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Marketing: Just Take a Look Jay M. Geier

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An easy introduction to what the orthodontist should be focused on when developing a marketing plan
by Jay M. Geier

Marketing should be fun. It is one of only a few investments that has the ability to give you a great return. However, it is also an area that is greatly misunderstood by doctors. So, in general terms below, I've described how you should look at marketing in your practice.

It's All About the Math
The marketing decisions you make should be made with a calculator. Understanding the math begins with knowing the numbers.

Average Revenue Per New Patient
Know what each new patient is worth to your practice. Take a 12-month period and divide your total annual collections by the number of new patients for the same period (Fig.1). Obviously, this doesn't mean you have collected this much on each of those new patients. It is an average revenue per new patient over the lifetime they are with you practice. Most doctors have an average revenue per patient of $2,500 to $5,000. Some more, some less.

Acquisition Cost
Take your monthly marketing budget (including but not limited to direct mail, newsletters, Yellow Pages ad, sign, TV, radio, Internet marketing, referral programs, etc.) and divide by the number of new patients for that same period (Fig. 2). Acquisition cost is usually between $50 and $100.

Once you know these two numbers, you should focus on acquiring more new patients at that dollar figure (acquisition cost) and ensure you have the capacity to serve them so you can scale up the number of people you treat. Ultimately, you can formulaically back into your net income goal. The path is through new patients, which you acquire through marketing.

In addition to this math, there are several important concepts which will guide you in making wise marketing decisions and investments.

Front End vs. Back End
The first one is what we call the front end versus back end of the business. The front end typically refers to the money you make on the first transaction. For example, a patient who you charge for an initial consult would be considered front end. Let's say the patient subsequently comes 10 or 12 times; that's called the back end.

Your business is heavily weighted on the back end. You don't make all of your money on the front, nor should you expect to. You should essentially "buy" patients with marketing by spending money on things that are designed to create patients. You will make some of that money on the first transaction, but the majority of the money will be made over time.

This is why marketing should be considered an investment, not an expense. You can spend the $50 or $100 (acquisition cost) to cultivate a new patient, and over time, you will get back $2,500 or $5,000 (average revenue) from that patient.

Doctors who are so concerned about the first transaction are doctors who simply don't understand the nature of their own business.

The Spending Limit Trap
The spending limit trap is a self-induced limitation that you have on your ability to spend money on marketing. If I go back in my business just 10 years, the amount of money I spent on marketing was just a minuscule slice of what I spend today. I had a trap. I had a limit. And even today, I have a limit. There is a certain amount of money I'm comfortable spending and when I go over that amount, it makes me nervous. Undoubtedly, you have some inherent limit too. There are consequences of that and it's a ceiling to your growth. The solution: reverse engineer what you are to spend.

Create a new annual collection goal and back out of it. An example, you're gross collection goal is $1.5 million this year. Simply divide that by your average revenue per new patient (Fig. 3). This will give you your new patient goal. Divide that by 12 and you'll have your monthly new patient goal.

Then take your monthly new patient goal and multiply it by your acquisition cost per new patient (Fig.4). This will tell you, roughly, what you need to spend each month on marketing to reach your annual collection goal.

Determine your spending limit based on reverse engineering and not the spending limit trap. The spending limit trap is inaccurate and has no basis, besides fear. There's nothing formulaic to it. There will be a difference between what you spend today, and what you should spend, based on the goal that you want to accomplish.

Tracking Results – Holding Your Marketing Accountable
Like any other investment, you need to set up the mechanics to track your marketing so you know which investments are performing and which are not. This way you have the ability to make an accurate determination about the results your marketing produced.

When I ask my clients how they track their marketing, many of them say, "I just ask my front desk staff, and they tell me." This does not constitute tracking. This form of tracking is inaccurate! There are two very important statistics to track, which a call-tracking system can track for you.

Response Rate
When you send out a marketing piece, there is a level of inquiry – via e-mail, Web site and phone. How many pieces you sent out divided by the number of inquires you receive determines your response rate (Fig.5).

Scheduled Appointment Conversion Rate
Divide the number of inquiries by the number of patients who scheduled an appointment. There are always some people who inquire and never schedule an appointment. Many times the magic – the thing that determines profit versus breaking even – is how you attend to those two conversion points. First, focus on the scheduled appointment conversion rate. In every practice I've worked with I've found hidden opportunity here.

Your staff controls this conversion rate. What happens on the telephone is what determines whether or not the patient gets through the door.

If you've spent the money to market and someone calls your office, the goal is for your staff to schedule an appointment. What happens on the telephones is what gets patients in the door. Correcting staff 's mistakes is an easy fix but without a call tracking tool, it is hard to determine where your office is underperforming. A call-tracking tool is mandatory to protect your marketing investments.

Tracking Marketing Sources
Once you know how much you need to spend, and you have put the tracking system in place, take your new patient information and break it down by marketing source – the source by which the new patients found you.

This would include avenues like patient referrals, walk-ins, Yellow Pages ad, Web site, billboard, TV, radio commercial, etc. List every source that you have, and how many new patients you currently add from each source. How much money did you spend on each source (See Fig. 7)?

Are there any sources on which you have been spending a lot of money that are not returning what they should? If it turns out you have one area where your acquisition cost is $500 or $600, and you're not making money on those patients, cut out that marketing avenue and reallocate the money to another source.

Don't make these decisions prematurely. In other words, if any areas are questionable, keep them going and track them. Attend to those two conversion points long enough to determine what's not performing and then make decisions. If certain avenues of your marketing are not generating inquires, pull the plug on those marketing pieces. If they are generating inquires but the inquires aren't converting to scheduled appointments, then it's most likely an issue with how your staff is handling these inquiries.

Do these things first and you'll be in a great position to gear up your marketing.

In my next article (May 2011) I'm going to tell you about the ideal marketing avenue that should be your number-one source of new patients – patient referrals. If done correctly, patient referrals could be your best marketing investment.
Author’s Bio
Jay M. Geier is a speaker, consultant and the president and founder of the Scheduling Institute. He helps his clients reach new levels of success and create a lifestyle they dream of, using their practice as the vehicle. New clients begin working with Jay by enrolling in the Scheduling Institute where he guarantees a 10 to 30 percent increase in new patients by leveraging a practice's greatest asset – staff. He offers a call tracking service to his clients as well as events, additional training and coaching groups. Jay can be contacted by e-mailing jay.geier@schedulinginstitute.com, by calling 877-216-8225 or by visiting www.schedulinginstitute.com.
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