Well, not the band actually. I thought I’d talk a little bit about credence goods today, or I guess in our case, credence services. Credence goods (or services) are goods that the buyer has no means of valuing accurately even after they have consumed the good due to asymmetric information (i.e., one party in a transaction knows significantly more than the other).
A good example of this might be going to buy wine at a wine shop. The wine shop owner holds most of the information in this transaction, due to their knowledge of the products, not least from knowing what they paid for each bottle, but also where they bought their bottles from (reputation and authenticity) and how the bottles were stored (spoilage). The seller’s main disadvantage is they do not know the buyer’s tastes or budgets.
To the uninformed purchaser, there is little information to go off of beyond a simple knowledge of grapes, varietals and regions. Even an expert wine buyer is placed at a disadvantage to the seller, as the seller still holds more information than the expert, since the seller knows how the bottles were stored, the authenticity of the bottle, the reputation of the wholesaler etc.
In situations such as this, where the seller holds the lion’s share of the knowledge, the seller is often placed in the position of leading the transaction, explaining the product or service, comparing it to other products or services etc. while trying to obtain the buyer’s side of the information (budget and tastes). Think of buying a used car, which is also a credence good.
There are many ways this transaction can play out.
1. An honest seller
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That accurately identifies the buyer’s tastes and budget.
The transaction flows smoothly where both the buyer and seller are satisfied through the consumption of the product.
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That fails to identify or misidentifies the buyer’s tastes and budget.
Unless the purchased bottle is spoiled or varies wildly from the consumer’s taste, the buyer may never know how well the most recent bottle fit their tastes.
2. A dishonest seller
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That accurately identifies the buyer’s tastes and budgets but steers the buyer towards a more profitable bottle.
Unless the buyer is an expert or meets with an expert, the transaction tends to flow smoothly.
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That inaccurately identifies the buyer’s tastes and budget and steers the buyer towards their most profitable bottle.
This has the highest possibility for risk, as not only is the seller completely disregarding the buyer’s wishes but also pushing the transaction towards their own favor. So while there is always the chance of a happy solution (there’s always a happy Harry in every group), the chances that the dishonest seller randomly matches a buyer’s taste and budget with the seller’s choices are low.
Now, in dentistry we are met with a few added complications to our credence service problem.
- We regularly see our buyers on a routine, usually scheduled basis. This makes being a dishonest seller with little to no regard for the patient a risky option (unless you’re the only doc in town, or for some odd reason you only see tourists).
- There is an art to the science of dentistry, leading to different solutions for the same problem, or even how aggressively we diagnose.
Both of these problems can be mostly managed by trying to identify the patient’s needs/desires and budget and attempting to match them. This is where your front desk and patient management protocols come into play, and something I can address another day.
But next to that is to look at the psychology of the buyer. So what do you do when you don’t understand the good you’re buying even after you have consumed it? Well, consumers tend to look for other indicators of a match. While not a full credence good because we understand what we consumed afterwards, as tourists in an unknown town we often look for filled tables as an indicator of a restaurant’s quality. Savvy restaurateurs that have picked up on this tend to fill the tables closest to entry first to give that illusion of being full. We often hear the same recommendation for our offices that we should always book out appointments one to two weeks out for the same reason.
As a consumer I like to look at other aspects that are more difficult to fake. While I will probably never know the cleanliness of a kitchen in a restaurant that I visit, I can be fairly confident of my food when I check the cleanliness of their bathrooms, because someone who puts in the effort to keep some of the dirtiest and hardest to maintain areas of their business clean is probably taking a good step to maintain it elsewhere as well.
As a provider I try a different perspective. I take the saying that “People may not remember what you say, but they’ll always remember how you make them feel” seriously. So as a cash-oriented practice we try to signal the value in our services by creating an atmosphere that’s comforting to the patient from the smells of the office to minimizing chair time in the lobby to following up every appointment with an injection with a phone call to the patient. So while the patient may never know the quality of the work you put in their mouth and severe pain and further oral health problems you helped to prevent, they’ll certainly remember how well you treated them in your office.
So finally to what got me started on this conversation. I was doing some fun research in economics and stumbled upon an interesting article from some economists who did some work on this in Switzerland. While I have my own qualms with some of the conclusions the article reaches, it was very insightful, not just about economics but also how the dental industry in Switzerland works. So I thought I would share it here. It’s a bit less wonky as far as academic economic pieces go. If it’s too long or still too dense, then I recommend just copy/pasting it into your favorite AI and asking it to summarize it for you.