The Path to Profitability
Differentiating in a commodity-driven market is critical to success for dental laboratories in this harsh economic climate.
By Keith Miolen
Many laboratories have seen a combination of factors affecting their revenue stream—a tough economy, a rise in overseas outsourcing, the demand for a competitively priced product, and the reduced number of restorative cases being treatment-planned. It has forced laboratory owners to become more efficient, revamp and streamline budgets, rethink production processes, and operate with a smaller workforce in order to maintain an acceptable profit margin. The focus of many laboratories is shifting from the technical to the business-oriented, as the industry quickly moves from handcrafting into a digital industrial age.
As laboratories hone their internal efficiencies, they must also look at their marketing plans. After all, a company’s marketing efforts help generate the revenue necessary to operate. Yet, economic decline and tightening budgets have contributed to revenue cutbacks, even in marketing. So how do laboratories develop and grow business in a time of nonexistent economic growth? One way is to create specialty goods and services that offer special value to clients, and differentiate a business from its competitors.
A specialty product is often perceived as one that is in high demand but only a few businesses can produce. Today’s specialty product, however, can become tomorrow’s commodity. A good example is the zirconia-based restoration. Zirconia was once perceived to be a high-dollar all-ceramic restoration, which could only be fabricated by the few laboratories that had access to CAD/CAM technology. For those laboratories, the demand for these restorations drove business for several years. But zirconia-based restorations dropped in price and became commoditized as the number of outsource milling centers grew, and the technology penetrated deeper into the market. Today, new developments in CAD/CAM technology and newer uses for zirconia, such as milling full contour, provide laboratories with new specialty products with higher value. However, once they become the norm, they too will become a commodity. So what types of specialty products and services can be developed that differentiate businesses, keep them competitive, and generate income? Here are a few options that can be incorporated to protect a business from a commoditized market.
For many patients who need comprehensive restorative treatment, the challenge today is financial. Fewer patients can afford to have all their treatment needs addressed at once, especially when it involves complex comprehensive care. For dentists and laboratories, the ability to segment large complex cases into manageable and affordable stages can increase the rate of case acceptance and give the patient the functional and esthetic outcome desired. Elizabeth Bakeman, DDS, FAACD, of Grand Rapids, Michigan, has felt the effects of the profession’s economic turbulence in her cosmetic and restorative practice. However, she mastered the ability to segment complex and comprehensive restorative treatment plans long before the recession hit. In
order to accommodate patients’ financial constraints, she works closely with the patient on the overall desired outcome, designing a treatment plan that best addresses the patient’s financial, functional, and esthetic needs. The patients let the practice know how much dentistry they can afford for a given year, and Dr. Bakeman tries to adhere to that framework.
“This has always been a viable option, but patients are opting for the segmented approach more than in previous years,” Dr. Bakeman says. “For example, direct composite, long-term provisional restorations and CAD-fabricated resin onlays are viable options for managing the occlusion on a provisional basis.” This allows for stability in centric occlusion, if vertical has been altered and provides harmony to function, until those areas can be approached and definitively treated. Laboratories that want to help clients increase case acceptance should work closely with them to stage treatment procedures. Laboratories should evaluate cases after models have been mounted, and should recommend ways to break a case down into cost-effective manageable procedures. Segmenting case treatment allows patients greater access to needed care, and can become a great specialty service that both laboratories and dentists can offer to retain patients who might otherwise put off necessary but expensive treatment.
Differentiating through education can also build the external side of the business. By becoming a knowledgeable resource for clients, rather than simply a producer of a prescribed product, value and confidence in the dentist/technician relationship can be built, and otherwise price-sensitive clients can be retained. Unfortunately, education is often overlooked as a specialty service, and is seldom marketed by laboratories focused on competing on price and esthetics. Dental technology trade show attendance and continuing education programs are down, and an average of 15% to 20% of businesses are slow, according to NADL statistics. However, the opportunity exists to educate employees and to help laboratories rise above the crowd and prepare for new or expanded business initiatives and opportunities when the economy turns around. Taking advantage of educational opportunities and technological advances will help businesses survive in this price-competitive market.
Opting for All-Ceramics
The fluctuating metals market and high cost of gold provide laboratories the opportunity to market the benefits of all-ceramic restorations to their client base, and move them away from metal-based restorations. By 2014, 39% of all restorations fabricated in the US will be all-ceramic-based, according to estimates from iData Research, a market research firm servicing the dental industry. Getting invested in producing all-ceramic restorations holds several advantages for the laboratory, especially full-contour restorations fabricated with monolithic ceramic materials using milling or pressing technology. Producing all-ceramic restorations without a fabricated core streamlines production, which makes these products more profitable to produce at a higher profit margin. Of course, preparation requirements and occlusion fundamentals are just as vital to the long-term success of an all-ceramic restoration and will require educating clients. Converting clients to all-ceramic restorations produced by milling or pressing a full-contour design is a great way to increase revenue, position the business for the future, and help clients service a more informed patient base that demands higher esthetics and more biocompatible solutions.
The ability to react to trends in the market, and to find ways to differentiate a laboratory from its competitors will keep a business stable, even in tough economic climates. Each laboratory has control over how it establishes its path to profitability. Combining technical skill with business savvy, and establishing well-grounded specialty products and services will help keep any business on a financially balanced platform.
Keith Miolen is the chief operating officer and director of education at King Dental Studios in Bristol, Tennessee. He would like to acknowledge Elizabeth Bakeman, DDS, as a clinical contributor to this article.