Robert Ribciuc is the Managing Partner at EBITDA Catalyst. He helped establish, grew, and managed a successful advisory/consulting firm focusing on pricing strategy and analytics, go-to-market optimization, and revenue management for middle-market corporate and private equity portfolio (PE) clients in diverse industry verticals.
In this episode, Robert shares the need to understand the veterinary business as a whole, from the service to the non-service products to come up with the best pricing strategy.
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Why you have to check out today’s podcast:
- Understand how veterinary practice is different from other industries
- Consider the use of good, better, best pricing strategies when dealing with veterinary services and products
- Learn to holistically understand the veterinary business from the two sides — the service and the non-service aspect to create best pricing strategies
“The hypothetical practice where the veterinarian also acts as the practice manager, which the more you go up in size you have multiple practices, and then you get to these corporate entities, they try to avoid that like the plague.”
– Robert Ribciuc
Topics Covered:
02:31 – Robert’s thoughts on what is said as unreasonable expenses in taking care of pets
07:07 – Understanding the dynamics of the veterinary practice as totally different from other industries
11:49 – How are the bigger veterinary companies leading when it comes to price increase?
14:22 – Payment schemes to consider for veterinary expenses
15:22 – How should veterinarians deal with pricing
17:19 – Staying in the veterinary business for long-term
18:17 – The concept of having a practice manager responsible for pricing, instead of the practice owner [implementing the good, better, best pricing]
22:01 – How to effectively manage pricing for the diverse range of services and products offered by a veterinary practice
27:49 – His definition of business success
Key Takeaways:
“One of the trends we should talk about is adoption or non-adoption of insurance in this space and other types of concepts from pricing like subscription or wellness plans, where instead of having that one time pain that is potentially dramatic and brings you to tears, you have a tiny bit of pain every month, but hopefully short of tears.” – Robert Ribciuc
“If you are one of these practices and you’re selling a product, you take the case of medication that’s being sold. And some of these practices sell some of the medication physically in the practice. And then there are providers like vet source, which is a way to have your online pharmacy that’s like your practices ordering portal for your practice customers, that’s a pretty significant part of revenue for a practice. And so there are questions over there. How do you get sophisticated with pricing in that space?” – Robert Ribciuc
Resources/People Mentioned:
- Blue Pearl Emergency: https://bluepearlvet.com
- Banfield Pet Hospital: https://www.banfield.com
- Mars: https://www.marsveterinary.com
- General Mills: https://en.wikipedia.org/wiki/General_Mills
- Blue Buffalo: https://bluebuffalo.com
- VHMA: https://www.vhma.org/home
Connect with Robert Ribciuc:
- LinkedIn: https://www.linkedin.com/in/ribciuc/
- Email: [email protected]
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Robert Ribciuc
The hypothetical practice where the veterinarian also acts as the practice manager, which the more you go up in size you have multiple practices, and then you get to these corporate entities, they try to avoid that like the plague.
[Intro]
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the puppy love relationship between them. I’m Mark Stiving. Our guest today is Robert Ribciuc. Here are three things you want to know about Robert before we start. He has a BA in Math and Economics from Harvard. Seems to have a lot of people from Harvard lately and an MBA from Chicago Booth. He was head of pricing at Honeywell, and for the last 10 years, he’s been managing partner of EBITDA Catalyst. Welcome, Robert.
Robert Ribciuc
Hey, nice to see you again, Mark. And, you baited me with the Harvard thing the first time you had me on the podcast, so I’m not going there with you again.
Mark Stiving
So I just had Carole Mahoney on like a week ago, and she was from Harvard, but she played along. She’s from Harvard too. So it was really nice. It was really nice. So today, by the way, I always ask the question, how did you get into pricing? And Robert’s been on twice before, and I think I asked him that question both times. So if you’re really curious, we can go back to that. But today, what Robert and I are going to talk about is pricing in the pet world. Now, I have a dog named Jake. Absolutely love my dog. In fact, I always wanted it. I had a dog growing up, but I didn’t have one from my teen years until maybe 10 years ago. And I have to say, I always wanted one. And I didn’t realize how much I would love this thing until after I got him. And so I can imagine myself paying ridiculous amounts of money to take care of my dog. And in fact, I often have to say to myself, no, if he gets cancer, I’m putting him down, right? Because I don’t want to spend tons of money. Now, I’m not sure if that was a good opening for this conversation or not, but it certainly expresses how I feel about pets and at least my pets.
