Turn your testimonials into a powerful and convincing marketing tool.
by William Howard Horrocks
What is a normal/customary annual marketing budget for a dental practice?
By “normal/customary” I will
assume you mean a practice that's been in existence (and same location)
for greater than 5 years. I will also assume you mean a “bread and
butter family” type practice. For these practices, we encourage a
marketing budget range. The range is 5% of TTM and 5% of goal revenues.
As an example, a 600k (TTM) practice that has a goal of 700k should have
a marketing budget range of 30k to 35k for the year.
Startups: The average general
dentist will require 700 active patient charts to productively support a
30 hour per week schedule. The average acquisition cost of a “quality”
(see below) new patient ranges from $80 to $120. If the practice in NOT
going to use insurance participation (see below) as a marketing medium,
the practice needs to acquire all 700 patients through external and
internal marketing. 700 new patients within the first year times an
average acquisition cost puts the first year marketing budget at 70k.
Transitioning Ownership:
Dentists who are buying an existing practice can expect to lose a
certain percentage of the existing patient base. At best, they can
expect to minimize this loss at 20% of the existing patient base. In
addition, existing patients who do see the new owner will almost always
slow down their purchases of dental services during the first 18 months
of ownership. This is the “getting to know you phase”. All of this has
to be taken into account when determining the total number of new
patients required to meet or exceed the new owner's revenue goals after
purchase.
Insurance Participation – What's the real scoop?
Insurance participation in
dentistry is nothing more than another available marketing medium. Our
firm is neither for nor against using insurance participation as a
marketing medium. We just look at it in a very straight forward business
manner.
Insurance companies use their
sales/marketing prowess to accumulate 10,000 to 20,000 local employees
through the employer base. The insurance companies then “sell access” of
the patient base back to the dentist for 72 cents to 88 cents on the
dollar. This marketing medium represents a 12% to 18% marketing “cost”
to the dental business. Since we've already established that you can
successfully market/promote a dental practice for 5% of revenues (in 96%
of the markets in the US ), you can see the true cost of using
insurance to promote the dental practice long term.
Why do dentists participate with insurance or rely so heavily on participation for their new patient flow?
The short answer is, they
don't know any better. As a CPA, I'm sure you recognize the business
prowess of most of your dentist clients. Dentists are patient/clinical
centric people. Very few understand or even want to understand business.
Most dentists are also very risk intolerant. This is an important
distinction.
Insurance participation is easy to do (you just sign up!)
There is no up front commitment (other than just being a dentist)
There is no up front cost (therefore, no perceived risk)
You mention “quality” new patient. What is that?
First, let me give you the
statistical definition of a “quality” new patient. A “quality” new
patient is any patient that matches or exceeds the average revenue per
active patient that the dental office currently enjoys. I'll give you an
example.
Example Practice: 500k annual
revenues, 1000 active patients, average revenue per active patient =
$500. A “Quality” new patient for this practice would be a new patient
that brings in at least $500 within the first year.
IF a dental practice
focuses their marketing/promotion toward higher “quality” patients, the
first year return on investment will double every two years for a
maximum of 6 years. Then, it will double again every 6 years.
Dentistry is a recurring
revenue business (as I'm sure most of you know). One of your clients'
biggest mistakes is marketing/promoting for volumes of new patients to
fill the schedule. Here's the lesson to pass on to your clients. Volumes
of new patients temporarily fill your schedule. Quality new patients
ALWAYS fill your wallet.
What is doc/patient ratio?
The dentist/patient ratio in a
given market area is the single biggest analytical tool used when
formulating an appropriate marketing plan for a given dental practice.
We also refer to the dentist/patient ratio when we explain what our
expectations are from whatever marketing we do for a client. The
national average is 1 dentist for every 1500 people. If a dentist is in a
1:600 dentist/patient ratio – that dental practice will indeed have a
VERY tough time gaining quality new patient momentum. It's just supply
and demand. It's economics 101. I'm sure I don't have to explain this to
this group. This does NOT mean you can't successfully promote a dental
practice in this type of environment. The majority of our clients are in
tough competitive areas.
The other side (the fun side)
of the supply/demand analysis is also found throughout the US . If we
analyze a market area for a client and find a 1:4500 dentist/patient
ratio, we KNOW we've got a great story just waiting to happen.
A case study: In September of
2006, we helped open a new dental practice for a client in upstate NY.
Dentist/patient ratio in their county was 1:5800. We started with a
first year budget of 90,000. Female dentist, husband (with an MBA thank
goodness) is the office manager. In December of 06, their production hit
$85k for the month. We have them projected at first year revenues of
$1.2m in their first year. I am not telling you this because we get this
type of result with all of our clients. We DO get this type of result
with other clients in 1:5800 dentist/patient ratio markets. What your
clients need to understand is the power of supply/demand AND the beauty
of dentistry as a business model. It truly is a recurring revenue,
return on investment building business model. In competitive areas, they
just have to give it the time to mature.
I hope the answer to some of
these questions help you and your clients better understand how
effective marketing works. If you have any other questions at all,
please feel free to contact me.
New Patients, Inc.
Mark Dilatush
VP of Professional Relations
866.336.8237
markd@newpatientsinc.com
Mark Dilatush
VP of Professional Relations
866.336.8237
markd@newpatientsinc.com
Yes this is true. If treat your patients well it's becomes successful stories for you. I think this may helpful to increase your patients.
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