Calculating a Dental Marketing Return On Investment
We still run across quite few doctors who still do not understand the value of marketing for new dental patients. We understand why… for most dentists the additional money that they are going to spend on marketing is money that they were planning to take home as salary. But the reality is: practices that are not marketing are not growing!
The fact is… Dental Marketing is an INVESTMENT… not an EXPENSE! This is a point that I drive home repeatedly whenever I speak at dental seminars. Some think it is self-serving on my part, given that I am a dental marketer. But that is not why I make this point. Lets look at the definitions of the two words:
- Investment: the action or process of investing money for future profit or material result.
- Expense: the cost required for something; the money spent on something.
An Investment is something that you want to do, because you want to see a return. An expense is something you have to do, because it is required. Do you see the difference? Approaching your dental marketing as an Expense is to approach it with a negative attitude. “I have to do this or else my Hygienist will quit.” Is that the right attitude? No it isn’t. Your attitude should be “I am choosing to invest this money in marketing because I want to increase production, get more new patients and take home more money at the end of the year!” As the famous personal wealth coach T. Harv Eker has always said, “What You Focus On Expands.” Do you want to focus on the positive outcomes or the negative?
So lets look at what kind of return a dental practice can expect to get on their marketing investment. The table below assumes 5 scenarios of marketing investment (from $15K to $55K) as well as the corresponding number of new patients that a practice might expect to get. Here are some other assumptions that we are making:
- The Average one-year production per new patient = $500
- Referral Multiplier = 0.1 (for every 10 new patients they will refer 1 other patient)
- Patient Retention Rate Yr2 = 65%
- Patient Retention Rate Yr3 = 45%
- Average Profit/Take Home for the Dentist = 35%
There are several important things to note about the above table:
- Disclaimer: Each practice is different. One practice could spend $30K per year on marketing and have completely different results than another practice spending the same amount. PPO vs. Fee-for-service, location, Team training, phone skills, etc. could all affect the success of a dental practice’s marketing plan.
- The more new patients you get, the more internal referral opportunities that you will have.
- Since the initial investment in marketing those patients in Year1 does not have to be repeated, your return on your marketing dollars goes up significantly in Year2 and Year3.
- The more you spend (since it is correlated to the number of new patients you get), the more return you will get on your marketing dollars.
- If your Financial Planner approached you with an investment opportunity where you invest $60K and get back $276K in three years, would you take it? Or would you ask – “can’t I invest more than $60K!!!!”