What to Consider
The amount you should spend on marketing depends heavily on many factors, including:
• Age of practice: New practices usually spend more on marketing than mature ones, since they have a smaller referral base.
• Location: Urban practices usually spend more than rural practices or practices in underserved markets, because of higher competition.
• Optical: Dispensing practices usually spend less than non-dispensing practices. This may be because non-dispensing practices include more refractive surgeons who do a lot of marketing.
• Specialty: Refractive surgeons usually out-spend general ophthalmologists, who in turn out-spend glaucoma specialists and vitreoretinal consultants. The more elective and non-referral based the specialty, the more that's spent on marketing.
• Technology: Ophthalmologists who recently purchased expensive new technology usually spend more on marketing to promote use of that technology.
• Solo vs. group practice: The same advertisement in a newspaper or phone book costs 80 percent less per physician in a five-doctor group practice than it does for a solo physician.
• Competition: When a new, heavily marketing doctor enters a marketplace, marketing expenditures for many existing practices also increase to maintain competition.
We are not talking about small differences here, either. For example, dispensing ophthalmologists in the southern United States spend an average of six times what dispensing ophthalmologists in the North Central region spend on advertising —twice the national average. On the other hand, their non-dispensing counterparts spend the same percentage of collections as each other.1
Marketing expenditures are commonly measured as a percentage of collections, rather than as a fixed-dollar amount, to accommodate varying sizes of practices. Looking at how a percentage of collections is spent on marketing, ophthalmologists spend anywhere from "near-zero" (everyone has a phone book listing, at least) up to 10 percent or more of collections. The national average is 0.8 percent of collections for dispensing and 1.4 percent for non-dispensing ophthalmologists.2
Creating a Plan
A marketing plan is no more than an organized approach to your practice goals, which are unique for all the reasons listed above. For any practice, a goal will usually be represented by either a patient count by clinical type or conversion to a dollar amount. This goal helps send you in the right direction, unlike practices that might spend money on marketing without a clear definition of direction and objectives.
Creating the basis for a marketing plan is not complex and can be often done without much outside help. Here is a simple outline to follow: 3
• Short-term objectives: Less than one year
• Long-term objectives: One year or more
• Target audience
• What does the target want?
• Who you are
• Analyze competition
• Budget
• How to compete
• Plan of execution
Importantly, you will note that Budget is step seven, not step one. Define your objectives and understand your direction first; then talk about time and money.
Talking Money
With a goal in mind, it is a straightforward task to back into a marketing budget. The formula in the table at right converts a collections (receipts) goal into marketing costs.4 Enter your data in the right-hand column.
This formula can be applied to subsets of the practice in order to determine an overall practice marketing budget. For example, you may want to increase the practice receipts one-half by refractive surgery and one-half by all other surgery.
Convert Collections into Marketing Costs
Goal: Receipts/month
Total receipts/month now
(minus) _______
Increased receipts needed
(equals) _______
Collection ratio (receipts/charges, from practice data
percent (%) _____
Increased charges needed to achieve receipts (increased receipts/collection ratio)
average charge per patient
number of patients needed to reach goal (charges needed/avg. charge per patient)
$ overhead per patient now (patients/year / overhead/yr)
$ additional overhead per new patient (variable overhead if fixed costs have been met)
$ profit per new patient
Marketing costs budget per new patient (how much are you willing to spend to obtain the profit per new patient -- a personal decision)
marketing costs per month total ([budget per patient]x[number of patients needed])
Playing the Marketing Game
One consideration is that of "ante." As in poker, in marketing you need a certain minimum investment just to get into the game. That ante is determined by the market (the "game"). If your market is saturated or supersaturated with expensive refractive-surgery ads, you must be willing to step up to their level of competition, or else not play. Your best marketing strategy might be to target another niche, such as cataracts, or relocate to a less competitive location.
How Important Is History?
A mistake some practices make in planning is to base their budget solely on historic data and circumstances rather than goals and the current environment. How much past data to consider in your marketing plan depends greatly on what is happening in your market. If you are in an underserved area, and wish to promote a new dispensary, you are marketing to grow and can budget just for the new business you wish to attract above the demands of your current patients (a percentage of targeted growth). If you have an existing dispensary and a big-name franchise retailer opens across the street, you will need to consider a budget to protect business you might otherwise lose (a percentage of total historic revenues).
Time Is Investment, Too
It's important to note that the preceding computations assumed spending dollars for marketing. An alternative is to spend time instead. Which of these you spend is determined primarily by which you have in greater supply—time or money. Either way, it is a cost to the practice, and the expense must be carefully weighed in relation to the hoped-for gain.
With costs in mind, you go to the next steps: How to compete and Plan of execution. Here, you might want to seek outside help from a consultant experienced in medical marketing.
The line separating wisely spending marketing funds and wasting them is not always a clear one, especially in the beginning. Therefore, you'll want to apply a scientific method to the process that evaluates stimulation and response in the marketplace. Be prepared for frequent corrections to your plan.
While a discussion of marketing strategies is beyond the scope of this article, resources on the topic are easily found on the Internet and through the Medical Group Management Association (mgma.com). Whatever your investment, having a budget for marketing your practice is a sound business strategy.
Contact Keith Borglum at (707) 546-4433, or visit PracticeMgmt.com.
References
1. Medical and Dental Expense Averages, Joint Statistics Report on Healthcare 2003; Ophthalmology-Dispensing, National Assoc. of Health Care Consultants p65; www.HealthCon.org/statistics.html.
2. Ibid.
3. Reprinted courtesy of the Medical Practice Forms Book; Marketing Form M-1, p289, author Keith Borglum; PMIC, http://pmiconline.site.yahoo.net/meprfo3.html.
4. Ibid, form M-3 p289.