Robert Ribciuc
Well, first of all, thank you for having me again, Mark. And, I don’t know if being on this for the third time gives me some sort of special points or recognition, but I’ll start using it as a marketing claim. Being on the best pricing podcast in the world, potentially more than anyone else in the world, if that ends up to be factually true, and I’m sure that will work. But back to pets. I mean you are spot on. And your relationship with your pets, I think, is probably representative of a global trend, which is, everybody uses the words humanization of pets. but that has created, not only one of the fastest growing businesses, both here in the US and globally, also recently growing both in volume and in pricing, right?
So compounded growth. So there’s secular trends with general humanization of pets. There was the COVID, an enormous bump in adoption as people found themselves at home, particularly millennials, adopting a ton of pets. And so, for all those reasons, I mean, in the US we’re approaching 70%. I think it’s something like 68% of households now own a pet. And it’s not just puppies. Let’s do justice to the kittens as well. It’s something like 87 million households own at least one pet. There’s some that own more than one. And then, to your point, what people are willing to spend, it’s both the quality of those relationships and more and more people considering pets, true members of the family. But I think that’s also a synergistic trend where people see how other people relate to their pets.
And as it happens in consumer societies of which we are perhaps one of the best, people see what somebody else has for their pet, and they say, why not my pet? And so I think that has put extraordinary tailwinds behind this industry. And of course, as you know as a friend, I’m married to a veterinarian, so I hear a lot about what’s happening in the veterinary space. And, I have discovered that for me personally, working on projects in this space is a double joy, right? We love animals. I love to indirectly help businesses do better, provide better things for animals. But more importantly, when I’m at the dinner table with my wife and my daughter, please do not try to get a veterinarian interested in, I don’t know, corporate software pricing or something like that, or just price, value, discovery or, but when it’s, pricing in the pet space, of course, the space has all these subspaces, right?
There’s veterinary services, which is one of the largest there is, pet foods. There’s other pet services like boarding and grooming and so on and so forth. And each of these have fascinating dynamics. It’s becoming a gigantic business, I think 140 billion in the US or something like that, you have giant companies like Nestle and Mars with $20 billion businesses in this space, General Mills going on 10. And then you have everybody else, under that layer of giants that, very much can use, pricing, sophistication. And we can talk in more detail about, this is an industry that’s giant in size, but is still very underpenetrated with pricing sophistication and tools and practices.
Mark Stiving
Yeah, I think some of the areas in pets that you mentioned seem normal and obvious to me, right? So if I think about pet retail or pet food, these are me selling products to pet owners. And of course, I can play on the emotion, and they’re going to have a higher willingness to pay. And we’re going to segment those who care a lot about their pets and those who don’t care as much, right? So all of that feels normal to me. What doesn’t feel normal is veterinarians.
Robert Ribciuc
Oh, let’s talk about that.
Mark Stiving
And here’s why it doesn’t feel normal. There are some industries where people get into the industry because they love the industry and they have no idea how to run a business. And so, I’m going to lump veterinarians in with bike shops and scuba diving shops.
Robert Ribciuc
I mean, not only do I agree with you, but I’ll take you one further. I mean, there are so many dynamics about this industry that are different, right? So, one is, to your point, people don’t become veterinarians to run P and Ls and think about ROIs of investment and so forth. And, interestingly enough, that dichotomy of enormously passionate, dedicated, and caring human beings who care below average about money and, running a financially, successful business, or at least used to, has actually given rise to all these imbalances that are, I think, very few people realize, right? So, for example, going to veterinary school is extremely expensive, comparable, if not higher, with medical school for humans. Many of these veterinarians come out with significant debt and so on.
