While preparing your mindset to go to the next level in your practice is the first step towards transforming your practice into a marketing machine, there are several other key principles which will also impact your success. These four key factors are so important to your business success in this new economy, that unless you build your marketing strategies using them, you will have a 99% chance of failing. So, take your time with these four cornerstone principles and then implement them into your business.
Key #1: Calculate the Lifetime Value of Your Patient
To turn your practice into a money-maker, one of the first things you need to do is calculate the lifetime value of your patients. The lifetime value (LTV) of a patient is the amount of profit each patient brings to your practice over the course of their buying lifetime with your practice. Now, I will show you a simple way to calculate the LTV, but unless you keep great records you should probably hire a bookkeeper to dig through receipts and calculate the numbers for you.
To evaluate the profitability of your promotional expenses, you need to know how much a new patient is worth to you. For example, if you consider that a new patient is worth 500$ and you invest 5000$ in a postcard campaign, you need to add more than 10 new patients to consider the campaign a success.
The value of a new patient depends on the dental services offered, the number of years that you will keep the patient and the number of referrals that will be generated. Read on to learn how to determine the value of a new patient for your clinic.
Customer lifetime value concept
The lifetime value of a customer is a marketing concept that aims to assess the additional profits that will be generated by an additional client over many years. To determine its value, we must consider the following factors:
The lifetime income generated by the new customer;
The rate of profitability of the products and services;
The number of customer who will be referred by the new customer.
In order to help you calculate your lifetime customer value, I will give you an example below.
|Average Annual Revenue Per Patient|| $260
|Average Number of Years as a Patient||6|
|Profit Margin of Products/Services||35%|
|Number of Referrals by Patient||1|
|Lifetime Value of a New Patient
($260 x 6 x 35% x (1 + 1)
So, in this example on average each customer represents $1920 worth of profit.
So, in the example I used above, when someone buys from that practice, on average they represent at least $1092 in profit. However, it doesn’t have to stop there. In fact, your goal should be to increase the lifetime value of each customer by getting them back into your practice more often.
The reason why the lifetime value of a patient is so important is because it gives you an idea of how much you should invest in marketing to get the patient in the first place. So, in the example above the business owner knows that if he spends another $5,000 in marketing in the same ways he’s investing in marketing now, he can reasonably expect to double his profits. Without knowing the lifetime value of his customers, he wouldn’t have the confidence to make that kind of investment in marketing.
For some dental services, the calculation is slightly different because the patient only needs your services once. It is then necessary to adjust the equation a little bit.
The profit margin for dental services is between 20% and 35%. If you have a lot of technology, you’re probably closer to 20%, but these investments allow you to generate more revenue. See your accountant to determine the rate most appropriate to your situation.
To correctly determine the value of a new patient, you must also consider that this patient will likely refer other patients. These referrals increase the value of each new patient.
With the help of your accountant, do the exercise of calculating the lifetime value of your patients. You will be surprised at how high it is. Then use this information to assess the profitability of each of your promotional efforts. This will help you determine the promotional efforts that should be kept or abandoned.
Key #2: Find Out the Source of Every Lead That Comes Into Your Business
If there was one piece of advice that I would want you to remember, it would be tracking where every lead comes from that you get into your business. In order to track where your leads come from, you can ask prospects when they walk into your business or you can use special phone numbers on your website and in your ads. You can also use five page websites designed for a specific sale, coupons, tracking codes or anything else you can think of know exactly where your prospects are coming from.
At the end of the day, you absolutely need to know exactly where your leads are coming from, so that you can know exactly what’s working in your business. Once you know where your leads are coming from, then you can begin to invest marketing in those specific areas that are generating the best leads and customers. Without tracking your leads, you will always be wasting thousands of dollars on ineffective marketing strategies.
Key #3: Calculate Your Return on Investment for Any Marketing That You Do
This crucial key builds on the previous key that I mentioned. Quite honestly, the only way to truly know your return on investment is to track the results of every marketing strategy. Once you know how much you are spending, then you will know exactly how much each marketing dollar is bringing back to your business.
For example, if you spent $500 on an ad in a local newspaper which generated two patients, who then spent a total of $3,500 in your office, your return on your investment is 700%! So for every $1 you spent, you received $7 back. That’s a very good investment.
Key #4: Create Ads And Marketing Materials That Consistently Put Money In Your Pocket:
If you ever want to see a huge waste of money, then watch the ads being played during the Super Bowl. Those ads that run during the Super Bowl ads are designed to be funny and cute and win advertising awards. However, those ads rarely make their companies any real profit. As a matter of fact, those commercials are the laughing stock of the marketing industry because companies blissfully line up and pay millions for those types of “funny” ads while receiving little to no results for their marketing dollars.
The fact of the matter is, you either need to know how to write and design good ads or have the resources to hire a good copywriter. Regardless of which option you choose, I encourage you to study good copywriters so that they have a feel for what usually works. As the owner, you should definitely know how to create ads, letters and emails that generate leads. A good expert to study to learn copywriting is Dan Kennedy. Simply type in his name in Google.com and you will find tons of resources about copywriting.
Here’s a quick tip sheet on the basics which every ad you create should have:
To get your free ad that you can use in your marketing, go to www.freedentalad.com
Now, the keys to success listed above may seem like a lot of hard work, but you only have to do the hardest work in the beginning. However, the most important factor which will contribute to your success in your practice is your willingness to actually implement these strategies on a consistent basis.