How Much Should Your Practice Spend on Medical Marketing?
Today medical Internet marketing is required if you’re looking to attract new patients and grow your practice. The value of an Internet marketing plan for your healthcare practice can be measured in real dollars and cents, but if you’re just getting started, how do you know what to spend?
Do a little research on the web and you’ll find a wide range of recommendations; anywhere from 2% to 15% of a practice’s profit or revenue is recommended as the “right” number.
The truth, though, is that no one-size-fits-all strategy exists for calculating a practice’s marketing budget. Your marketing plan should be based on a number of factors: your medical area of expertise, geographic region and ideal patient.
You must also take into account the ultimate goals for your practice and the associated timelines. If you want to double the size of your practice in 6 months, you will need a hefty marketing budget to put you on that trajectory.
As you to begin to identify an Internet marketing budget that works with your practice, we’ve listed a few key points to take into consideration.
[Even if you already have such a budget, for the sake of this exercise, start with a 5% of revenue figure and then add or subtract from there where applicable.]
Patient Acquisition Cost (PAC)
Your practice's PAC is the amount spent on marketing divided by the number of new patients you acquire in a given month. For example, if you spend $1,000 on social-media marketing and management and bring in 75 new patients, then your PAC is around $13. That’s a great number for smaller areas, but practices in big cities will want to see higher patient acquisition numbers.
If you are located in a big city, add 1% to your budget, as you’ll need a sufficient allocation to reach a larger pool of customers and compete against a higher number of competitors.
If the majority of your new patients come from physician referrals, subtract 1-2%, especially if you know that method of acquisition is sustainable over the long-term.
Return on Investment (ROI)
Your ROI number is clear-cut and fairly simple to calculate.
For example, if you spend $225 on a particular Internet advertisement, which in turn brings in 2 patients, and your historical average profit per patient is $25, then the return on your marketing investment is only $50. Such a return would indicate the need for a change in, or elimination of, that particular marketing scheme.
If, on the other hand, that same $225 brings in 10 new patients then your return is $250, a positive ROI. Such a return makes for an easy decision to max out your budget in this area to a sustainable level for your practice.
In other words, add the maximum percentage amount that you are comfortable with, to your highest converting channels with the largest ROI.
Once you’ve addressed these top two budget items, consider these additional scenarios:
- If your practice relies primarily or entirely on insurance and/or Medicare reimbursements, you’ll see a very limited profit margin. To diversify your revenue streams, consider offering new products or services, and add 2% to your marketing budget.
- If you’ve already added and introduced new high-profit services and products, add 5% to your marketing budget, as you’ll need to aggressively market those items to recover the hard costs.
- Have you noticed a loss of market share in your area? Make a decision now to be a leader in medical practice marketing and win back that share and more. Adding 2%, not a huge increase, will move you ahead of your competitors, as the vast majority of practices still do not aggressively market themselves.
The Bottom Line
Medical Internet marketing is vital if you want to get your message in front of new patients who would have never found you otherwise.
The bottom line is that no one strategy will work for every practice.
Start small and work with your digital marketing agency to stay focused on what works best for your medical practice. Increase your budget in the areas that prove profitable and eliminate or reconfigure those that aren’t.
One of the major benefits of Internet marketing, besides being one of the most effective forms of marketing, is that it allows you to precisely track your ROI, often in real time. You’ll be able to quickly gauge results and tailor your budget accordingly.