Care plans renewal strategy: Understanding churn and how to deal with it

What is “care plan churn” and why does it matter?

The term “churn” refers to the number of plans that do not renew over a given period and is expressed as a percentage of total renewals possible (number of non-renewed plans/number of plans eligible for renewal). For example, if there are 250 plans available for renewal in the month of August, and 225 of those 250 renew, then your churn would be 10%.

In recurring billing businesses (e.g., streaming service providers, mobile phone carriers, dental membership programs, veterinary practices with wellness plans, etc.), companies try to keep the churn rate as low as possible to help maintain a stable revenue stream and reduce acquisition costs of new customers. And, while you might not consider your wellness program as a recurring billing business, it most definitely is.

Loyalty leads to happy pets

In addition to the monetary benefits of low churn, the loyalty and compliance driven by your care plan program can lead to healthier pets, happier pet parents, and fulfilled practices. Moreover, higher retention rates give veterinary professionals more opportunities to build stronger relationships with clients and become their trusted resource when it comes to all things pet-health related.

Churn by the numbers

Churn can sneak up on a business. Let’s look at an example to explain the effect that churn rate has on recurring revenue, based on our internal research that estimates an average of $150,000 in annual revenue for a practice with 100 pets on plans.¹

Example: The effects of churn

Wiggles Animal Hospital sells 100 care plans in year one. In year two, it adds 100 plans, but with 50% churn, at the end of year two, the result is 150 plans, or $250,000 in plan-associated revenue, an estimated loss of $50,000 due to non-renewal. Not bad, but not what it could be. In year three, Wiggles Animal Hospital adds another 100 new plans, but still has 50% churn. At the end of year three, this results in only 175 activated plans or $262,500 in revenue, an estimated loss of $187,500 due to non-renewal.

Now let’s say Wiggles Animal Hospital experienced a lower churn rate of 20%. At the end of year three, the practice would have 244 active plans worth approximately $366,000 in revenue. With an increase of over $100,000 in plan-associated revenue, this represents a significant improvement and shows why it is so important to focus on keeping the churn rate as low as possible.

Ultimately, churn will determine how big a complete care plan program can become and how lucrative it can be for the practice. If your members churn too fast, you end up taking four steps forward and three steps back. So, from day one, understanding the factors that affect renewal rates, and then planning and implementing a low-churn renewal strategy will determine the long-term growth and sustainability of your care plan program.

High churn = poor renewal rate

Our experience shows that when it comes to renewal strategies, ensuring that program participants perceive consistent and above-anticipated value as a member is the best strategy to ensure low churn. Demonstrating value needs to happen from the first day a client enrolls in their pet’s care plan.

The good news is that perception of value is almost entirely dependent upon communication, and good communication skills come with training and focus. You should not expect your team to automatically know how to communicate value. But you can teach them.

Step one: Train your team to communicate purpose and value

The puppy/kitten plan level offers a perfect example of the need to train and coach the team on communicating value. Puppy and kitten plans literally fly off the shelf without any communication necessary because new pet owners see them as no brainers. They know that their puppy or kitten will need multiple visits, vaccines, etc., in that first year, and enrolling in a care plan ensures that it will all be taken care of.

Being able to divide the cost of that care over 12 payments makes care plans even more appealing. However, these easy selling points do not communicate the lifetime value of preventive care, which means that without additional communication, it is likely that clients will see no reason to renew an adult plan the following year.

Education and service delivery are key

Educating clients that care plans help keep their pets healthy throughout their lives is critical. Focus on the bigger picture, so that pet owners will understand the value of keeping their adult pet on a complete care plan program.

Providing the services included in the plan is also a big part of reducing churn. It is the practice’s responsibility to ensure that all the key services included in a plan are delivered within one year. A large part of a renewal strategy is to stay on top of this and make sure that clients have every opportunity to redeem these veterinary care plan services (think physicals, fecal exams, and routine bloodwork). You can’t expect someone to renew a plan when they never used the services from the previous year.

