This past weekend, John Volk presented NAPHIA’s Pet Insurance Best Practices Guide at the CVC Convention in Virginia Beach. Here is a recent article from dvm360.com that summarizes the trends in the pet health insurance industry that can impact a veterinary practice.
Take a look to see where we are taking our research next!
When talking about pet owners, it’s easy to picture the typical pet-owning family, says John Volk, CVC speaker and veterinary-market analyst. This picture consists of Dad, Mom, two children (all white, of course), a dog and maybe a cat or two.
That picture is fading fast, Volk says. Important but subtle changes taking place in the pet-owner population will have a dramatic impact on veterinary practices soon—if they’re not already. Some of these changes may affect your practice more than others, Volk says—the key is to know which are happening in your neighborhood and how you can address them among your clients. Here are the trends—and what they mean for your practice.
1. Financial stress
One of the things the Great Recession taught us is that financial pressures do indeed impact veterinary care, Volk says. And even though the U.S. has been in recovery for a number of years, many pet owners are still experiencing financial pressure. Median earnings for U.S. men haven’t changed significantly since the 1970s when adjusted for inflation, Volk says. Women’s earnings have improved in that time, so that helps in two-parent households—but there are fewer of those than ever (more on that momentarily). In a nutshell, we’re still a long way from where we were before veterinary visits started declining in the early 2000s.
But wait, you say. Business was rocking and rolling in the early 2000’s. Maybe visits weren’t increasing rapidly for many veterinarians, but business was good. Here’s why, according to Volk: Remember the housing bubble? From 2001 to 2006, Americans pulled $5 trillion—yes, trillion—out of their inflated home values and spent it on things like big screen TVs, cars, restaurant meals, vacations and, yes, veterinary care. That’s about $17,500 for every man, woman and child in the U.S. That money is gone, and it won’t return anytime soon, Volk says. For one thing, the housing bubble is over. For another, people are saving more than they’ve saved in a long time. That’s a good thing for their financial security. But it does mean that they’re spending less on veterinary care and other discretionary items.
What’s more, the recovery hasn’t occurred evenly across the economy, Volk says. It has heavily favored the well-educated. In Chicago, for example, where Volk is based, median earnings are still well below 2007 levels in all categories except those with graduate degrees. Underemployment is still rampant, especially among those with less than a college education.
The result of all this is a declining middle class, Volk says. Since 2000, the middle class has declined from 54 percent to 50 percent of the population (continuation of a trend—in 1971 it was 61 percent). So what exactly do we mean by “middle class”? According to the Pew Research Center, a family of four with an annual household income of $44,000 to $132,000 is considered middle-class, as in an individual who makes $22,000 to $66,000. Correspondingly, lower socioeconomic levels have increased since 2000, from 27 percent of the population to 29 percent, and the upper groups have seen a similar gain, from 18 percent to 21 percent.
If you practice in an upscale neighborhood, this may sound like great news, Volk says. In the last 30 years, the only demographic group that has experienced an increase in net worth is the upper class! But if you serve the 80 percent of Americans who are not in the upper class, be aware that there’s still a lot of financial pressure on your clients.
Implications for veterinarians. This financial stress—and the resultant decline in disposable income—will make it more difficult for veterinary practices to continue to raise prices. There’s evidence that inflation in the cost of veterinary services is driving pet owners away and causing continuing declines in veterinary visits, Volk says. That’s a losing proposition for you, your clients and the patients you care for.
So look for ways to manage pricing, especially for shopped and routine services. Try to improve value, not price. Also look for ways to make it easier for clients to pay for your services—things like monthly preventive care plans, pet insurance and medical credit cards such as CareCredit.
