask where the less expensive frames are, and we have them grouped loosely by price so I show them, but most then inevitably stray from that starting point and find something they love in the average or higher tiers. I have had to adjust one line to a different tier because their pricing jumped, but there is literally nothing to it, I just told my opticians "ok this line is now tier 3 instead of 2", noted it on our internal tier pricing chart, and it's done. No re-keying inventory, re-printing frame tags. So nice. I have had ZERO problem with it and am so happy with the simplicity. If I do encounter a snag in the future, I'll try and remember to being it up here.

[Uncle Fester]

You do see the money you will lose with VSP if the wholesale cost changes a dollar and the frame is now no longer covered. Right?

I long for the good old days when everyone knew frame prices changed in the spring after the show.

Now they often change based on some bean counters algorithm of how fast they are selling.

And don't get me started on the XX and .50 cent charges!
(sigh...)

[drk]

Fester, this is an important point to consider.

So...the wholesale price for the frame drives about half of the patient out of pocket expense. We can't control that.

The optical's retail price for the frame drives the other half. As long as we are not greatly undervaluing a frame at retail, then I don't see where the danger lies.

To your point, if a frame wholesales at "X", which classifies it as "covered", but the wholesale increases to "X + $5", the frame may not be "fully covered" but there will be an overage. That, frankly, helps the optical's bottom line to be providing a supposedly "better" frame.

If another frame is wholesaling at "Y" and is NOT fully covered, but then changes to "Y-$5" and becomes fully covered, then we'd lose profitability because we get reimbursed less by the patient on a "budget/covered" frame.

Right? Just thinking it through.

[Uncle Fester]

"If another frame is wholesaling at "Y" and is NOT fully covered, but then changes to "Y-$5" and becomes fully covered, then we'd lose profitability because we get reimbursed less by the patient on a "budget/covered" frame."

If the frame was not covered to begin with, adding more cost to it still means it is not covered and the retail "sticker" should change accordingly. At least in our office and we track changes like that pretty closely.

Or is that minus 5? If so what line is that!?


At least that's my 2 pennies to this admittedly various substance addled mind from the inglorious results of a misspent youth. (Oh- and I still think I'm young;)

[drk]

Agree. Just asking. Thanks.

[iD]

I guess time will tell if the insurance reimbursements are greatly affected by this. How long do you plan on trying this out?