It’s the question on almost every dentist’s mind: how much of my dental office’s profits should I devote to marketing the practice?
This question can get tricky because it’s difficult for some dentists to assign a particular value to marketing. Calculating the value of tangible items, like office equipment is much easier than calculating the Return on Investment (ROI) for ads, billboards or direct mail marketing campaigns – because this requires a long term tracking system.
Yes, marketing value can be hard to assess… but that doesn’t mean it isn’t extremely valuable. In fact, effective marketing is what will keep your dental practice alive and kicking.
Acknowledging that you need marketing for your practice is a big positive step forward – but it doesn’t help you decide how much to invest in it. The best way to calculate how much you should invest in your dental marketing program is to base it on your goals for practice growth, and the return you expect to get from your marketing efforts.
Return on investment is based on a few things, but here are the top three factors:
1. The response rate to your marketing campaign or plan
2. The yearly and lifetime value of a patient
3. The number of referrals each patient will likely produce
Estimating these, combined with your goals for practice growth, will help you calculate a budget for your practice’s marketing.
For example, a new dental office in need of steady patients will have to allocate a higher percentage of its profits to marketing, compared to a decade-old practice. More specifically, the marketing “rule” is that if you’ve only been open 0-3 years, you should expect to invest between 5% and 10% of your gross projected income.
After you determine your annual marketing budget, it’s time to decide how much to invest in external marketing, versus how much to invest in internal marketing.
Obviously, you need to attract new patients using external marketing. However, you need to build trust and loyalty with your dental office’s existing patients through internal marketing programs. (There’s no point in focusing on new business if you lose the old patients in the process.)
Most dental practices could use a constant stream of new patients, and so it’s best to consider devoting 70% of your marketing budget to the external side of things, and 30% to internal.
External marketing might include ads, a great website and a direct mail strategy, for example. Internal might rely on newsletters, a referral program, in-office signage and more.
Even if your practice is thriving, and you don’t think you can possibly cram one more patient into your crazy schedule, you should still consider external marketing. Think of your practice as a leaky bucket: patients leave practices all the time, like water drip, drip dripping out of a bucket with holes in it. People move, people die, they change insurance or they simply stop coming for financial reasons. Either way, you need to replenish the water in that bucket as it seeps out.
In other words, you need to restore your patient numbers on a monthly basis, because for reasons out of your control, attrition rates will always be something you need to consider; and new patients mean a healthy practice… or a full bucket!
So… how much should you invest in your dental office’s marketing? Well, the answer is pretty simple: enough to keep growing your practice.
A lot of dental offices fail to invest in promotions, especially in difficult economic times. But marketing is as essential as the equipment you rely on every day.
A good marketing plan is your dental practice’s best friend – and like any relationship, the more you put in, the more you’ll get back. So be generous.