2. Less homeownership
Homeownership in the U.S. is declining. These days more adults are living with their parents than anytime since the 1940s. Case in point: In 2015, more men 18 to 34 years old were living with parents or relatives than married or living with a significant other, Volk says. And almost as many women aged 18 to 34 were living with family versus married or cohabiting. There has also been a shift from owning to renting, Volk says. Pet population tends to follow household formation, and household formation took a big hit during the recession—in patterns that seem to be settling in long term.
An unrelated trend that doesn’t bode well for pet ownership is the aging population. Pet ownership tends to start declining when adults reach 50 to 55 years of age and declines to very low levels by the time people reach 70 or older, Volk says. And guess what? The 55-and- older cohort is the fastest-growing population group in the U.S.
Implications for veterinary practices: If you’re not seeing a lot of new clients, the stagnation of the pet population may be a factor, Volk says. That means you have to work all the harder to attract new clients. More people are sourcing pets from shelters and rescue groups than ever before. Volk suggests working with these organizations, as well as breeders, and welcome organizations to identify people who may have a new need for veterinary services.
3. More single-parent families
The percentage of households with two parents is declining, Volk says. In 2014 only 69 percent of household had two parents, down from 87 percent in 1960. Twenty-five percent of households are headed by a single mother, and an additional 15 percent of households have the mother as the sole or primary breadwinner. In most but not all of those households, mean income is lower than those in which men are the primary breadwinners, Volk says.
Implications for veterinarians: In single-parent households, time and often money are challenges. Offering convenient hours can make it easier for these busy clients to fit in veterinary care. Volk says, by way of example, that his daughters—both full-time professionals—take their children to the pediatrician on Sunday morning (because every pediatrician in downtown Chicago offers evening and weekend hours). Want to get really crazy? Consider a “veterinary van” or “doggie daycare bus” to pick up pets and bring them to your facility for services.
4. More millennials
Now Volk has better news. Currently those in the 25 to 29 and 30 to 34 age cohorts are the third- and fourth-largest groups in the U.S. By 2020, those two groups will be the largest population groups. This is the age range when people are most likely to purchase a home, get married, have children and acquire pets, Volk says. In fact, many of them are deferring having children and acquiring pets instead.
These millennials are partly responsible for an uptick in the number of households owning pets, Volk says. But while they are favorable to owning pets, they’re different from their parents when it comes to pet care. Brakke Consulting, Volk’s firm, conducted a study recently and learned that millennials are less dependent on veterinarians for pet care advice and are more open to purchasing healthcare products and services from nonconventional sources. They are also more likely to outsource services than their parents, so they are heavier users of pet daycare, boarding and grooming services. (Another Chicago example: Some veterinary practices are offering dog walking services for their clients.)
Implications for veterinarians: If you offer daycare, boarding or grooming services, millennials are an excellent target for your services. In addition, keep in mind that many of these are first-time pet owners, so it’s worth your while to spend extra time educating them about proper pet care, including proper veterinary care.
5. Changing ethnicity
Every year, the U.S. becomes less white. In fact, within 50 years, all of us—regardless of race or national origin—will be minorities, Volk says. In recent years, the greatest influx of immigrants has been Latinos. But the tide is turning, and increasingly Asians will be the predominant immigrant group. Today 87 percent of pet-owning households are white. By 2025—less than 10 years from now—only 60 percent of pet-owning households will be white, Volk says. And different ethnic groups have different approaches to pet ownership and pet care—as well as different levels of resources to fund them.
Implications for veterinarians: Make sure you’re reaching out to all the potential constituencies in your trade area, Volk recommends. If you have a large Latino or Asian population in your area, reach out to them through their community organizations and religious institutions. And make sure your staff reflects the ethnicity of your clientele.
Again, what’s going on in your neighborhood is what matters most, Volk notes. But changing demographics can sneak up on you. Be alert to financial pressures on your clients, or to shifting racial or ethnic cohorts in your neighborhood. Don’t just target the same group of clients you’ve always targeted. Those new groups need care for their pets, too. But they may purchase veterinary services differently than the clients you’ve traditionally served.