Your Dental Practice Marketing Budget: The Real Truth

Let’s discuss your dental practice marketing budget as we approach a new year.

We’re gearing up for our Elite Program member’s live meeting on Friday this week.  Coming off a fantastic Christmas and New Years.  Here’s a photo of my partner, mother and I at Fountainbleau before Christmas dinner at Gotham Steak.  No one’s trip to Miami Beach should be without a visit to this grand hotel.  It had a face-lift a few years back and is better than it ever was in it’s last hey-day. 

…..on to the topic at hand…..

What should you be spending on your dental practice marketing budget?

You’ll hear most “experts” state 3-7% in writing and from the podium.   Here’s the truth:  That was right 20+ years ago but is 100% wrong these days.

Where did this 3-7% number come from?  Well, it came from the earliest days when dentists were just starting to market before the proliferation of insurance discounting was an industry norm.  In other words, it’s a direct hold-over from a different reality which no longer exists and isn’t coming back.

Some practices still proudly boast that they only spend 3-7% or even less, when in truth, they are committing anywhere from 10-37% or even MORE to their marketing!

How’s that?  Well, if you write-off anything based on insurance contracts (and 90%+ dentists do), then your write-off IS a direct marketing expense.   Except in this case YOU don’t decide on where it gets spent or on what type of patient/case it is spent attracting, the insurance company does.  And guess what they are going to do with your marketing expense that you gladly had them? They use it to find more employers for subscribing to their discounted plan(s) and to keep you shackled to the discount IV.

To make matters worse, some dentists agree to a set fee schedule from a carrier and then dependent on a particular plan offered, discount back from the set fee schedule.  Double whammy!  Those boys and girls are then ones who spend 40% of their fees on marketing and still hold up their hands during my presentations and proudly say they spent 3% last year.

The most astute dentists (certainly our Program members are in that group), tend to have an epiphany moment when they look at their production/collection/write-off tally in a given year and find that on $1M in production they wrote off $100K in insurance expenses.  Speaking from personal experience both as clinician and leading consultant, $100K directly invested in external marketing will generate $1.5M-$2M in highly profitable business.   The minority who get this invariably seek out ways to disengage from the discounting game and enhance their dental practice marketing budget.

So, what’s the real deal with % of dental practice marketing budget needed ?  For those who want to truly attract fee for service cases, complex procedures, implants, apnea, sedation, etc. your marketing expenses for direct external marketing will be 15% of collections.  The good news is all those suckers addicted to the PPO write-off cannot afford to compete with that kind of marketing budget and attract the higher profit cases.  For those that truly understand this, you get a permanent marketing advantage to stay ahead of your competitors. While they can’t “afford” to market since they are consigning most of their dental practice marketing budget to the insurance company, the savvy can invest it in ways that bring real returns.

In case you think this is going to get any easier (more middle class patients buying outside insurance, insurance maximums going up, plans getting “better”) think again.  For those who haven’t been reading what the economists see related to the post-recession reality in the US, here’s what lies ahead:  Already stagnant household middle class incomes staying suck at 1970’s levels.   Income growth will take another 4-5 years to return to 2007 levels.  A reasonable chance you might not see your patient’s middle class incomes returning to that level for the rest of your career.   35% of those changing jobs after the recession have taken a 20% or more hair-cut on income.  A middle class used to chowing down at the trough of cheap Chinese imports (artificially making them feel like their stagnant income is worth more) finding a surprise over the next 18 months as newly ignited inflation in China is set to increase import prices by 35%.

Here’s the rub with your marketing budget being sucked up as part of the write-offs.  The longer one sails on the ship of discounted fees, the harder it becomes to market your way off that ship and onto one where ongoing higher profits and lifestyle are predictable and that only 10% of the profession currently enjoy.

It’s not just about the dental practice marketing budget either….

In addition to this change in thinking related to marketing and the insurance company “write-off” as marketing dollars you are spending, moving from a sales system geared for selling “all things UCR” to one that can sell fee for service things that are far beyond insurance maximums and UCR is a must.  99% of what’s taught for selling dentistry is all about “maximums and UCR.”  Thus, for every practice seeking to change course, starting with your sales system is THE first and most rationale step.

Can one gradually get off one ship and move to the other?  Yes, it is possible to gradually withdraw from plans as time goes by, sell at higher fees to those (a minority) patients who stay loyal, and market your way onto your better ship for the long haul.  Upgrading your selling System is, once again, the only way to make such a reality.

For many, changing ships requires short term pain to divert personal income to marketing that sets up the cycle of buying more profitable cases that allow for marketing costs to approach 15%.  For those who have indebted themselves up to the cranial apex, to “keep up with the Jones’” or perceived lifestyle dentists “should” have, they’re in the worst shape as the debt treadmill demands service regardless of how one feels about any of this.  For most of those, it ain’t happenin……

If you’re seeing the light, now’s the time for action.

For those not understanding any of this or refusing to acknowledge reality, look forward to working harder every year to stay even, or worse, ever harder to actually make less.  The forces mentioned above are accelerating.  Wait too long and you’ll be just more road kill that I’ll talk about from the podium.

Consider yourself forewarned……To get started on how to market correctly try my #1 top selling book on Amazon or go to my website here.