The Independent Dentist and Advertising-an expense or investment?
For the independent dentist who considers advertising……which is it……..and expense or or an investment ?
Only a few years ago, advertising by dentists was prohibited and the playing field was level for all. But things have changed and advertising has become a necessary expense for dentists in private practices who want to remain independent of insurance dictates and who don’t want to be overpowered by low-cost commercial dental chains with big ad budgets aimed at creating volume by heavily discounting services.
Without reaching out to the public, independent dentists are finding it increasingly difficult to generate a sufficient patient flow to cover rising overhead while being well compensated for their skills.
When it comes to an ad budget, expenses should be broken down into two categories:
– Marketing to present patients, past patients, and prospects who have asked for information previously.
-Marketing for new patient acquisition.
For a successful campaign when marketing to present, past, and past prospective patients the ROI (return on investment) typically yields between three and ten times the expense. (For every dollar spent earnings are between $3.00 and $10.00 in a relatively short period of time.) It’s a no-brainer and easily timed at regular intervals during the year. Again, these are patients or others who are already likely to do business with you as an independent dentist.
The yield for marketing to acquire new patients is measured on a different scale. That’s because MOST ad campaigns and marketing initiatives having to do with new customer acquisition usually don’t break even. Instead, they incur negatives (an expense). It’s important to think of this form of advertising as investment in securing patients, just as digging an oil well requires investment before any oil can be withdrawn for profit. [The exception to this rule is when marketing for new (big case) patients as the case fee is higher. (More on that in a bit.)
What advertising is VERY capable of doing is building value into your business, your brand, and your customer list. In this role, advertising and marketing is an investment vehicle. Don’t look to it for then end-all be-all for immediate income, instead, consider it a long-term business building strategy. As long as you do it smartly, you thrive for the long run.
Initial yield on a successful campaign to secure new patients may be as little as 0.25% (25 cents of income on the dollar spent). It is incumbent on the practice to make the most of each new patient by presenting comprehensive high-quality care at adequate fees whenever appropriate. There is no place in this equation for selling on price or offering bargains!
For example, when advertising for new patients, let’s say the office sends out 5,000 mailers at a fee of $2,400. It gets 25 calls from the mailing and they book 12 appointments. Those 12 appointments bring in an average of $1,200 which could be considered a break even situation. But when overhead expenses of 50% (optimistically) are included in the calculation the ROI drops to 0.5 or fifty cents for every dollar spent. At this point, the advertising campaign (to acquire new patients) becomes an investment in future earnings instead of an immediate cash generator. Additionally, if you promote for bigger cases along with regular new patients, you will pick up several of those cases which further shifts the returns and economics in the short term in your favor.
It’s rare that better advertising is THE answer to improving immediate cash flow. Instead, it should be viewed as a necessary expense for the independent dentist required to facilitate the flow of new patients who can refer others or accept comprehensive care at full fee.
Advertising for new patients is investing money up front to gain eventual profits. It should be evaluated over a period of months or even years instead of just days or weeks. Better ad decisions will make a difference but just as crucial (or even more so) is the offices mastery of powerful sales and retention systems which will convert some of the new prospects into satisfied long-term patients willing to spend for top-notch dental care. Better selling is the one ingredient missed by most.
One sure way to make your advertising pays off much faster is by simultaneously aiming to have a smaller number of newly acquired patients that have bigger needs. For example, if within the 12 new patients garnered from your mailing campaign, one accepts a cosmetic makeover for $20K, it raises the ROI from one half to the breakeven point immediately. All the good will, future sales and referrals would be gravy after that one patient putting you in a position to reinvest in more advertising and business growth. It’s that kind of thinking that the smartest dentists in practice are utilizing today as independent dentists.
Is advertising necessary for most practices? Yes! Is it the single determiner of financial success? No! Advertising for new patients is important but it’s only part of the story.
What profits and ROI should you expect from your Direct-to-Prospect Advertising?
Results from a dental marketing campaign depend on a variety of variables including:
– Cost and number of pieces mailed
– Response rate
– Projected average lifetime value of responses including referrals
– Projected overhead expenses