Dentistry is in economic recovery mode right now. And that means saving money whenever and wherever possible.
Unfortunately, many dentists tend to believe that marketing is one of those areas where they can cut back on spending. But to paraphrase Henry Ford, stopping advertising to save money is like stopping a watch to save time.
The future of your dental practice depends on maximizing the amount of revenue you generate and minimizing the amount of money you spend. You can bet your bottom dollar that marketing has far greater potential impact on the revenue side of that relationship.
That means the real solution for dentists isn’t to stop spending marketing money. It’s to stop wasting marketing money. But how do you know if you’re throwing money away?
ROI, or return on investment, is commonly used for marketing budgeting purposes. The simple definition of marketing ROI is how much profit you gain from your promotional efforts divided by your expenses. But there are two different ways you can look at that ratio.
Why Long Term ROI Is More Important Than Short Term ROI
Short term ROI looks strictly at immediate profitability, usually for a particular campaign or channel like pay-per-click or radio.
To calculate, simply take the amount of new patient fees you generated from your marketing (revenue) minus the amount of money you spent (cost) and divide that difference by the cost. Multiply the result by 100 to convert to a percentage. The simple representation of this formula is…
ROI% = ((Revenue – Cost) / Cost) x 100
Long term ROI, on the other hand, focuses on the bigger picture of your practice’s health. It takes a deeper look into your revenue and considers both the immediate and ongoing benefit you will generate from each new patient you acquire. That includes the number of other new patients they will refer.
Which type of ROI should you focus on? Short term ROI is fine for simplified comparisons between different ads or campaigns, but to get a better overall perspective of your practice’s growth, look at long term ROI to verify that you’re on the right track.
Four Steps to a Better Long Term ROI
1. Collect Your Data
Your decisions are only as good as your data, so you’ll need to make sure your information is complete and accurate. To have a clear picture of your ROI you need to have the most exact numbers possible for the following:
- Cost of your marketing
- Number of new patient leads generated
- Number of new patients
- Average number of new patient referrals from your existing patients
- Average amount of time your current patients remain active
- Average amount of revenue generated from each of your current patients
Call tracking software can be extremely valuable since it can pull all of your data into one dashboard and trace all of your new patients back to the marketing source that brought them to your office.
2. Calculate Your Long Term ROI
You don’t have to be a math geek to calculate your marketing ROI. We offer a handy (and FREE) Dental Marketing ROI Calculator. Just plug in the data you collected and get the results instantly.
3. Evaluate Your Results
A good return on investment for dental practices is generally considered to be 300-500% or better, depending on how mature that office’s strategy is. If your ROI is higher than that, terrific!
If you fall below 300%, it would be worthwhile to take a closer look at your marketing efforts. Sometimes, disappointing numbers are just the result of poor tracking, and you may actually be getting better results than you think. But if you think your numbers are reasonably accurate, it may take some digging to figure out exactly where you’re leaking profits. Generally, there are two ways to improve your ROI.
4. Fix Your Broken ROI
Reduce Your Cost of Acquiring New Patients
If your overall ROI is low, you may be dumping money into one or more strategies that aren’t producing results. Cost is most often inflated by a poor lead conversion process. If you are generating a good number of prospective patients, but not a lot of actual appointments, investing the time and effort to train your front desk staff on patient conversion may be the solution. (Listen to my recent episode on The Dental Marketer Podcast here for more on that.)
Increase Your Lifetime Patient Value
It’s also possible that you aren’t getting as much value from your patients as you can, possibly because they aren’t staying with your practice very long, they aren’t referring new patients, or they simply aren’t getting treatment or preventive care as frequently as they should. Providing an outstanding patient experience tends to solve all of those problems, and doesn’t cost you a penny.
Ready to build a better ROI for your dental practice? Collect your data and plug the numbers into our FREE Dental Marketing ROI Calculator to see how healthy your marketing really is.
Written by: Xana Winans