Habit #2 of Successful Medical Practices – Commit to a Marketing Budget

This is the second habit in my series of 5 Habits of the most successful medical practices. Working with over 2500 medical practices over my 20-year long career, I’ve been able to see what habits successful medical practices have that set them apart from mediocre practices. In my first post of this series (Habit #1: Always set clear goals), I introduced the S.M.A.R.T. goal setting method.Here’s Habit #2: Setting and committing to the right marketing budget.There are certain marketing activities that any medical practice must undertake. Although some just require your time, like asking patients for referrals, many require a financial investment. Whether it’s your website, print ads, direct mail, or your TV spots, you have to spend money to make money. The question I get a lot is “How much should I spend?”There are 3 different methods for determining a marketing budget. The 1st and most common method, and least effective, is based on a personal preference – “Here is how much I feel like spending.” Typically this is an arbitrary number and there are no strategies nor thought behind it.The 2nd method is based on percentage of revenues. The range for most medical practices is between three and fifteen percent of forecasted annual revenue. This is a large range, because it depends on the sub-specialty of your medical practice. Practices that tend to market directly to the patient such as Lasik surgeons, plastic surgeons, hearing-aid dispensers or cosmetic dentists will be towards the upper end of this range, between 10 and 15 percent. This is because a significant portion of their marketing budget is spent on external media, such as TV, media placement in newspapers and magazines, and Pay-Per-Click (PPC) search engine campaigns. Medical practices that tend to market exclusively within the medical community to generate referrals are typically on the lower end of the range, typically 3 to 5 percent.The 3rd method is the Return-on-Investment (ROI) method. The logic behind the ROI Method is that for every dollar you spend you want to make more in return. The question I typically get is “How much is a reasonable rate of return?” For forecasting purposes, in using the ROI method, I recommend between a 3:1 and 8:1 return on investment. Smaller and less established practices tend to gain a lower return on investment, whereas larger, more established practices tend to get a higher return. This method is essential for medical practices that want to gain significant growth. Here’s an example: If you want to grow your practice by $250,000 and you are a small established practice, using a forecasted return of 5:1, your marketing budget would $50,000.I encourage all practices not to arbitrarily come up with a marketing budget, but to utilize a combination of the second and third methods introduced above, depending on what’s appropriate for your sub-specialty and how aggressively you want to grow your practice.

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