Background

This case study involves a plastic surgery center which is located in a highly desirable beach resort frequented by tourists from around the world. In order to diversify the center’s portfolio and leverage higher paying customer base, the center explored and started promoting themselves in the medical tourism industry. They ventured into the industry when it was just taking off. Hence the center took the advantage of being an early market entrant and started establishing itself as a market leader in the field of plastic surgery as well as a trendsetter of medical tourism in the region.

Taking advantage of early entry in the industry, they experienced initial success from foreign patients and their income rose exponentially. This led them to ignore the local market demand and focus on international medical tourists. Their prices for plastic surgery procedures kept going higher compared to other local & regional plastic surgery clinics. In the meantime, the competition for the same procedures and patient base increased significantly, and started taking higher market shares. Over a five-year period, they saw a significant rise and subsequent drop in income. The decrease was significant enough to go below their original net profit before they ventured into the medical tourism market.

Objective of the Evolution

Once the center realized that the current market approach is not viable, they started evaluating how to develop a sustainable program managing a balance between local and international patient base. The goal of the turnaround was to understand local and international customer needs and values to design a targeted program which can produce sustainable results – and bring them back as the region’s leader in the field of plastic surgery.

Turnaround Approach

It was a hard management decision to bring outsiders to manage the company turnaround. For this, the management had to admit the reality of the situation and understand its status quo that will not result in profitability of the practice. Based on this approach, here are top 5 factors that contributed to the company’s turnaround which included:

1. Pricing Analysis: Understanding plastic surgery prices in local, regional, and target countries is critical to align new pricing for the clinic. The goal was not to set random pricing based on what was the “going rate” but coming up with a pricing strategy which was based on understanding market competition, operating costs of clinic, and desired profit margin. This helped build a much more resilient pricing model which became highly competitive in local and regional markets.
2. Market Segmentation: It was essential to segment the local and international market to deliver a focused message to each audience instead of targeting everyone in the region. This included revamping of all their marketing materials both online, print and local marketing, outlining specific geographical areas for marketing, as well as defining top 5 procedures they would focus on which the clinic was most successful.
3. Return on Investment (ROI) Based Financial Model: To attract international patients while remaining price competitive, the ROI model was created. It included treatment prices, travel cost, local incidentals, and expenses. This gave a complete picture of the true treatment costs and why someone should travel abroad for surgical procedures. This was effectively used to market and communicate to prospective patients to drive consumer confidence on the practice.
4. Process Alignment: Although it was a small plastic surgery clinic, it was essential to look into the processes and what impact they had. For example, they had to assess marketing processes, patient coordination processes, pre and post-operative care processes, among others to create an exceptional customer service experience. This was extremely important to increase word of mouth and peer reviews as well as repeat patronage from the customers.
5. Management Change: They had to understand that they needed to take a different direction. It was essential to educate the problem to the management team. When the management was not willing to change and adapt with the new direction, it became clear that they had to make the changes from the top in order for the program to succeed.

Results and Conclusions

The hardest part of this turnaround was to bring the management team together so that everyone was on board with the change. The clinic took 3 months to realign with the new structure. Within 6 months of implementation, the clinic started seeing positive financial results. Within 1 year, they hired 2 more plastic surgeons for the practice which started growing. They reached a balance of 70% of the business from local patients and 30% from international patients. This also eliminated seasonality of the demand. From being price competitive in the region, and specializing on five procedures, they have built themselves the center of excellence in plastic surgery.