And when it comes to how veterinarians were paid historically, I mean, it’s an order of magnitude less than human medicine, right? And so you and I know that from an internal rate of return or ROI or how long you will break even to get out of debt, all of those things have been very difficult. And to some extent, extremely unfair. And veterinarians will point out that it’s not just my wife, many others that in fact, the typical veterinarian can treat multiple species, can operate in multiple specialties, surgery, internal medicine, cardiology, whereas in human medicine, there’s typically a narrow specialization for all, but general practitioners. And I think that when people look at the inflation in that space, which has been significant since COVID, because finally the supply demand imbalance is in the favor of veterinarians, right?
We don’t train enough for as many pets as there are. And so people say, whoa, it’s gotten so expensive to go to the veterinarian, right? But I think as you well know, we tend to compare versus what it was previously and what it was previously made nearly no sense given the level of investment people make in these careers. And that’s just the veterinarians. And then you go to the rest of the staffing in these clinics, and you have extraordinarily underpaid technicians and so on and so forth. And so I think that the business of veterinary practices was ripe for, hey, business expertise is needed here, whether we like it or not. And nobody wants to stay in debt for their entire life. Nobody wants to stay underpaid for their entire life. And so several trends have been happening. One, corporate roll-ups, whether it’s private equity, whether it’s wealthy, investors or giant corporations like Mars.
Mars is the largest owner of veterinary practices in the world. I think they have about 2000. They employ over 50,000 veterinarians. They’re also the biggest maker of pet food in the world. So all these brands that people, you go to Banfield Hospital that’s owned by Mars, you go to VCA that’s owned by Mars, you go to Blue Pearl Emergency that’s owned by Mars, right? And, so on one hand that institutionalization is creating more emphasis on better business efficiencies including pricing. On the other hand, of course, in any industry where you come from that local relationship-driven, passion-driven, mom and pop, one-unit owned by people who’ve been in business for 30 years, and you see these trends with giants taking over a significant share of the industry, there’s tension there, right? And there’s an open question, well, how can we compete with these giants that have pricing expertise, have supply chain sourcing expertise, and at the same time maintain the values of medicine? That and caregiving for these pets that we care so much about?
Mark Stiving
I would think as you were describing this, that Mars and the large companies, although they certainly, they’re going to bring better business practices in, I would also think that they would find a way to drive prices up, which would make it easier for the independent veterinarian to stay in business. Are they driving prices down or driving them up?
Robert Ribciuc
Well, there’s certainly no doubt that the last two, three years when the supply demand has dramatically shifted, in favor of supply being a price maker, right? I mean, we’ve seen inflation, I think, cumulative over the last two, three years since the middle of COVID something like 30% for veterinary services, and that’s average right across all of the practices in the US. And so you would think for sure in that space, the giant more sophisticated practices, on one hand, they may be the leaders because they have the sophistication and they understand the value of capturing fair pricing. On the other hand, of course, they’re a lot more visible when you have 10,000 practices or 2,000 practices. It’s pretty hard to hide and not get in the papers if prices go up 20% in one year.
So there’s been a lot of coverage of inflation in the space. And I do think it’s important to understand that there’s something like 50,000 practices in the US and I want to say corporate ownership is still somewhere below about 10,000, right? So it’s still less than 20%, might be a decent bit less than 20%. And so those guys can potentially try to lead, but they’re still not a giant enough force in the ensemble of the industry to be able to lead without caring whether the rest of the industry follows or not, right? Right. So there’s that balancing act they also have to play, right? If they go too aggressive, everybody’s going to leave their practices and say, see the greedy corporations, we told you so.
Mark Stiving
I would think this is a hard question. You’re going to walk into a veterinarian facility. It’s usually the vet who’s running it. We’re not talking about a corporate one. We’re talking about a private one. There’s a vet who owns it and runs it, and you’re going to try to teach this vet how to raise prices or even hold prices. And so I’m going to give you the following scenario, and I want to know how you teach them to manage the situation. So Mark brings his dog in, he’s in love with his dog. There’s a procedure that we charge a thousand dollars for, but it really only costs us a hundred dollars in materials. And Mark says, I don’t have a thousand dollars. And he starts crying.
