Drug Testing Business Success

MDT Pricing Series. Price “Per Test” is Still the Standard.

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Price per test is still the pricing approach requested by most customers.

This method is a logical means to quantifying the total cost of a drug & alcohol testing program.

How to Charge the Customer for a Random Testing Program?

Questions here may include:

  • What is the minimum number of tests that must be conducted on any site visit.

  • Will you reduce the per test price when a nominated number of tests are exceeded on a site visit.

  • How will you charge for a single test, such as an incident call out fast response?

  • How do you charge for travel? Is this absorbed in the per test rate or charged in addition as a separate item?

It should also be recognised that even if you use standard or static pricing, flexibility may often be required due to travel considerations and/or aggressive quotes being required for large customers or tender proposals.

The starting point for any quote process for me has always been, establish the testing plan.

How many tests, how often and where. Or more technically – volume, frequency and location. This allows you to map out costs and more effectively price for the customer.

 

Minimum Testing Levels

Definitely set a minimum level of testing to be conducted. If you test less than the minimum on a site visit, charge an attendance fee. This method can also be used for the single test incident call out.  So the attendance fee for both instances can be the same, which keeps things simple.

Volume Discounts

Use of a sliding scale of pricing to enable discount for high test numbers on a single visit can complicate your pricing. Simple is often better.

A sliding scale can sometimes influence the customer to focus on hitting the price reduction number of tests rather than aiming for optimal deterrent or targeting other important factors.

For example, consider a customer site which requires 20 tests per month.  Using your sliding scale pricing, the customer may be best served to conduct all 20 in one visit. However consider the additional value they could receive where instead you attend twice for the month and conduct 10 each time (assuming travel or site attendance fees are equal). This is also crossing over into another discussion we should have later – along the lines of “frequent visits with lower volume” versus “less frequent visits with high volume”

Travel Charges

Travel is often an issue when it comes to drug testing programs. Customers like paying for travel even less than paying for their drug testing!!

A major issue exists for sites which are outside of city areas and even remote in some instances.  Where travel is to be charged this can render the price per test overall, to blow out considerably.

For example, travel to a site 200km away may add say $600 to the cost of a site visit. If 10 tests are conducted at say $80 per test, for $800 there, then the total becomes $1,400 – equating to $140 per test.

What are the options here?

First, consider the total value of your customer’s annual program. Create a testing plan and assess the likely cost of travel overall.  It may turn out the travel cost is approximately 10% of the total program cost.  Once you quantify the cost to you, the pricing strategy can then be adopted.

  1. Perhaps you can spread the estimated cost over all the testing volume and add a few dollars to the per test price. This allows a simple pricing structure all inclusive, often a winner with the customers.

  2. Once quantified, travel may not be as costly as you think. What about waiving the travel cost? Or heavily discounting the travel and offering a flat fee for the remotely located sites?

Remember that these “remote sites” have site managers that may complain to their National managers regarding costs.  Their voices are heard and you want to avoid causing them too much grief wherever possible.

Travel cost of course is directly related to your geographic coverage and is often a challenge for a developing drug testing business.  Be prepared to take a hit on travel costs in the early days.  If you can expand your coverage then your travel cost will reduce – and so can the customer’s travel cost.

Monitor, measure and identify inefficiency to achieve overall improvement.

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About the Author:

Cameron Stuart provides forward thinking business education services to the Drug Testing Industry through his company Drug Testing Business Success. Key principles of his business include low cost strategies for maximum results.
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