Eyeing a growing market for veterinary care and pet products, a former bank officer creates a network of providers

Lucky, Jay Bloom's golden retriever, was a dog with many talents. He could give his paw on command. He could sit, fetch, and roll over. And, according to his master, he even inspired a catchy start-up plan.

Bloom, cofounder of Pet Assure Inc., a fast-growing discount club for pet owners, often summons up the late Lucky's memory to recount how the company, based in Dover, N.J., got its start. Lucky, he recalls, had the bad fortune to require a hip replacement. But Bloom claims that when he asked his pet insurer to cover the $3,000 procedure, the answer was no.

As Bloom, a 31-year-old former financial officer at the Chase Manhattan Bank, tells the story, he didn't just howl, he got even. Almost three years ago, he and his wife, Carolyn, started Pet Assure, which gives club members a 25% across-the-board discount on veterinary care, plus price breaks on a variety of pet-related services and products purchased within the company's network. Since then the 20-employee company has signed up some 30,000 pet owners, posting revenues last year of roughly $1 million. And Bloom sees plenty of room for growth.

These are boom times for pet-care entrepreneurs like Bloom. With the U.S. economy surging, pet owners are lavishing more luxury goods and services on their cats and dogs than ever before. Total annual spending on household pets has been climbing steadily during the 1990s and is expected to reach $28.5 billion by the year 2001, according to the American Pet Products Manufacturers Association, based in Greenwich, Conn. Much of the money is going to veterinary care, including advanced procedures like chemotherapy and CAT scans, according to experts.

When Bloom began researching the pet-care market, in 1994, he says, he found only one well known pet-insurance carrier, Veterinary Pet Insurance (VPI), founded in 1980 and based in Anaheim, Calif. VPI, though, didn't offer coverage for basic shots and checkups, not to mention surgery for dogs like Lucky that belong to a breed with a genetic predisposition to a particular ailment (in Lucky's case, hip dysplasia). Bloom became convinced that a discount club like Pet Assure could succeed by offering a pet owner savings of hundreds, if not thousands, of dollars a year for veterinary care alone.

Drawing on $200,000 in personal savings, plus another $600,000 raised from friends and family, Bloom and his wife began a campaign to recruit vets to the Pet Assure provider network. As might be expected, many veterinarians weren't clamoring to offer 25% reductions in their fees.

Pet Assure's pitch? The increase in office visits by new customers would more than compensate for the discounts. What's more, Bloom promised participating vets a 50% share of the club's annual membership fees ($99 for one pet). "As soon as I heard about it, I realized the potential," says Phillip Raclyn, a New York City veterinarian who signed on in 1996. Today, according to Bloom, Pet Assure's provider network includes roughly 1,700 vets in 43 states, or more than 5% of the 30,000 vets nationwide who treat household pets.

Pet Assure has also signed up a network of about 1,000 groomers, dog day-care centers, and other pet services as providers. Meanwhile, it's been pushing to grow its membership rolls with new partnerships. A recent venture with Associated Card Services Bank, based in Stevens Point, Wis., gives a free club membership to pet owners who sign up for a special-issue Pet Assure MasterCard.

A new alliance with Cigna's property and casualty division is expected to bring in still more revenues. As part of the plan, Cigna pet-policy holders will be able to use Pet Assure's network of veterinarians and pay a modest fee per visit. Pet Assure earns a fixed sum as a network access fee for each policy sold, although Bloom declines to disclose the amount.

There's no guarantee that the partnerships will pay off. Both VPI, the industry leader, and Petshealth, a new pet insurer based in Canton, Ohio, have been stepping up their marketing efforts. And both point out that they offer the kind of old-fashioned, fee-for-service coverage that consumers and vets prefer. "We've seen a lot of competitors start up and drop out," says Jack Stephens, the CEO of VPI and a veterinarian.

Bloom insists that Pet Assure has proved it can more than hold its own. "We have some pretty potent distribution channels in place," he says, noting that the pet-food and pet-supply retail chain Petco began selling club membership at some of its stores last spring. "Our growth will be exponential."