Robert Ribciuc
I mean that’s probably an everyday scene at virtually every vet practice. And when you were saying earlier, and I should let you finish your question, but when you were saying earlier, something about how expensive and you realized, after you’ve got the pets and so forth like one of the trends we should talk about is adoption or non-adoption of insurance in this space, right? And other types of concepts from pricing like subscription or wellness plans, where instead of having that one time pain that is potentially dramatic and brings you to tears, you have a tiny bit of pain every month, but hopefully short of tears.
Mark Stiving
Okay? I’m with you. We can talk about those other things, but the question is how do you convince the vet to hold their price, right? Because it’s so easy to say, okay, I’ll do it for a hundred dollars, that’s what my costs are. They love dogs.
Robert Ribciuc
Yeah. I mean, I think, in the hypothetical practice where the veterinarian also acts as the practice manager, right? The more you go up in size, you have multiple practices, and then you get to these corporate entities, they try to avoid that like the plague, right? Like one of the pitches of corporate ownership or combining practices and so forth, veterinarians don’t want to deal with that situation. They want to treat Mark’s dog and they want to have somebody else deal with Mark’s crying, Mark’s financing, and ultimately extracting fair payment from Mark one way or the other, right? But in that hypothetical scenario where that one veterinarian is the decision maker both for care and for business, like that’s precisely the type of scenario where these practices can use help, right?
First of all, make the connection, like in pricing, you, and I know things like discounting authority, right? And how do you track the cumulative impact, right? So maybe you say, as a practice owner, I want to give myself the freedom to be nice to two Marks a month, but I can’t be nice to every Mark, every price that they’re able to pay. And, I don’t think, with individual practice owners, you can say ahead of time that every single one will hold to their price, but the ones who’ve been around for long enough and stayed in business, stayed in business by not playing along with every situation like that, right?
Mark Stiving
Yeah. And I actually love the very first answer you gave, which is, if you’re a veterinarian, you should have a practice manager, right? You should be splitting up who’s going to run the business versus who’s going to take care of the animals part of the business. Yeah.
Robert Ribciuc
And wherever the size and the finances of the practice allow that, that would be the more standard situation, right? And, again, if it’s still just a veterinarian, there’s practice management software that can help a little bit, but chances are, if you don’t learn the lesson, you can’t give in on every pricing conversation, you’re not going to be a viable business for very long, right?
Mark Stiving
Absolutely. So, but the thing I love about the practice manager then is if you think about two concepts we think of often is willingness to pay and willingness to accept, right? So my customer’s willingness to pay is one thing, but we have to have some willingness to accept and how do we manage what that looks like? And the problem that I see with veterinarians is that they just have this emotional pull, and it’s hard. And they’re always going to be willing to break whatever rules they set. And so having a practice manager takes that away.
Robert Ribciuc
Yeah. I mean, I think, it’s interesting. So I did a bit of partnering in this space and spoke a fair bit with our colleague, Utpal Dholakia, who actually did some really good work with VHMA, so the Veterinary Hospital Managers Association. So that’s exactly the association that is supposed to train practice managers and best practices across, and they primarily cater to those small, independent, clinics as opposed to, large corporate and so forth. And, there was some great work initially, and this was mostly before COVID. So those realities have changed even more dramatically now with, sort of higher pricing power in the industry. But he set all these challenges, like, where is your good, better, best? I mean, Mark’s crying.
Is there a way to have some things that have, instead of giving him the best, you give him the good, and you can close some of the gap to his price point, right? So things that we deploy in other industries all the time can you tell Mark to consider insurance, or can you have an annual wellness plan that covers the most typical scenarios he’s going to face? So all of those are tools that should come in, in front of, I’m just going to give you the discount, and let you name your own price, right? And I think that the challenge as you would expect there is, it’s one thing to have some really thoughtful frameworks. And he did some of that, and he shared them with me, and I’m actually, you talked to the VHMA about some of these, but, it’s another thing to operationalize them, right?