Tips for training staff

Here are some of the lifelong care concepts to focus on when training the team:

• Plans are based on the practice’s ultimate care recommendations—their pet is receiving optimal care.
• Pets age faster than humans, which makes frequent physical examinations and annual diagnostics critical for catching conditions early when they are still treatable.
• It is important for pet owners to discuss diet, exercise, and behavior with their veterinarian regularly.
• Just as with humans, an emphasis on preventive care leads to long, healthier lives.
• Plans are tailored to a pet’s needs based on age and other factors; optional items provided by the veterinarian offer further customization.
• Pet owners will continue to have all the other member benefits provided, such as additional exams, discounts, etc.

TIP: Nothing speaks louder than personal experience. If you really want team members to communicate value, consider offering wellness plans as an employee benefit. There are many ways to do this, but one is to significantly subsidize plans so that the employee can purchase them at a reduced price for their pets. How many of them are currently following the highest standard of preventive care for their own pets? It varies, but many cannot afford it. If team members can utilize care plans, their experience can translate into personal recommendations that come from more than just a script.

Step two: Personalize care with customization

To increase value, a well-run wellness program often allows pet owners to choose from optional services and additional chronic-condition plans, including diabetes, hyperthyroidism, Addison’s disease, and canine Cushing’s Disease. Optional services let you tailor the plan to the pet; for example, spay/neuter on an adult plan, microchips, heartworm/flea/tick medication, additional diagnostics for high-risk breeds, etc. Chronic illness plans allow a pet owner to add a separate plan to manage their pet’s specific medical condition, such as diabetes, pain management, rehabilitation, etc.

Being able to tailor services or plans to the individual needs of a pet drives even more loyalty and value, helping to further reduce churn. Keep in mind that care plans do not have to be medically oriented. For example, if you offer grooming at your practice, consider an introductory program as an option for chronic illness plans. Think of the same for boarding and daycare. Get creative and you can come up with programs for pets of all ages and services.

Step three: Pre-book appointments

Pre-booking is a must. For a myriad of reasons, the last thing you want your team to do is chase down clients right before their plan expires to get them in to redeem important services. Such a delay shows disorganization and a lack of program management, which does not instill confidence or make your clients want to renew their plans.

Consider scheduling pets on a care plan for their next biannual preventive care examination before they check out. This creates a consistent six-month scheduling cycle (just like going to the dentist), which increases the perception of value and ensures that there is consistent communication between the veterinarian and pet owner regarding the best plan for their pet.

Communicate regularly and often

Talk to clients about their plans often. If a client has a care plan that includes an optional service they don’t want to pay for every year (like dental), let them know you can adjust. That way, they won’t cancel their whole plan, their pets will continue to receive vital preventive care services, and you can keep them coming back to your practice.

The good news is that clients are very willing to pre-schedule these exams because they are included in their plan, especially if you employ a comprehensive text/email reminder communication system. Having this system in place is critical for the success of your program.

Additional considerations

Here are three more things that should be top of mind with care plans:

• As part of preventive care examinations/visits, veterinarians need to take the time to review each service that is being delivered and explain why that service is important, either as a preventive measure or diagnostic tool.
• It is important for veterinarians and team members to consistently commend plan holders for being extraordinary pet owners.
• Clients that enroll their pets in your wellness program should feel like they are part of a special group and be appreciated for choosing to provide the highest quality care.

Reducing churn to grow your practice

So, what is the bottom when it comes to churn? Team training on communicating program value, offering optional services and chronic illness plans, and employing strategic scheduling protocols are the best ways to keep churn to a minimum. By minimizing churn, you can increase year-over-year growth of your care plan program.

As a partner, Covetrus provides a complete pet wellness program solution that combines software and professional services to make managing a complete care program easy, including reducing churn.

Covetrus® CarePlans is a flexible program designed to help your practice provide affordable, personalized pet healthcare, resulting in improved treatment compliance, efficiency, and profitably.

Learn more about Covetrus CarePlans.

¹ Why Wellness? [white paper], Covetrus/VCP, 2020.  https://software.covetrus.com/wp-content/uploads/dlm_uploads/2022/01/Why-Wellness_WhitePaper_1_7.pdf