Pick Your Price
What's superior service worth to you?
Matrix Providers is a government contractor that provides medical staffing services to hundreds of health-care facilities nationwide. It is a multi-billion-dollar market and a "safe harbor" for the incubation of small businesses via the SBA-monitored “set-aside” rules codified in the Federal Acquisition Regulation (FAR).
The combination of a massive market and government buying power, as well as a steady stream of undifferentiated small businesses willing to competitively bid low prices to gain market share, results in a “commodity market” that creates a real challenge in building and pricing a high-performance product.
Keep the common low price point and win with the best price – or promise more at a higher price and then face the daunting task of meeting those promises?
Matrix Providers took this on in 2010, and eight years later there are definitive signs of success, but it isn't easy.
The mission was to improve the success rate of finding and placing medical staff from a government-market baseline of 83 percent to 87 percent to 100 percent. We insisted we could improve our success rate by as much as 17 percent – recruiting innovation, customer service and cost control to achieve that goal.
The government can, and sometimes does award to higher bids if past performance and quality are demonstrably better. We set out to be just that with a goal of a 10 percent premium price trade-off for 15 percent better service.
We have learned the government will rarely pay more than a 10 percent premium for quality and does not do so uniformly.
So we had to learn to pick our performance-proposition battles carefully.
For example, some customers – hospitals – prioritize low cost and thus suffer from lousy performance. That means missing health-care workers and sub-optimal delivery. Others treasure intense management and service.
Those are the customers we invest in. We have taken five-figure losses at times to sustain that mission and those relationships.
The government is a fickle customer, driven by regulatory and cost-cutting cycles that are impossible to predict. Hospitals that once paid performance premiums suddenly “award low,” and we lose the work. It takes months and years to cultivate a customer willing to pay a modest premium for significantly better service – and it takes one month to lose them.
How does a small business mitigate such risk?
Matrix Providers practices customer diversification in a portfolio management style: Win a few, lose as few as possible – it’s part of the game. Over 400 Matrix Providers staff members are currently placed in about 100 facilities among five agencies and programs in 34 states. We see that diversification as a hedge.
We also see this situation as a huge opportunity to discover which of those customers appreciate our quality and performance and are willing to pay to experience the difference. That is where we invest: Those with whom we share a mission, and with whom we create loyalty.
Word gets around: There’s a high-performance player on the field, setting a new performance standard. The federal health-care staffing market is roughly $3 billion per year, with perhaps 20,000 staff on-contract at any given time. Maybe not today, maybe tomorrow, someone is going to hit a rough patch, and they will reach to us, and we will show up for them. And that’s enough to give us a shot, to create and sustain a performance segment in a commodity environment.
It is never a slam-dunk. This year, for government reasons that we did see coming, over 35 percent of ours and others’ contracts are being re-competed, and the low-ballers are out in force, looking for market share. We have doubled down in 2018, investing a lot of hard-earned profit in performance, customer service and outreach to retain contact with our favored relationships and health care workers.
The fight to sustain our performance segment in this commodity market is at full roar, and so far we are holding our own. We don't know how it will turn out, but the risk is worth the potential (probable?) reward.
Dr. Bill Rivard is the CEO of Matrix Providers.