So in the same scenario that you’re describing, okay, how is this small practice with a couple of veterinarians, maybe one owner, not everybody’s a business person, how do you help them think about where to start with some versioning of their service or some versioning of their wellness plans? How do you help them monitor the discussion we had before, right? So what’s the cumulative discounting that you’ve granted this month, right? Like, what is the preset red line you’re setting for yourself before you’re going to be in trouble, paying the rent next month and so on. So, I think I’m very interested in this primarily because when we work as consultants, scale helps, right? Because whatever work we do, if it’s over a billion dollars, it’s going to produce, considerably more, return than if it’s over $10 million. And what’s interesting here is, this is one of the reasons this part of the industry is underserved. So you’ve got to have some degree of love and passion to want to help in this space. And because of the situation that I’m in, and because many of the things I do, I don’t really do primarily for money, I am the guy that’s going to try to do that.
Mark Stiving
Nice. So you’re just doing it so you have good dinner conversations.
Robert Ribciuc
Well, I mean, what’s the worth of a happy wife, right? Exactly. Like, so let’s have a value pricing conversation on that.
Mark Stiving
So you could walk home and hand her a hundred dollars, or you could walk home and talk about dogs and pricing for veterinarians.
Robert Ribciuc
There’s no contest between those two scenarios any day.
Mark Stiving
Right. Very nice.
Robert Ribciuc
But I mean, look, in all seriousness though, right? Just like the veterinarians, I mean, of course all of us too have to ultimately put bread on the table and earn a living. And, I think there are larger entities. So some of the corporate entities, believe it or not, I mean, we focused a lot on the one practice with one veterinarian, but you would be astounded how broad the set of, pain points and problems is even in corporate-owned 30, 60, a hundred practices, , the kinds of roll-up places where the whole theory around the roll-up is we will have practice managers and we will consolidate more of the business function of the veterinary space. And, I mean I’ve had a conversation just a week or two ago, people don’t realize there’s veterinary services, but there’s also all the products that are being sold in a veterinary practice, right?
Particularly the medication, anything that’s not a service. And, there you have effectively, retailer slash distributor situation, sell in prices or the prices they pay to manufacturers or distributors can change frequently. And there’s been a lot of historical cost plus one size fits all, including some of this inflation, even in the services side or the pet food side. And I wrote the post on LinkedIn just this past week, and I’d love to have your comments when you see it, but I was kind of enumerating all the signs, kind of like the willingness to pay slowing down a little bit, right? So we had this huge run up in inflation and I worked with a couple of different clients in pet food. If I worked with someone in 2020, they are 60 to 80 to a hundred percent more expensive today, right?
So premium pet foods have had a huge run, veterinary services have had a huge run. And what’s happening is we’re seeing a tiny bit of reversion to the mean inflation is slowing down. Some of the brands like General Mills, Blue Buffalo, Joint Business reported two quarters in a row of flat sales, declining operating profits. And so the wall is kind of there for the blunt approach, which raises the bar as we know, to come in with the segmented approach, right? So if you are one of these practices and you’re selling a product, you take the case of medication, right? That’s being sold. And some of these practices sell some of the medication physically in the practice. And then there are providers like vet source, which is a way to have your online pharmacy that’s like your practices ordering portal for your practice customers, right?
And, that’s a pretty significant part of revenue for a practice. And so there are questions over there. Well, how do you get more sophisticated with pricing in that space, right? Because there is a difference between, for example, a type of medication that’s for a current and urgent danger, like an antibiotic for some sort of big infection that the pet owner has to take home tonight somewhere and give to the pet. So, in your case, he doesn’t come crying tomorrow again, right? And, there might be a relatively small amount for a limited period of time, right? So, it’s an urgent rather than a chronic situation. And you can compare that with something that the pet now has a chronic condition. He’s going to need to take this all his or her life or whatever.
And, cumulatively it’s going to be whatever, thousands if not tens of thousands of dollars over the life of the pet, whatever that may be. Well, in the first case, is that person likely to sit in the practice and do five comparisons with Amazon? And even if you order it, that’s not going to come until two days from today versus the second one where the size of the problem is such that at some point this person is probably going to do a comparison for all but the least price sensitive people. And so you should have a segmented approach, right? Like, what are these dimensions on which the willingness to pay and the sensitivity and the competition are going to vary, right? And that’s not there in most practices.
