By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD
Feb. 13, 2019
Deciding where to spend marketing dollars, and how much to spend, is a challenge. Here are steps to ensure your marketing pays off in increased profitability.
HOW MUCH SHOULD YOU SPEND ON MARKETING?
If you are an established practice with an acceptable number of new patients coming into your office (20 percent or more per year), then you should be spending 1-2 percent of your gross revenue on marketing. If you are less than 20 percent new patients each year, then you might need to spend more. If you are a new practice, your number one problem is getting patients into your practice so your marketing spend might be as high as 15-20 percent of gross revenue collected.
HOW DO YOU KNOW WHERE TO SPEND MARKETING DOLLARS?
Marketing people say that 50 percent of marketing dollars are effective, but we don’t know which 50 percent of the marketing efforts are effective. With the tools available today, we can calculate which marketing programs are effective and which ones are less effective.
The most straightforward way to calculate the return on investment (ROI) of your marketing is to subtract the marketing costs from the income generated from the marketing, then divide by the marketing costs. The formula is:
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ROI = (Income from marketing – Marketing Cost) / Marketing Cost
So, if sales increased by $1,000 and the marketing campaign cost $200, then the ROI is ($1,000 – $200)/$200 = 400 percent.
Essential to this approach is knowing that the increase in gross revenue collected is from the specific marketing plan implemented. How can this be done? The key is to make sure you can link every patient who purchased anything to a specific marketing plan.
Taking out a new phone number that is only attached to a specific marketing program will enable staff to know anyone who calls on that phone line is coming from that marketing program.
Another way to do this is to put into your marketing a line that says, “Ask for Tom when you make an appointment because he has a gift for you.” For this to work, there cannot be anyone on staff named Tom. With this approach, staff will know that anyone who asks for Tom is coming from that specific marketing program. (If you are running multiple marketing programs simultaneously, then you can use a different name for each marketing program.)
What do you do with this information? Put more money into successful marketing programs and less money into less successful marketing programs.