Mark Stiving
So Robert, I want to pause you for a second because we’re almost out of time. And I actually want to bring this back to something that I find fascinating. So the first comment is, I’m thrilled with what you’ve done with saying, hey, I’m going to focus on this industry. And we often say, in fact, I say to people who talk to me about being consulted all the time. If you can choose an industry and focus on it, you can become an expert. Now, I intentionally don’t do that, which is why I don’t get paid very much. That’s probably not true. But in all honesty, I think I would grow faster if I said, I want to focus on this industry. I just don’t because I don’t want to. But now that you have said, look, I’m really focusing on this pet industry, and so much just by talking to you, like I could tell, so much about the problems. Do you think it’s helping your business by doing it this way?
Robert Ribciuc
So I think that, if your definition of success in the business is, grow it the fastest, make the most amount of money and so on and so forth, right? That being more of a generalist in our world, tends not to be the fastest path to, it’s like medicine, right? You want to make the most amount of money, go be a dermatologist or orthopedist or whatever. But I think I measure success quite a bit differently from that. Like, my goal is not to make a billion dollars or run McKinsey tomorrow.
Mark Stiving
It’s dinner conversations for you. We get it.
Robert Ribciuc
It’s a balance, kind of, to win a balanced life, right?
Mark Stiving
But, take away the money for a second, right? I love money, I love talking about money, I love thinking about money, but in reality, even if you didn’t think of money, the fact that you now know so much about this one industry, you can walk into almost anybody in the pet industry and have a good understanding of what their problems are likely going to be, have a way to a language to communicate with them. I mean, I think you’ve done a phenomenal job with this.
Robert Ribciuc
Well, I appreciate that, and I still think there’s more to be learned and there’s more to be done. And my approach, I try to partner with other people that are brilliant and have done great work in the space. And here I’ve benefited from a couple, Utpal has been extraordinarily generous. And if we do stuff in the veterinary industry, he’s a partner I can go in with and lean on his knowledge as well. But, to your point, it definitely feels good when you start sounding more informed than the average guy in the room. I think that’s a quality of growth that honestly feeds your sense of contribution, right? Because when I was talking about the balanced life for me, contribution and ultimately knowing there’s going to be whatever, a thousand practices that maybe 10 years from now are going to be better, more sustainable, able to provide better care, because they’re better businesses, right? Absolutely feels gratifying. And I think it’s a journey. So if anybody listening to this has pricing problems in the industry, I would love to talk to you. But, you are the, one of the other people that I lean on, , your mentorship and just, thought partnership and, just me learning to be a better consultant has been also part of that journey. And thank you for that.
Mark Stiving
That’s so kind of you to say that. So we’re going to have to wrap this up though. I should just send it right there though.
Robert Ribciuc
You just have to send me a detailed spreadsheet with how far am I from being the all time most appearing guest on your podcast, I hear in the veterinary space they care about that a lot.
Mark Stiving
Do they? Okay. Good. So Robert, thanks so much for your time today. If anybody out there wants to contact you, including any veterinarians who I’m sure they’re all sitting around listening to a pricing podcast, how can they do that?
Robert Ribciuc
You should watch out for this because I have a post coming up on LinkedIn exactly about this. Like my wife’s take on a problem and my take on a problem, and she tells me people will not read your stuff, if you do all these things. But, to your question, people can find me on LinkedIn. It’s a weird last name, but you will have it, spelled out in your podcast. And then, [email protected] for anybody who wants to reach out directly.
Mark Stiving
Alright, to our listeners, thank you so much for your time. If you enjoyed this, would you please leave us a rating and a review, and if you have any questions or comments about the podcast or pricing in general, feel free to email me. Robert, why is your hand up?
Robert Ribciuc
I just didn’t want to leave this without saying the most obvious thing I should have said all along, which is before you go in crying to your practice, with a veterinary need, please call us. My wife would love to help you day or night.
Mark Stiving
And she’s a veterinarian. Ooh, I’ve got a vet on call now. Nice!
Robert Ribciuc
For the very bad. Only for the very bad.
Mark Stiving
Thanks.
Robert Ribciuc
I mean, Mark between that and you crying, come on.
Mark Stiving
I know exactly. So, if you do have any questions about pricing, feel free to email me, [email protected]. Now, go make an impact!
